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How to Terminate an Employment Contract in UAE: A Guide for Employers and Employees

The UAE Labour Law regulates the rights and obligations of employers and employees in the private sector. One of the important aspects of the law is the termination of employment contracts, which can have significant implications for both parties. This article will provide an overview of the legal provisions and procedures for terminating employment contracts in the UAE, as well as some tips and best practices to avoid disputes and penalties.

What is Termination of Labour Contract?

Termination of Labour Contract is the end of the employment relationship between an employer and an employee in the UAE. It can happen for various reasons and under different circumstances, depending on the type and duration of the contract.

You may want to know: Have a Labour Ban? Here’s How to Lift It

Reasons for Termination of Employment/ Labour Contract

According to Article 42 of the Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector, the ‘UAE Labour Law’, an employment contract may be terminated under the following circumstances:

  • The contract reaches its end date and is not extended or renewed.
  • Both the employer and the employee consent in writing to end the contract.
  • One of the parties decides to end the contract, as long as they comply with the terms of termination and the notice period specified in the contract.
  • The employer passes away and the contract is related to their personal capacity.
  • The employee dies or becomes permanently and completely unable to work, as confirmed by a medical authority.
  • The employee receives a final court sentence of imprisonment for at least three months.
  • The business shuts down permanently, in line with the applicable laws in the UAE.
  • The employer goes bankrupt or insolvent, or faces any extraordinary or economic challenges that hinder the project’s continuation.
  • The employee fails to meet the requirements for renewing the work permit due to reasons beyond the employer’s control.

Terms and Conditions for Termination of Employment Contract with Notice

As per Article 43 of the ‘UAE Labour Law’, a valid reason is required for either party to terminate the employment contract, and the following conditions must be met:

  1. The other party must receive a written notice of termination.
  2. The terminating party must observe a notice period of 1 month (30 days) to 3 months (90 days).

Moreover, the following rules apply during the notice period:

  1. The contract terms must be fulfilled by both parties
  2. The worker must receive their full wage as per the contract
  3. The party who does not comply with the notice period must compensate the other with a ‘notice period’ allowance, which is equal to the worker’s wage for the entire notice period or the remaining part of it. The allowance for the notice period is based on the worker’s last wage.
  4. The worker can take an unpaid leave of one day per week to look for another job, if the employer terminates the contract.

Note:  The notice period can be shortened or waived by mutual consent of both parties, without violating any of their rights.

You may want to know: Wrongful Termination in UAE: Compensation for Employees Under Arbitrary Dismissal

Grounds for termination of contract without notice by the employer

According to Article 44 of the ‘UAE Labour Law’, an employer can end the employment contract without notice, if the employee:

  1. Uses a fake identity or presents falsified documents or certificates.
  1. Makes a mistake that causes significant financial loss to the employer or intentionally harms the employer’s properties and admits to it. The employer must report the incident to MoHRE within seven working days from the date of discovery.
  2. Disregards the safety instructions for the workers and the workplace, which were either written and posted in visible places or verbally explained to an illiterate worker.
  3. Neglects their basic obligations under the employment contract and continues to breach them despite receiving two warnings of dismissal, if the same violation occurs again.
  4. Reveals any confidential information of the business that leads to losses or a lost opportunity for the employer, or benefits themselves personally.
  5. Is found to be intoxicated or under the influence of illegal drugs during working hours, or commits an act that violates the public morals at the workplace.
  6. Attacks the employer, the manager or any of their co-workers during their work.
  7. Is absent without a valid reason for more than 20 non-consecutive days or more than 7 consecutive days in one year.
  8. Abuses their position unlawfully to achieve personal outcomes and advantages.
  9. Works for another business without following the rules and procedures in this regard.

Note: The law requires that the employer conduct a written investigation of the worker before terminating without notice. The termination notice must be in writing, justified and delivered properly to the employee.

Reasons for Termination of Contract Without Notice by the Employee

As per Article 45 of the the ‘UAE Labour Law’, an employee can end the employment contract without notice, if the employer:

  • Fails to comply with their contractual or legal duties, subject to the condition that the worker informs the MoHRE 14 working days prior to the date of resignation and the employer does not rectify the breach despite receiving a notice from the MoHRE.
  • Assaulted or harasses the worker at the workplace, and the worker reports the incident to the relevant authorities and the MoHRE within five working days from the date they were able to do so.
  • Asks the worker to do a work that is substantially different from the work agreed upon in the employment contract, without the worker’s written approval, except for cases where the work is absolutely necessary and as stated in Article 12 of the UAE Labour law.
  • Neglects to eliminate the factors that cause a serious risk and/or endanger the workers’ safety or health, even though they are aware of them.

You Should Need to Know: UAE New Labour Law 

Need to End Your Employment in the UAE? HHS lawyers Can Help

Terminating a labour contract in the UAE can be tricky and risky. You need to follow the UAE Labour Law and protect your rights and interests. That’s why you need HHS labour lawyers in Dubai, one of the top law firms in Dubai. Here’s what we can do for you:

  • Handle all kinds of labour issues, such as termination, benefits, dismissal, and disputes.
  • Draft, review, and negotiate employment contracts.
  • Represent you in legal proceedings or negotiations.
  • Advise you on the latest updates and developments in the UAE Labour Law.

Whether you want to end your employment legally, or you have been terminated unlawfully, contact HHS lawyers in Dubai today and get an initial consultation with a qualified labour lawyer. We are ready to serve you anytime, anywhere in the UAE. Don’t wait, call us now!

Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.