Termination of Employment Contracts in United Arab Emirates

1. Individual dismissals and severance payment

The UAE Labour Law does not set out a list of reasons permitting an employer to terminate an employee’s employment. An employer is therefore able to terminate employment on notice; the minimum being 30 days’ written notice. On termination an employee (whether in the DIFC or in the rest of the UAE) is entitled to end of service gratuity which is a form of severance pay calculated on the final salary and linked to length of service.

An employee whose employment is terminated other than for misconduct or poor performance may claim arbitrary dismissal, the maximum compensation for which is three months’ remuneration in addition to notice and end of service gratuity.

The DIFC Employment Law does not provide for an entitlement to claim unfair dismissal. However, both the employer and the employee are entitled to terminate employment without notice (and without severance payments where the employer is at fault) for ’cause’. This is defined as “circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment”.

Article 120 of the UAE Labour Law sets out an exhaustive list of gross misconduct reasons for which an employer may terminate employment without notice or the payment of end of service gratuity. The DIFC Employment Law provides that an employer may terminate without notice or the payment of end of service gratuity if it would be reasonable for an employer in those particular circumstances to do so.

2. Redundancy

Neither the UAE Labour Law nor the DIFC Employment Law provide for a concept of redundancy. The UAE courts have recognized an employer’s right to reorganize its business and restructure resulting in elimination of roles. However, a high burden of proof is applied and the employer’s business decision scrutinized closely.

For more information, please contact L&E Global.
This information was contributed by Clyde & Co.
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