Termination
An employment relationship is a contractual relationship
which, as a general rule, may be terminated by either party. Article 113 of the
UAE Labor Law provides that a contract of employment shall terminate in any of
the following cases:
1- if both parties agree to its termination, on condition that the worker's
consent is given in writing;
2- on the expiry of the period prescribed in the contract, unless the contract
is expressly or tacitly extended in accordance with the provisions of the Labor
Law;
3- if either of the parties of a contact concluded for an unspecified term,
expresses his intention to terminate the contract; provided that the provisions
of the Law regarding the period of notice are observed and on grounds accepted
for the non-arbitrary termination of the contract.
An employer's death does not ensue the termination of a labor contract, unless the subject of the contract is related to him personally.
The contract will be terminated upon an employee's total disability, without prejudice to his end of service benefits. However, if the employee's disability is partial and he is able to perform other work which suits his health, the employer should transfer the employee to such other work if the employee so requests, and should give him wages equal to those paid for similar work.
Notice Period
Article 117 of the UAE Federal Labor Law provides that the
employer or the employee who wish to terminate a contact concluded for an
unspecified term, should give to the other party a notice in writing at least 30
days prior to termination. However, the period of notice may exceed 30 days in
case the parties have agreed to increase that period in the employment contract
(Article (118)).
The employment contract will continue to be valid throughout the
period of notice and will terminate only upon the expiry of the said
period. Thus the employee will be entitled during the period of
notice to full pay calculated on the basis of his last remuneration and he will
be required in return to perform his works during that period if the employer so
requests ( Article (118)).
If the employer fails to give the employee notice of the termination, or reduces
the period of notice, the employer will have to pay the employee a compensation
equal to the employee ‘s remuneration in respect of the entire period of notice
or the time by which it was reduced, even where no prejudice has been sustained
by the employee( Article (119)).
In this context, it should be noted that it is strictly forbidden under the
provisions of the UAE Labor Law to dismiss an employee or serve him a notice of
termination of the employment contract while he is on leave.
An employer may terminate the employment contract and dismiss the employee without notice and with immediate effect for any of the following reasons specified in Article 120 of the UAE Labor Law:
a- If the employee adopts a false identity or nationality or
submits forged certificates or documents;
b- If the employee is engaged on probation and dismissed during the
probationary or on its expiry;
c- If the employee makes a mistake resulting in substantial material loss of
the employer, on condition that the latter notifies the labor department of the
incident within 48 hours of his becoming aware of its occurrence;
d- If the employee disobeys instructions respecting industrial safety or
the safety of the workplace, on condition that such instructions are in writing
and have been posted up at a conspicuous place and, in the case of an illiterate
employee, that she has been acquainted with them orally;
e- If the employee does not perform her basic duties under the contract of
employment and persists in violating them despite the fact that she has been the
subject of a written investigation for this reason and that she has been warned
that she will be dismissed if such behavior continues;
f- If the employee reveals any secret of the establishment in which she is
employed;
g- If the employee is finally sentenced by a competent court for an offence
involving honor, honesty or public morals;
h- If the employee is found in a state of drunkenness or under the influence of
a drug during working hours;
i- If while working, the employee assaults the employer, the
responsible manager or any of her work mates;
j- If the employee absconds form work without a valid reason within one year,
for more than 20 non-consecutive days, or more than seven continuous days.
An employee may terminate her contract of employment without notice, as per
Article 121 of the UAE Labor Law in either of the following two cases:
a- If the employer has not fulfilled his obligation towards
her as provided in the contract or in the Law, for instance where an employer
does not pay his employee her wages on time.
b- If she is assaulted by the employer or his legal representative.
If there are justified grounds for the termination
it is deemed a lawful termination. If the law does not recognize the grounds of
the termination, it is deemed arbitrary and the employee is entitled to receive
compensation.
Abusive Termination by the Employer
Article 122 of the UAE Labor Law describes as arbitrary termination by the employer, a termination “…irrelevant to the work and particularly, if the reason is that the worker has submitted a serious complaint to the competent authorities or has instituted legal proceedings against the employer that has been proved to be valid.”
Unfortunately, there exists no criterion in the UAE Labor Law to define what is a termination reason which is related to employment. However, jurists are of the opinion that article 106(2) of the UAE Civil Transactions Law of 1985 could be used as a guideline. In this regard, Article 106(2) provides that:
The exercise of a right shall be unlawful:
(a) if there is an intentional infringement (of another’s rights);
(b) if the interests which such exercise of right is designed to bring about are contrary to the rules of the Islamic Shari’ah, the law, public order, or morals;
(c) if the interests desired are disproportionate to the harm that will be suffered by others; or
(d) if it exceeds the bounds of usage and custom.
Regarding business restructuring and redundancy, such reason for termination of an employment contract of an unspecified term, may be held by UAE courts as being an action which is related to the business environment, and as such is not an arbitrary action against a particular employee. Hence such redundancy may be subsequently found by a court of law to be justified.
An employer may terminate the employment contract, whether of specified or unspecified term, and dismiss the employee without notice and with immediate effect for any of the reasons specified in Article 120 of the UAE Labor Law, and such termination will be deemed as lawful.
The reasons specified in Article 120 are the following:
a- If the employee adopts a false identity or nationality or
submits forged certificates or documents;
b- If the employee is engaged on probation and dismissed during the
probationary or on its expiry;
c- If the employee makes a mistake resulting in substantial material loss of
the employer, on condition that the latter notifies the labor department of the
incident within 48 hours of his becoming aware of its occurrence;
d- If the employee disobeys instructions respecting industrial safety or
the safety of the workplace, on condition that such instructions are in writing
and have been posted up at a conspicuous place and, in the case of an illiterate
employee, that she has been acquainted with them orally;
e- If the employee does not perform her basic duties under the contract of
employment and persists in violating them despite the fact that she has been the
subject of a written investigation for this reason and that she has been warned
that she will be dismissed if such behavior continues;
f- If the employee reveals any secret of the establishment in which she is
employed;
g- If the employee is finally sentenced by a competent court for an offence
involving honor, honesty or public morals;
h- If the employee is found in a state of drunkenness or under the influence of
a drug during working hours;
i- If while working, the employee assaults the employer, the
responsible manager or any of her work mates;
j- If the employee absconds form work without a valid reason within one year,
for more than 20 non-consecutive days, or more than seven continuous days.
If termination by the employer of an employment contract of
unspecified term is deemed abusive by the
competent court, then the court may order the employer to pay the employee an
additional compensation, without prejudice to the employee's right to her other
post-termination entitlements. The court will assess such compensation with due
regard to the nature of the work, the amount of prejudice the employee has
sustained and her period of service, and after investigating the circumstances
of the employment. The amount of the compensation will in no case exceed the
employee’s remuneration for three months calculated on the basis of the last
remuneration she was entitled to.
Regarding contracts of employment concluded for a specified term, Article 115 of
the UAE Labor Law describes as arbitrary termination by the employer, a
termination for reasons other than those specified in Article 120 and requires
the employer “…to compensate the worker for any prejudice the latter sustains
provided that the amount of compensation shall in no case exceed the aggregate
remuneration due for a period of three months or the residual period of the
contract whichever is shorter unless the contract contains a provision to the
contrary.”
In this context, it should be noted that business
restructuring or redundancy is not included among the aforementioned reasons
specified in article 120, and consequently, the termination of an employment
contract concluded for a specified term for such a reason will probably be
deemed arbitrary.
Abusive Termination by the Employee
An employee's freedom to end an employment relationship of unspecified term, subject to an obligation to give notice, is a basic guarantee of the freedom of labor protected by the International Labor Organization's Forced Labor Convention, 1930 (No. 29), and the Abolition of Forced Labor Convention, 1957 (No. 105), which the UAE has ratified.
On the other hand, Article 116 of the UAE Labor Law describes as arbitrary termination by the employee of an employment contract of specified term, a termination for reasons other than those specified in Article 121 and requires the employee to “…compensate the employer for any prejudice the latter sustains as a result: provided that the amount of compensation shall not exceed half the worker's remuneration for three months or the residual period of the contract whichever is shorter unless the contract contains a provision to the contrary.” The reasons specified in Article 121 are the following:
a- If the employer has not fulfilled his obligation
towards the employee as provided in the contract or in the Law, for instance
where an employer does not pay his employee her wages on time.
b- If the employee is assaulted by the employer or his legal representative.
Upon termination of the employment contract, an employee will be entitled to the following benefits:
1. A notice period, or any amount due in lieu of the notice period in the case of a contract of unspecified term.
2. In the case of a contract of unspecified term, compensation for abusive dismissal if the contract was terminated by the employer for grounds unrecognized by the UAE Labor Law as justifiable cause for such termination. The amount of the compensation will not exceed the employee’s remuneration for three months calculated on the basis of the last remuneration she was entitled to, unless the contract contains a provision to the contrary.
3. In the case of a contract of specified term, compensation for abusive dismissal if the contract was terminated by the employer for grounds other than those provided for in Article 120 of the UAE Labor Law. The amount of the compensation will not exceed the aggregate remuneration due for a period of three months or the residual period of the contract whichever is shorter, unless the contract contains a provision to the contrary.
4. Payments for overtime or any unpaid balance of wages.
5. Payments equivalent to the balance of unutilized leave or any part thereof.
6. End of service gratuity calculated on basis of the period of service.
7. Repatriation expenses as per the Law or the employment contact.
Gratuity
The days of absence from work without pay will not be included in calculating the period of service.
The employee will be entitled to gratuity in respect of fractions of a year she spent in service provided that she has completed at least one year of continuous service.
End-of-service gratuity is determined on the basis of an employee's last basic wage received as opposed to the employee's total wage received.
Except for allowances and bonuses, any amount payable to an employee as wages including wages paid on percentage basis, commissions, or for performance will be considered as wage and will be taken into consideration in calculating gratuity.
Employees who were hired prior to the date of enactment of the UAE Labor Law
will not be entitled to gratuity for the period preceding the Law. This is
without prejudice to any entitlements or payments they were entitled to under
other laws or regulations applicable. However, gratuity for those employees
under the Law will be calculated thereafter from the date of enactment.
The employer may deduct any amount owed to him by the employee such as
outstanding loans, from the employee's end of the service gratuity.
An employee may be deprived of her end of service gratuity if she has been dismissed for one of the reasons stated in Article 120 of the UAE Labor Law, or if she terminated her employment to avoid such dismissal.
Where an establishment has a savings fund for the employees and the rules of
the fund provide that it will be a substitute to the gratuity benefits outlined
in the Law, the employee will either be paid the amount of savings in her
account or the end of service gratuity due in accordance with the Law, whichever
is more beneficial to the employee. Where the rules of the fund do not provide
that it will be a substitute to the gratuity benefits outlined in the Law, the
employee may benefit from both, and receive whatever is due to her in the
savings fund in addition to the statutory end of service gratuity.
Where an establishment has a retirement or insurance scheme, or any similar
scheme, an employee who is entitled to a retirement pension may opt between it
and the prescribed end of service gratuity or whatever she is entitled to
receive from the pension or insurance fund, whichever is more beneficial to the
employee.
Gratuity will only become due and payable upon termination of an employment contract.
The employee's wages, overtime, and any other benefits, including end of service gratuity, are considered to be a preferential debt for which the employee shall have a lien over any movable or immovable property owned by the employer ranking second to government charges, judicial fees and family alimony payments.
Gratuity in respect of Employment Contracts of Unspecified Term
In the case of an employment contract of an unspecified term, an employee who completes one year or more in continuous service of her employer shall be entitled to gratuity at the end of her service. The gratuity shall be calculated as follows:
1- 21 days wages for each year of the first five years of service.
2- 30 days wages for each additional year of service provided that the aggregate
amount of the gratuity does not exceed two years wages.
Under Article 121 of the Law, an employee will be entitled to her full gratuity on resignation, even if such resignation occurs without prior notice, in either of the following circumstances:
a- If the employer has not fulfilled his obligation towards the employee as
provided in the contract or in the Law, for instance where an employer does not
pay his employee her wages on time.
b- If the employee is assaulted by the employer or his legal representative.
However, if the employee has resigned of her own will, after having duly given prior notice to the employer, for reasons other that those provided for in Article 121 of the UAE Labor Law, then she will be entitled to the following:
1- One third of the end of service gratuity if the employee resigns after a continuous service of not less than one year and not more than three years.
2- Two thirds of the end of service gratuity if the period of continuous service is more than three years and less than five years he is entitled.
3- Full end of service gratuity if the period of continuous service is more than five years.
If the employee leaves work of her own will, without prior notice, otherwise than for one of the reasons specified in Article 121 of the UAE Labor Law, then she will forfeit all entitlement to end of service gratuity.
Gratuity in respect of Employment Contracts of Specified Term
In the case of an employment contract of a specified term, an employee who completes one year or more in continuous service of her employer shall be entitled to gratuity at the end of her service. The gratuity shall be calculated as follows:
1- 21 days wages for each year of the first five years of service.
2- 30 days wages for each additional year of service provided that the aggregate
amount of the gratuity does not exceed two years wages.
However, If the employee who is employed under a contract of specified term on the other hand chooses to resign before the end of the contract, she will not be entitled to end of service gratuity unless her continuous service exceeds five years.
If the employer has a pension scheme applicable to all the employees of the
business, such a scheme must be published and known to all employees, and must
specify that it will be a substitute to the gratuity rules outlined in the Law.
It must also be more beneficial to the employees than the gratuity provision of
the Law. Otherwise the employee may benefit from both unless the employee agreed
or consented to the scheme in question.
Social Security Scheme Applicable to UAE Nationals
As for social security scheme, The Pensions & Social Securities Law, Federal Law No. (7) of 1999, is applicable to UAE Nationals only employed in both the public and private sectors. It provides, amongst other things, for certain contributions to be made by the employee and the employer to the Public Authority of Pensions and Social securities.
For a person employed in the public sector these contributions are equivalent to 5% of the contributory pension salary to be paid by the employee and 15% of the contributory pension salary payable by the employer. As for the private sector, the government shall bear 2.5% of the 15% share payable by the employer as contributions to the Authority.
The Law also provides for the amount to be paid as a pension to eligible nationals upon reaching the retirement age of 60, or disability pension in the case of an employee becoming disabled and thereby unable to work. It further covers the amount of pension payable to beneficiaries upon demise of a secured person.
Repatriation of Employees
Upon termination of an employee's contract, the employer is responsible for the
repatriation expenses of the employee to the place of recruitment or to any
other place which the two parties have agreed upon. If the employee serves
another employer after the termination of her contract, the latter will be
responsible for the repatriation expenses of the employee upon termination of
her service. If the reason for termination of the contract is attributable to
the employee, then she will be responsible for her repatriation costs if she has
sufficient means.
Repatriation expenses means the value of the employee travel ticket as well as
what the Labor contract or the rules of the establishment specify regarding the
travel expenses for the employee's family and the cost of shipping of her
belonging.
Where the employer provides accommodation to the employee,
she shall be obliged to vacate the premises within thirty days from the date of
termination of her service, provided that the employee has been paid her
repatriation expenses and all her other post-termination entitlements.
Protecting Your Rights Before Leaving the Job
You will be in a much better position to enforce all of your post-termination
rights if you carefully document the circumstances of dismissal.
For example, if you are the victim of an abusive termination, you will typically need to prove that you were dismissed for reasons that were not related to work.
There are a number of ways to document what happened. The easiest is to keep an employment diary where you record and date each significant work-related event such as performance reviews, commendations or reprimands, salary increases or decreases and even informal comments your employer makes to you about your work. Note the date, time and location for each event, which members of management were involved and whether or not witnesses were present.
Whenever possible, back up your log with materials issued by your employer, such as copies of memos, brochures and any written evaluations, commendations or criticisms of your work.
If a problem develops, ask to see your personnel file if allowed. Make a copy of all reports and reviews in it. And make a list of every single document the file contains. That way, if your employer later adds anything you will have proof that it was created after the fact.
Dispute Settlement
Where there is a dispute between the employee and the employer, the employee may
submit a complaint to the Labor Department in the emirate in which the employer's
establishment is located. The complaint must set out a summary of the facts,
calculation of the amount due, and enclose a copy of the labor contract.
The parties to the employment relationship will be summoned to hear their arguments at the
Labor Department in the Ministry of Labor and Social Affairs which must make a
recommendation within two weeks from the date of submitting the complaint.
Should the parties fail to settle the dispute as recommended by the Ministry, the
matter will then have to be referred to court, and in such a case, the Ministry will issue a summary of the facts and a memorandum together with its recommendation, and the arguments put
forward by both parties. Within three days from the date the application is
received, the court will schedule a hearing date and summon the other party to
hear the matter.
In all cases no claim of any entitlement due under the provisions of the UAE
Labor Law will be heard if brought to court after the lapse of one year from the
date on which such entitlement became due, and no claim will be admitted if the
above provisions regarding submitting the complaint to the Labor Department are
not adhered to.
However, filing an action
before the Ministry will suspend the time from running. If the Ministry fails to
transfer the case to court within two weeks, the employee may then proceed to
court without referral from the labor office.
Employees are exempt from paying court fees. This exemption also applies if an
appeal is filed at the court of appeal. However, should a matter fail to be
settled at the Ministry, an employer who elects to proceed with court action
must pay court fees, which are normally based on a percentage of the amount
claimed.
The UAE Labor Law provides different provisions regarding claims made by a number
of employees of the same establishment who file a collective complaint against
their employer.
In fact, the right to collective bargaining in the United Arab Emirates is
guaranteed by the UAE Labor Law, which has established a mechanism to settle
labor disputes through specific structures supervised by the labor
administration in the following manner:
(i) If a dispute arises between an employer and his employees, both parties
shall seek to settle it directly and amicably, and shall attempt to reach a
negotiated settlement.
(ii) Should both parties fail to reach an amicable settlement, they shall submit
the dispute to the competent labor department to mediate in an amicable
settlement.
(iii) Should the labor department concerned fail to settle the collective
dispute, it shall refer the matter to a conciliation committee for solution. If
both parties accept the decision of the conciliation committee, this shall be
recorded in writing. If they fail to reach an agreement, then any party to the
dispute may refer the matter within a given period of time to the Supreme
Arbitration Committee whose award shall be binding on both parties and final.