Cancellation of employment contract

In the UAE, the cancellation of employment contract is regulated by the Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector – the UAE Labour Law. This article will provide an overview of the provisions related to cancelling employment agreements in the UAE.

What does Termination of Employment entail?

It refers to the conclusion of the working association between an employer and an employee. The conclusion of employment can occur through the initiative of either the employee or the employer, or mutually, as outlined in the contractual stipulations agreed upon by both parties.

When can an employment contract be terminated in the UAE?

According to the UAE Labour Law, both the employer and employee have the right to terminate an employment contract, provided that they comply with the legal consequences of the termination. The contract can be terminated in the following circumstances:

• If the contract term expires and it is not extended or renewed.
• If both parties mutually agree in writing to terminate the contract.
• If either party wishes to end the contract, provided that they observe the provisions of termination of the employment contract and the notice period agreed upon.
• In the event of the employer’s death, if the subject of the contract is related to its entity.
• In the event of the worker’s death or full permanent inability to work, based on a certificate issued by a medical entity.
• Where a worker faces a final court judgment of a freedom-restricting penalty for not less than three months.
• If the establishment is closed permanently, in accordance with the legislation in force in the UAE.
• If the employer becomes bankrupt or insolvent or faces any economic or exceptional reasons that prevent the continuation of the project.
• If the worker fails to fulfil the conditions for renewing the work permit for any reason beyond the control of the employer.

Notice period of termination

If either party wishes to terminate the employment contract, they must serve a notice period of one month to three months. During the notice period, the employee must continue to perform their work as agreed upon in the contract and are entitled to their full wage. Suppose the employer fails to serve the notice period. In that case, they must pay the employee a notice period allowance equal to their wage for the full notice period or proportionate to the remaining period.

Employment Termination by Employer

If the employer terminates the contract, the worker is entitled to an unpaid leave of one day per week during the notice period to search for another job.

Can an employer reduce or exempt the notice period for terminating an employment contract in the UAE?

Yes, the notice period for terminating an employment contract in the UAE can be reduced or exempted by mutual agreement between the employer and employee without infringing on any parties' rights.

Summary of Termination Provisions:

• Notice Period: Minimum of one month to a maximum of three months.
• Employee Rights: Full wage during notice and one day of unpaid leave per week for job searching.
• Failure to Serve Notice: Mandatory payment of a notice period allowance equal to the wage for the remaining period.
• Mutual Agreement: Both parties can agree to terminate the contract or reduce the notice period.