Your Guide to Terminate Limited and Unlimited Contracts

Under the Federal Decree-Law No. 33 of 2021, as amended by the Federal Decree-Law No. 14 of 2022, on the regulation of labour relations (“UAE labour law”), the employment contracts are to be for a specified period, not exceeding three years. This contract may be extended or renewed for a similar or a shorter period, once or more than once.

Under Article 42 of the UAE Labour Law, an employment contract can be terminated for the following instances: 

• By mutual agreement of the Parties, and the termination is given in writing; 

• Upon expiry of its term, unless it has been extended according to the provisions of this Law; 

• At the request of either of the parties, provided that the provisions regarding termination and notice period provided under this law are observed;

• Death of the employer if the subject matter of the contract related to him in person;

• Death or permanent total disability of the worker evidenced through a medical entity;

• A worker being sentenced to a freedom-restricting penalty of at least 3 months;

• Permanent closure of establishment as per the laws of the country;

• Bankruptcy or insolvency or any other economic or exceptional reason on part of the employer, as a result of which the project is closed as per the laws of the country;

• Failure on part of the worker to renew the work permit for a reason beyond the control of the employer

Termination of a Contract:

A contract may be terminated at the option of either the employer or the employee mutually according to the terms of Article 42 as cited above; or

Termination by Employer:

In addition to the above ground, an employer may terminate an employee immediately without providing any notice period as per any of the grounds of termination as specified under clause 44 of the UAE labour law. Article 44 of the UAE law labour law cites the following ten grounds:

• If the employee assumes false identity or nationality or submits forged certificates or documents;

• If the employee has committed any fault which has resulted in a substantial material loss to the employer or damaged his property and the employer acknowledged it, provided that the employer notifies the labour department of the incident within 7 days of his becoming aware of its occurrence;

• If the employee disobeys instructions on the safety of work or workplace.

• If the employee defaults on his basic duties under the contract and fail to redress such default despite a written interrogation and a two times’ warning that he will be dismissed if such default is repeated;

• If the employee exploits his job for personal gains;

• If the employee reveals any confidential information about his employer resulting in the employer’s loss; 

• If the employee joins another employer without following the rules laid down in this regard;

• If the employee is found in a state of drunkenness or under the influence of narcotics during working hours;

• If the employee assaults the employer, the manager in charge or any of his workmates during working hours; 

• If the employee absents himself from work without a valid reason for more than 20 non-successive days in one single year, or more than seven successive days;

Termination of a Contract by the Employee:

In addition to the ground provided under Article 42 of UAE labour law, as discussed above, an employee on the other hand can lawfully terminate an employment contract without notice if:

• The employer fails to honour his obligations towards the employee, as provided for in the contract or this Law. The employee should notify the Ministry 14 days before leaving work, and the employer in this case did not take any measures despite being notified by the Ministry.

• If there is a danger in the workplace to the health and safety of the employee.

• The employer assigns work to the employee that is fundamentally different from what was agreed upon as per the contract, except in cases of necessity.

• If the employee is assaulted by the employer or the employer's legal representative.

Article 68 of the UAE labour law further clarifies that the law will apply to employment contracts of indefinite duration, which were concluded under the Federal Law No. 8 of 1980. Employers are required to convert employment contracts of indefinite duration into fixed-term employment contracts, under the conditions, rules and procedures set out in the labour law within one year from 2 February 2022. This period may be extended.

Related Links

• Know Your Labor Rights
• End of Service Benefits Comparison of Gratuity under the UAE Labor Law and DIFC Laws
• Can i sue my employer for wrongful termination?

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