Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

An unspecified term contract may be terminated for a legitimate reason with notice given at least 30 days prior to the termination. Termination is considered arbitrary and can be adjudicated if the cause for it is not related to the employee’s work or is a result of a justifiable action brought by the employee against the employer. A contract may be terminated without notice in limited circumstances.

The Dubai International Financial Centre (DIFC) Employment Law requires that an employee be terminated for cause in circumstances where the conduct of the employee warrants termination, and where a reasonable employer would have terminated the employment.

The Abu Dhabi Global Market (ADGM) Employment Regulations anticipate that there may be circumstances in which an employer may terminate an employee for a reason other than cause.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

The minimum notice period under the Labour Law is 30 days. An employer and employee can mutually agree to a longer notice period, but they cannot shorten notice to less than the statutory minimum period. If either party defaults on the agreed notice period, he or she must pay compensation in lieu of notice based on the employee’s current pay (in proportion to the number of days in default).

In the DIFC, the minimum notice period is:

  • seven days if the period of continuous employment is less than three months;
  • 30 days if the period of continuous employment is at least three months but less than five years; and
  • 90 days if the period of continuous employment is five years or more.

 

However, an employer and employee can agree to a:

  • longer or shorter period of notice;
  • waiver of the notice entirely; and
  • payment in lieu of notice.

 

In the ADGM, the minimum notice period is:

  • seven days if the period of continuous employment is less than three months; or 
  • 30 days if the period of continuous employment is three months or more. 

 

This notice period does not apply where the employee is terminated for cause, during probation or for excessive sick leave.

The minimum notice periods do not prevent either an employer and employee from agreeing to a longer period of notice nor does it prevent either party from waiving notice or from accepting a payment in lieu of notice.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

An employer can dismiss an employee without notice if the employee commits an act of gross misconduct or is on probation. Under the Labour Law, the offences that constitute gross misconduct are limited to the following:

  • adopting a false identity or nationality or submitting forged certificates or documents;
  • making a mistake resulting in substantial material loss for the employer, and the employer notified the Ministry of Human Resources and Emiratisation of the incident within 48 hours of becoming aware of its occurrence;
  • disobeying instructions concerning industrial safety or the safety of the workplace if the instructions are in writing and displayed clearly; if the employee is illiterate, the employer should have read the instructions to him or her;
  • failing to perform basic duties under the contract of employment and persisting in violating them despite the fact that he or she has been both the subject of a written investigation and warned that he or she will be dismissed if the behaviour continues;
  • revealing company secrets;
  • sentencing by a competent court for an offence involving honour, honesty or public morals;
  • being found drunk or under the influence of a drug during working hours;
  • assaulting an employer, a responsible manager or a colleague during working hours;
  • being absent without a valid reason for more than 20 non-consecutive days, or more than seven consecutive days; and
  • if the employee works for another employer during his or her annual or sick leave.

 

An employer in the DIFC may terminate an employee’s employment with immediate effect for cause in circumstances where the conduct of the employee warrants termination.

Similarly, in the ADGM, an employer may terminate an employee’s employment with immediate effect for cause. Termination by the employer for cause means termination owing to the employee's conduct in circumstances where a reasonable employer would consider immediate termination to be warranted.

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

To be entitled to a gratuity or severance payment on termination of employment, the Labour Law requires an employee to have accrued one year’s continuous service and the dismissal not to be for gross misconduct. An end-of-service gratuity is calculated with reference to the employee’s last basic pay at the time of termination at the rate of:

  • 21 days’ basic pay for each of the first five years of service; and
  • 30 days’ basic pay for each year of service in excess of five years of service.

 

The position is the same in the ADGM.

The position is largely the same under the DIFC Employment Law except that the collection of the end-of-service benefit is slightly different, and there is no reduction in the end-of-service gratuity when an employee resigns. The DIFC has recently introduced a mandatory workplace savings scheme whereby the end-of-service benefit for employees is calculated and paid on a monthly basis by employers into a workplace savings fund. The monthly contribution amounts that employers are required to make is equal to the rates set out above in the Labour Law. Upon termination or resignation of employment, employees may choose to cash out their benefit or have it remain invested in the fund. This scheme began on 1 February 2020 and will apply to all employee contributions from this date.

An employee with an unlimited contract who resigns from his or her employment with less than five years’ service is entitled to a reduced gratuity payment, calculated by reference to length of service, as follows:

  • an employee who has more than one year but less than three years’ service is entitled to one-third of the total gratuity entitlement;
  • an employee who has more than three years’ but less than five years’ service is entitled to two-thirds of the total gratuity entitlement; and
  • an employee who has more than five years’ service is entitled to the full gratuity entitlement.

 

An employee is not entitled to an end-of-service gratuity payment in either of the following circumstances:

  • he or she is entitled to a company pension that complies with the provisions of the Labour Law or DIFC laws (as appropriate); or
  • pension contributions are made on his or her behalf to the General Pension and Social Security Authority.
Procedure

Are there any procedural requirements for dismissing an employee?

The Labour Law requires that employees be granted 30 days’ notice prior to dismissal. Employees can avail themselves of the grievance procedure if they believe that the employer’s action was wrongful. Employers must cancel or transfer sponsorship of an employee’s residence visa and labour card (or identity card if the employee is working in the DIFC, ADGM or in the free zones) within 30 days of termination of employment. Employees must sign a final settlement form confirming that they have received all their legal entitlements before the authorities will cancel their residence visa and labour card (or identity card, if applicable).

Approval from or notification to a government agency is not required, apart from the procedures involved in cancelling the employee’s labour permit and residence visa after an employee’s contract is terminated.

Employee protections

In what circumstances are employees protected from dismissal?

Employees on specified-term contracts may be terminated only for one of the specified acts of misconduct that are set out in the Labour Law. Employees under unspecified-term contracts can be terminated only for a legitimate reason and with a minimum notice of 30 days.

A 2009 Ministerial Resolution prohibits the dismissal of UAE nationals without the approval of the Minister of Human Resources and Emiratisation. This measure applies throughout the UAE, including the free zones other than the DIFC.

Employees in the DIFC must be terminated for cause and given a minimum notice period determined by their length of continuous employment with the employer. An employee may request a written statement of reasons for his or her dismissal if he or she has been continuously employed for at least one year.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

There are no special rules for mass termination or collective dismissals. Employee contracts must be individually terminated.

The position is the same in the DIFC and ADGM.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Class actions are not permitted under UAE law. The Dubai Court does not have a mechanism for class actions, so each claim must be filed separately. The Labour Law, however, permits collective work disputes to allow for quick and amicable resolution of disputes. The aggrieved employees must submit their complaints in writing to their employers and send copies of the complaints to the Ministry of Human Resources and Emiratisation. Employees must reply to the complaint within seven working days of the date of receipt, with a copy submitted to the Ministry. If the employers fail to respond or their replies do not resolve the disputes, the Ministry will mediate to settle the disputes. Failure to settle will result in the referral of the disputes to a conciliation board that is responsible for awarding a decision.

Under the DIFC Employment Law, multiple actions may be combined by applying for a Group Litigation Order from the DIFC Courts.

 

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

The Labour Law imposes a mandatory retirement age of 65 years on foreign nationals. To work beyond the mandatory age of retirement, the approval of the Minister of Human Resources and Emiratisation or undersecretary must be given. Approval is often granted if the employee is an expert or consultant with expertise in a rare speciality.

There is no mandatory retirement age in the DIFC or ADGM.