Important and/or distinctive aspects of rights on termination in the UAE 

Grounds for termination

Probation period

During the probation period, the employer is in a position to dismiss the employee without notice or reason. Under the UAE labour law, the maximum probation period is six months.

Work-related reason / Capability

A contract of unlimited duration (an open-ended contract) may only be terminated (without cause) with notice and for a legitimate, work-related reason.

The notice period does not always necessarily have to be worked: the employer can pay compensation in lieu of notice, or the employee can be placed on garden leave for the duration of the notice. During garden leave, the employee will still be bound to all the terms and conditions of the employment contract but not required to attend the office unless specifically requested to do so.

In instances where an employer wishes to terminate an employee on the grounds of capability, the employer should issue warning letters to improve performance or place the employee on a performance improvement plan. These are useful tools for the employer to demonstrate that there was a legitimate work-related reason to terminate the employee.

Where the reason for termination does not relate to the employee’s work and this can be substantially evidenced (e.g. discrimination), the employee is in a position to claim arbitrary termination that carries a maximum compensation of up to three (3) months’ salary. The compensation award is at the sole discretion of the Court. The Court will usually consider factors such as the length of service, position of the employee and the actual reason for the termination.

Gross misconduct (Cause)

Under the UAE labour law, an employee can be terminated for cause for 10 specific offences that are set out in the UAE Labour law. This allows for summary termination without notice or end of service gratuity.

Contracts of fixed duration (limited contracts) cannot be terminated during their term unless the termination is for cause or during the probation period. If an employer terminates the employment relationship during the term then it must compensate the employee by either three (3) months’ salary or for the duration until the end of the contract, whichever is shorter.

Redundancy

In theory, “redundancy” is not a valid reason for termination under UAE Labour Law and therefore there is a risk that dismissal for redundancy purposes may be deemed to be an ‘arbitrary dismissal’, which may result in the three months’ arbitrary dismissal compensation being payable by the employer. However, owing to the economic climate over the past couple of years, the Labour Courts have accepted that redundancy can be valid in some instances and so it has become increasingly common for employers to terminate employee’s contracts on the basis of “redundancy”.

In any event, arbitrary dismissal compensation is not an automatic benefit. This means that an employer does not have to pay it out to the employee on termination of employment. To receive it, the employee would have to make a claim at the Ministry of Labour or relevant free zone authority and subsequently at the Dubai courts.