New UAE labour law explained: What happens after an unlimited work contract is terminated?

Experts explain the notice period, compensation, and legal rights after unfair dismissal

by Dhanusha Gokulan

  • Follow us on
  • google-news
  • whatsapp
  • telegram


Published: Wed 8 Jun 2022, 12:06 PM

Last updated: Wed 8 Jun 2022, 10:41 PM

A top legal expert in the UAE has said employers need to provide a ‘legitimate reason’ and conduct a thorough internal investigation before dismissing their employees without a notice period.

If an employer terminates the contract without providing a legitimate reason, in that case, this may be considered ‘arbitrary’. The employer may have to compensate the employee with up to three months’ salary, per the new labour law, explained Judge Dr Ali Muhammad Al Hosani, first appeal judge and head of the technical office of the Labour Court, Dubai Courts.

Al Hosani said the reasons for dismissal include - if an employee submits false documents; fails to follow the employer’s instructions; fails to perform the duties, and reveals the employer's business secrets to third parties.

Employers can also dismiss employees if they are found in drunkenness or under the influence of drugs; commits immoral activities at the workplace; verbally or physically abuse the employer or colleagues; are absent from work for seven consecutive days or 20 non-consecutive days, etc.

On the other hand, an employee may also terminate the contract without notice if the employer does not fulfil the conditions laid down in the employment contract, assaults the employee, or assigns the employee another work without their consent.

If an employer does not serve the notice period to the employee, then monetary compensation is a must, said Al Hosani. Moreover, it is also unlawful to dismiss an employee for filing a complaint against the employer as per the new UAE Labour Law.

Law makes termination of work contracts flexible

Al Hosani said, "The new law gives more flexibility to both parties in terminating the relationship and does not require the completion of the contract term. The law allows them to terminate the relationship by giving two warnings by the law's regulations." He spoke at the second forum for employers, organised by the Labour Standards Development Authority (LSDA) in Sharjah.

Over 300 establishment owners and managers attended the insightful session. Federal Decree-Law No. 33 of 2021 on the regulation of labour relations in the private sector came into force on February 2 this year.

According to the UAE government, the law is designed to enhance employment rights and boost the competitiveness of the Emirates as a place to live and work, helping the region attract and retain world-class talent. The new law also makes provision for businesses to put in place part-time and flexible working arrangements.

Al Hosani outlined some of the critical points in the new law about the causes and effects of termination of work relationships. Here is everything you need to know:

How important is a written contractual agreement?

It is essential to have a contractual agreement between an employee and employer. Both parties need to know and write down the conditions for employment and termination, said AlHosani. "The foundation of the law is based on trust. Writing down the terms and conditions of the employment helps both parties," he said.

"Sometimes, cases are filed without a labour contract. We hear a lot of such cases in the courtroom. The law is in favour of both employees and the employer. The aim is to achieve a balanced work environment," Al Hosani added.

The legal expert also stated that the wage protection system (WPS) is tampered with in some cases. "There are cases where the salary is deposited via the WPS system and withdrawn from the employee's account in one minute. This is illegal and a clear misuse by employers," he explained.

Here are some critical facets of the new UAE labour law:

— It is illegal to keep the passports of the employees

— Recruitment, visa, work permit, and other legal costs of hiring the employee must be paid for by the employer. Employers cannot cut these costs from the employees' salary

— The company must pay for medical treatment costs and insurance fees

— The experience certificate must be non-biased and must be not written in a manner that would jeopardise future employment options for the employee

— There cannot be a delay in giving salaries

— Employers cannot force employees into doing work they are not comfortable doing

— Employees cannot be forced to work long hours

— Harassment, bullying, and emotional and sexual abuse will not be tolerated in the workplace

— For example, if an employer says 'your value is nothing to me' to an employee, it is considered emotional abuse

— A minimum notice period of 30 days continues. However, a maximum of 90 days' notice period has been introduced

— For employees leaving while still employed on unlimited term contracts, minimum notice periods apply of:

30 days for employees with up to five years' service

60 days for employees with between five- and ten years of service

Ninety days for employees with ten years' service or more.

— Employees summarily dismissed were not entitled to a notice period or end of service gratuity. However, the exhaustive list set out under the Old Labour Law has been maintained, with two further additions:

  • abusing position to obtain personal gains and profits; and
  • joining another establishment without complying with controls and procedures in place.

— The additional limitation has been placed on summary dismissal for failure to carry out primary duties – a written investigation and written warnings must be provided before the employee is dismissed

— An inquiry must be conducted before terminating an employee's contract

— Employers must give two warning letters to the employee before termination of employment

— Employers must also provide an apparent reason for dismissal

— An employee cannot be dismissed for consuming alcohol or other substances; however, an employee can be terminated from employment for drinking them during work timings. This includes working from home or while on official video calls

— Cursing or bad-mouthing can be another reason for termination of a work contract

— Employees summarily dismissed lose their entitlement to their notice period; however, now retain their entitlement to an end of service gratuity payment

— Employees with over one year's service continue to be entitled to gratuity, calculated on the same basis as before

— Employees summarily dismissed now retain their entitlement to gratuity, and no reductions apply where an employee resigns.

— Payment of compensation, together with all other termination payments, must be made within 14 days of the termination date.

— Stopping an employee from taking annual leave is not allowed

— Employers cannot terminate the contract of pregnant women


Dhanusha Gokulan
Dhanusha Gokulan

More news from