Termination of Unlimited Employment Contract in UAE
An unlimited contract is a one which is open ended and doesn’t have a specified time period of completion. It is governed by UAE Federal Law No. 8 of 1981 (UAE Employment Law). It is observed that there are a lot of misconceptions regarding the termination of unlimited contracts. People often believe that the employer can simply terminate the unlimited employment agreement by simply giving a notice to the employee without providing any reason whatsoever.
This misconception emanates from the gross misinterpretation of Article 117 of the UAE Employment Law. This Article states that the employer and the employee can terminate the unlimited contract for a “valid reason” by giving a notice. From a careful reading of the aforesaid Article, it is evident that the termination can’t take place on whims and fancies of the employer, but it requires a valid reason for the same.
The duration of the notice depends upon the longevity of the job period, which is calculated from the day the contract was formulated.
- The notice period will be 1 week the employee has been working for more than 6 months but less than a year.
- Two weeks, if the contract remains in force for not less than 1 year.
- One month, if the employee has been working for not less than 5 years.
The moot question that emerges here is what should be a “valid reason” and what are the criterias on which a valid reason is determined.
Article 122 of the UAE Employment Law provides that the termination will be considered arbitrary on the occurrence of the following events-
- The ground of termination is irrelevant to the work assigned to the worker.
- The employee has submitted a serious complaint against the employer.
- The proceedings initiated against the employer have proven to be valid in the court.
It becomes quite clear that the ground of termination must be related to the work. The legislature was equally conscious regarding the changing nature of business; therefore, with an objective of making this provision more concrete it came out with a Ministerial Order no. 28/1 of the Year 1981 regarding Model Disciplinary Code (“Disciplinary Code”).
This code deals with the various non observance of workplace related rules by the employee and provides suitable penalties which an employer can impose on such employees. The quantum of penalty depends upon the gravity of contravention and in extreme cases, it may result in termination. The Code clearly stipulates the guidelines for punishment and the manner in which the employer had to record such contravention.
However, it is important to note that this code is not exhaustive but merely indicative in nature. It supplements the provisions provided under Article 402 of the UAE Employment Law.
In practice, it is observed that the companies generally formulate their workplace related policies by following the disciplinary code. Nowadays, with the growing completion, achievement of a specific job target by the end of a specified period is also included in such policies and not achievement may result in termination from the job. However, if the employee is unfairly terminated, the employer is liable to provide suitable compensation to him.
It can be summarised that the employer right to terminate the unlimited employment agreement is subject to the existence of a valid work related reason. For this, the drafting of the employment contract gains special significance. So, you should seek assistance from the best legal attorneys for drafting the employment agreement.