Your guide to terminate limited and unlimited contracts

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Pursuant to the Federal Law No. 8 of 1980 on the regulations of labour relations and its amendments (“UAE labour law”) the employment contracts can be of two kinds ‘limited term contract’ and ‘unlimited term contracts’. As the name indicates, limited term contracts are set for specific term period, while unlimited term contracts are open ended and do not specify and end term.

Pursuant to Article 113 of the UAE Labour Law, an employment contract can be terminated for the following three instances:

  1. By mutual agreement of the Parties, provided that the worker’s consent is given in writing;
  2. Upon expiry of its term, unless it has been expressly or implicitly extended according to the provisions of this Law;
  3. For the convenience of either party to an indefinite term contract, provided that the provisions of this Law concerning the notice and the valid grounds of termination without arbitrariness are adhered to.

Termination of a limited term Contract:

A limited term contract may be terminated at the option of either the employer or the employee mutually pursuant to the terms of the Article 113 as cited above; or

Termination by Employer:

In addition, to the above ground, an employer may terminate an employee who is on a limited term contract immediately without providing any notice period, if any of the grounds of termination as specified under clause 120 of the UAE labor law occur. Article 120 of the UAE law labor law cites the following ten grounds:

  • If the employee assumed false identity or nationality or submits forged certificates or documents.
  • If the employee was dismissed during the probation period.
  • If the employee has committed any fault which has resulted in the substantial material loss to the employer, provided that the employer notifies the labor department of the incident within 48 hours 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 fails to redress such default despite a written interrogation and a warning that he will be dismissed if such default is repeated;
  • If the employee is finally convicted by a competent court of a crime against honor, honesty or public morals;
  • If the employee reveals any confidential information of his employer;
  • If the employee is found in a state of drunkenness or under the influence of a narcotic drug 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 for more than seven successive days

Termination of a limited contract by the employee:

In addition to the ground provided under Article 113 of UAE labor law, as discussed above, an employee on the other hand can lawfully terminate a limited term employment contract if:

  • If the employer fails to honor his obligations towards the employee, as provided for in the contract or in this Law. This clause includes instances wherein the employee is not paid his salary and other benefits as per his employment contract.
  • If the employee is assaulted by the employer or the employer’s legal representative.

Termination of an un-limited term Contract:

Pursuant to Article 117 of the UAE labour law, an unlimited term contract may be terminated by either the employer or the employee for a valid reason at any time provided the requirements towards the notice period is met by the terminating party. A ‘valid reason’ for terminating an unlimited contract should be any reason that is ‘work related’. Work related reasons can include amongst others, poor work performance, disciplinary breach or misconduct on part of the employee or other grounds.

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