Decoding UAE Employment Termination and Restructuring Laws
The termination of an employee's services in the United Arab Emirates (UAE) is governed by the Federal Law No. 33 of 2021 on the Regulation of Employment Relations and its executive regulations. In response to a reader's inquiry, the legal framework provides clear guidelines on the termination process.
According to Article 42 of the Employment Law, an employment contract may be terminated under various circumstances, including:
1. Mutual Agreement: Both parties can agree in writing to terminate the contract.
2. Expiration of Contract Term: The contract concludes at the end of its term unless extended or renewed.
3. Termination by Either Party Either the employer or the employee can terminate the contract, subject to the provisions of the law and the agreed notice period.
4. Death of Employer or Employee: The contract ends upon the death of the employer or employee, depending on the contract's nature.
5. Employee's Conviction If the employee is convicted and sentenced to a custodial penalty for at least three months.
6. Permanent Closure of Establishment: If the establishment permanently closes as per UAE legislation.
7. Bankruptcy or Insolvency of Employer: If the employer becomes bankrupt, insolvent, or unable to continue business due to economic or exceptional reasons.
However, the termination process must adhere to specific conditions outlined in the law. Article 43 establishes the notice period for termination, which must be not less than 30 days and not more than 90 days. The notice must be given in writing, and during the notice period, the employee is expected to fulfill their duties.
In the context of the reader's question about termination during a restructuring process without providing an explanation, it is assumed to involve asking an employee to resign. While this is acceptable if done through mutual agreement, if the employee does not agree, the employer may face a claim for compensation for arbitrary dismissal.
Article 47 of the Employment Law addresses arbitrary dismissal. It states that if an employee submits a valid complaint to the ministry or files a valid action against the employer, and the dismissal is deemed arbitrary, the employer must pay fair compensation determined by the competent court. The compensation, based on factors like the type of work, harm sustained, and length of service, should not exceed three months' salary.
A unilateral decision by the employer to terminate an employee for restructuring reasons may not be considered a valid reason for termination unless the employer is facing severe financial difficulties. In such cases, the employer may need to wind up its operations through a decision from the relevant authorities, as per Article 25(1)(b) of Cabinet Resolution No. 1 of 2022, in conjunction with Article 42(8) of the Employment Law.
In summary, while mutual agreement is a preferred way to terminate an employment contract, unilateral decisions by the employer may lead to claims for compensation. The law seeks to balance the rights of both employers and employees, ensuring fair treatment and justifiable reasons for termination in various circumstances. Employers are advised to adhere to the legal provisions and seek professional guidance when navigating the termination process.
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By- Sahiba Suri
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