The termination of employment contracts in UAE is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (UAE Labour Law), along with its Executive Regulations. The law establishes a structured legal regime to ensure that termination of employment is conducted in a fair, transparent, and legally compliant manner, safeguarding the rights of both employers and employees.

The termination of an employment contract triggers various legal consequences, including notice obligations, settlement of dues, and potential dispute resolution mechanisms.

Employment relationships in UAE are based on fixed-term contracts, as mandated by Article 7 of the UAE Labour Law. The termination of such contracts is primarily regulated by:

  1. Article 42 – Cases of termination of employment contracts
  2. Article 43 – Notice period
  3. Article 44 – Termination without notice by employer
  4. Article 45 – Termination without notice by employee
  5. Article 47 – Unlawful termination
  6. Article 51 – End-of-service gratuity

Grounds for Cancellation of Employment Contracts

  1. Expiry of Contract Term: Under Article 42(1), an employment contract terminates upon the expiry of its agreed term, unless the parties agree to renew or extend it.
  2. Mutual Agreement: As per Article 42(2), the employer and employee may terminate the contract at any time by mutual written agreement.
  3. Termination by Either Party with Notice: In accordance with Article 43, either party may terminate the contract for a legitimate reason by:
  • a. Serving written notice; and
  • b. Observing the agreed notice period (minimum 30 days and maximum 90 days)
  1. Termination Without Notice by Employer: Under Article 44, the employer may terminate the contract without notice in specific circumstances, including:
  • a. Submission of forged documents or false identity
  • b. Serious error resulting in substantial financial loss
  • c. Violation of workplace safety instructions
  • d. Failure to perform basic duties despite warnings
  • e. Disclosure of confidential information
  • f. Being under the influence of alcohol or drugs during work
  • g. Physical assault on employer or colleagues
  1. Termination Without Notice by Employee: Pursuant to Article 45, an employee may resign without notice if:
  • a. The employer breaches contractual or legal obligations
  • b. The employee is subjected to assault or harassment
  • c. There is serious risk to the employee’s safety, provided the employer was aware
  1. Death or Permanent Disability: As per Article 42(3), the contract is terminated upon the death of the employee or their permanent incapacity to perform work, as certified by a competent medical authority.
  2. Closure of Establishment: The closure, liquidation, or insolvency of the employer’s business may also result in termination of employment contracts.

Procedure for Cancellation of Employment Contracts

  1. Issuance of Notice: Where termination is effected with notice, the terminating party must provide written notice in accordance with Article 43, specifying the intention to terminate and observing the agreed notice period.
  2. Performance During Notice Period: Both parties are required to fulfil their contractual obligations during the notice period. The employer may, however, agree to waive the notice period by compensating the employee in lieu of notice.
  3. Settlement of End-of-Service Entitlements: Upon termination, the employer must settle all dues owed to the employee, including:
  • a. Outstanding wages
  • b. End-of-service gratuity (as per Article 51)
  • c. Payment in lieu of unused annual leave
  • d. Any other contractual benefits

4. Documentation and Acknowledgment: The employee may be required to sign a settlement or acknowledgment confirming receipt of dues. However, such acknowledgment does not preclude the employee from raising legitimate claims if rights are violated.

5.Filing with MOHRE: The employer must update the termination status through the Ministry of Human Resources and Emiratisation (MOHRE) system to officially record the cancellation of the employment relationship.

Unlawful Termination

Under Article 47, termination is deemed unlawful if it occurs due to the employee filing a complaint with MOHRE or initiating legal proceedings against the employer. In such cases, the employee may be entitled to compensation as determined by the court.

Dispute Resolution Mechanism

In the event of a dispute, the aggrieved party can make

  1. A complaint may be filed with MOHRE
  2. MOHRE attempts amicable settlement
  3. If unresolved, the matter is referred to the competent Labour Court

The courts may award compensation, reinstate rights, or order payment of dues depending on the circumstances.

Conclusion

The cancellation of employment contracts in UAE is governed by a comprehensive statutory framework designed to balance the interests of employers and employees. By clearly defining permissible grounds and procedures for termination, UAE Labour Law promotes fairness, transparency, and legal certainty in employment relationships. Strict adherence to these provisions is essential to avoid disputes, penalties, and potential legal liability.

At Ayesha Aldhaheri Advocates and Legal Consultants, we provide expert legal support to employers and employees in labour disputes, appeal matters, and UAE labour law compliance with clarity and professionalism.