Termination under Limited Labour Contract (the rules)

Limited labour Contract Termination – What does the Law say?

Please Read Updated Article: Termination under UAE Labour Law

You would already know that there can be 2 types of Contracts under Ministry of Labour: Limited Contract and Unlimited Contract.

You may have already read about Limited Contract. It’s a type of contract that is made for a ‘limited’ time, which is usually 2 years. UAE Labour Law covers the termination part of the UAE Labour Law, under 2 different Articles under the Labour Law. Here I will try and explain the same.

ARTICLE (115): Employer Terminates the Limited Contract

If the employer has terminated an employment contract with a limited period, for reasons other than those provided for under Article (120) hereof, he becomes liable for payment of compensation to the employee against damages sustained by him, provided that the sum of compensation in all events, may not exceed the total pay due to him for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise.

Note: This Article clearly states your rights in case you are terminated under Limited Labour Contract. If you are terminated under Limited Labour Contract, you are eligible for the compensation for the rest of the contract period or compensation for 3 months whichever is shorter. However, if you are terminated for any reason as below, you will not be eligible for the compensation.

Reasons for termination:

• If the employee adopts a false identity or nationality or if he submits forged documents or certificates.
• If the employee is appointed under a probationary period and dismissal occurred during or at the end of said period.
• If he commits an error causing substantial material loss to the employer provided that the latter advises the labour department of the incident within 48 hours from having knowledge of the same.
• If the employee violates instructions concerning safety of the place of business provided that such instructions are displayed in writing at conspicuous places and in case of an illiterate employee the latter be informed verbally of the same.
• If he fails to perform his basic duties under the contract of employment and persists in violating them despite formal investigation with him in this respect and warning him of dismissal if the same is repeated.
• If he divulges any secrets of the establishment where he is employed.
• If he is awarded final judgement by the competent court in respect of an offence prejudicing honour, honesty or public morals.
• If during working hours he is found drunk or under the influence of drug. If in the course of his work he commits an assault on the employer, the manager or any of his colleagues.
• If he absents himself without lawful excuse for more that twenty intermittent days or for more than seven successive day during one year.

ARTICLE (116): Employee Terminates the Limited Contract 

If the contract has been terminated on part of the employee, for reasons other than those provided for under Article (121) hereof, the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation, may not exceed half a month’s pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise.

Note: Article 116 mentions your rights as an employer. If your employee has terminated the Limited Labour Contract, your employee should compensate you 45 day salary or for the remaining contract period, whichever is shorter.

Companies are not eligible for compensation, if your employee terminates contract for below reasons:

• If the employer does not fulfil his obligations towards the employee as provided for in the contract or in this Law.
• If the employer of his legal regal representative has committed an act of assault against the employee.

So you can see here that the Labour Law of UAE makes fair effort to protect the rights of both the employer and the employee. Familiarise with UAE Labour Law by reading it. You must also appreciate that UAE Labour Law protects the rights of both the employee and the employer.