This article was written by Ola Al-Kadi, associate at Norton Rose Fulbright (Middle East) LLP

Unlike countries in Europe, where termination of the employment relationship can be more complex, in particular, for longer serving employees, an employer in the UAE is able to terminate an employee’s employment relatively easily by giving the agreed amount of notice.

Despite this general ability by an employer to terminate, UAE Federal Law No.8 of 1980 as amended (the Labour Law) recognises that there may be circumstances in which an employee is unfairly dismissed and expressly provides for the right of an employee to claim compensation where he can establish that his dismissal was unfair.

In what circumstances will termination be regarded as unfair?

Article 122 of the Labour Law provides that termination will be considered arbitrary if it was for a reason unrelated to work. The article contemplates that this is more likely to be the case if the employee has submitted a serious complaint to the competent authorities, or has instituted legal proceedings against the employer, that prove to be valid.  The Labour Law does not provide any further guidance as to the circumstances in which a termination of employment will be considered to be unfair and, as a general rule, the UAE Courts have held that the employee will have the burden of proving arbitrary conduct on the part of the employer. 

The UAE Courts have, however, held that, for contracts which do not have a fixed term, redundancy is a valid reason for termination and will not be treated as arbitrary.  The employer will, however, need to show that the redundancy is genuine (i.e. other employees are also being made redundant and the specific job in question should not be taken by another employee etc.).

Examples of where the UAE Courts have held a dismissal to be unfair thereby entitling the employee to compensation include:

  • where an employer has been in breach of his obligations under the employment contract or those provided by law, including the obligation to pay an employee’s salary within the timeframe laid down in the employment contract and this has caused the employee to leave his employment; and
  • where an employer has, by his oppressive acts and his breach of the conditions of the employment contract, put the employee in a position that makes it appear that it is the employee who has terminated the contract (whatever may have been the form of the termination), provided that it is proved that it was the acts of the employer that gave rise to such termination.  

Compensation for unfair dismissal

In assessing the amount of compensation payable for unfair dismissal, the UAE Courts have held that they would have regard to the type of employment in question, the extent of the damage suffered and the period of employment.  Notwithstanding this, Article 123 of the Labour Law provides that compensation for unfair dismissal shall not exceed an amount equivalent to three months’ salary unless the contract is for a fixed duration. In this case the employee will be entitled to compensation in an amount equal to the lesser of three months’ salary and the salary payable for the residual period of the contract, save where the parties have agreed to a higher level of compensation in the employment contract.