Examining the Shift: Arbitrary Dismissals and Compensation in the UAE Labour Law - Karma Global

Examining the Shift: Arbitrary Dismissals and Compensation in the UAE Labour Law

KARMA GLOBAL, besides its foray into specialized areas like staffing, onboarding, payroll, curbing regulatory risk, auditing and abiding by all labour law-related compliance, has joined hands with topmost Indian legal firm in order to further strengthen its enduring relationships with its over 500+ clients with cost-effective and time-bound legal solutions.

UAE’s Labour Law upholds unjust dismissal!   

The UAE labour laws are very lenient to the workers. When an employer dismisses an employee without a notice or warning letter or forces him to resign from the job without any reasonable grounds, such dismissal would amount to an arbitrary dismissal. Article 122 of the UAE Labour Law defines that when a worker is dismissed by his employer for a reason irrelevant to the work, it is ‘arbitrary termination’. According to Article 123 of the UAE Labour Law, if arbitrary dismissal is proven, the Court can order the employer to pay additional compensation to the employee. As per the UAE Labour Law, there can be two types of employment contracts between the employer and the employees. They are (i) Limited Term Contracts and (ii) Unlimited Term Contracts. In the case of a limited contract, there is no notice provision under the UAE Labour law for the termination of limited-term contract. Such contracts simply expire at the end of the term or on the date specified in the contract (unless terminated earlier by either party). In case of an unlimited contract, it can be terminated by either the employer or employee at any time subject to serving a notice to the other party for a period of at least 30 days, unless the Employment Contract provides for a longer notice period. It is an obligation of the employer under Article 46 of the UAE Labour Law to give a trainee enough time to acquire theoretical knowledge. He should also give the trainee sufficient time to learn the principles of the occupation and the skills for which he is recruited. Further, the Labour Law allows summary dismissal of an employee by the employer on eleven exhaustive grounds under Articles 88 and 120 of the UAE Labour Law. The grounds on which an employee can be dismissed without notice are:

1. Use of false identity or nationality and submission of forged certificates or documents.
2. If an employee is engaged on probation and is dismissed during or at the end of the probationary period.

Compensation for Arbitrary Dismissal According to the UAE Labour Law, the maximum additional compensation that can be awarded for an ‘arbitrary dismissal’ of an employee is three months’ remuneration, calculated based on the last pay received by the employee prior to dismissal. For determining the amount of compensation, the Court will consider the type of work, the extent of damage incurred to the employee and the total period of the employment. The amount, however, should not exceed three months wages. In addition to the aforementioned compensation, the employee can claim his gratuity, notice period dues, payment in lieu of untaken leave or any other unpaid dues and post-termination entitlements he is entitled to from his employer under UAE Labour Law. For the purpose of computation, the term ‘remuneration’ refers to an employee’s full pay (basic salary plus any monthly allowances).  In addition, where the employee receives regular or guaranteed bonus or commission payments, these may also be considered by the Court while determining the employee’s remuneration.  The actual amount of the award, if any, is ultimately determined by the Court.

Proprietary blog of Karma Global - collated and compiled by the internal staff of Karma Global  with the knowledge and expertise that they possess,  besides adaptation, illustration, derivation, transformation, collection and auto-generation for its monthly newsletter Issue 24   of  June  2024  and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – mudra@karmamgmt.com

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