In this piece, we ask Thenji Macanda, Senior Associate at law firm Taylor Wessing, about how the changes in terminating a limited and unlimited contract will empower the expat workers in the country.
She lists a number of things to keep in mind when terminating limited or unlimited employment contracts, as well as explains why a no-objection certificate (NOC) is not a pre-requisite anymore for switching jobs.
“These amendments to the law should make it easier and quicker for expatriate workers to terminate their employment contracts,” she told Emirates 24|7.
“Historically, employees required a no-objection certificate [NOC] from their employer to leave their employment.
“It was also fairly simple for an employer to place a labour ban on an employee where the employee had not completed at least two years’ service or had terminated a limited contract before the period of the contract had finished,” she says.
“The new changes should increase job mobility for employees and make it easier for workers to change employers.
“As a result of this, we think that employers will seek to improve employees' work conditions and offer better packages as a way to retain staff,” she added.
Procedure to follow when terminating a fixed-term employment contract
Elaborating on the UAE Ministerial Decree 765 of 2015 on Termination of a Limited Contract, Thenji Macanda explains that for employees who are employed on a limited (fixed term) employment contract, the relationship can be terminated on
1) expiration of the fixed term - not renewed;
2) Article 120 of the Labour law (termination for cause); and
3) unilateral termination by either party subject to compliance with certain formalities.
These formalities include that each has to notify the other party (maximum of a 3 month notice); the parties have to honour the contractual obligations and indemnify the other with the agreed compensation between one and three months for early termination.
The term of a limited contract cannot extend over two years (maximum term).
The reduction of the fixed term to a two-year limit should bring more flexibility to employees who may want to leave their employer and the term will also be in line with the majority of UAE visas which has a two-year life span.
Procedure to follow when terminating an unlimited employment contract
For those on unlimited contract, the decree states the relationship can be terminated with mutual consent, by giving a notice between 1 and 3 months under article 120 of the UAE Labour Law (Termination for Cause).
The parties involved are to honour obligations throughout the notice period. For terminations all parties should follow legal procedures.
The unlimited employment contract is by its very nature more flexible and currently parties are permitted to terminate the employment contract subject to each party giving notice.
The major amendment in respect of unlimited contracts is the capped duration of notice at three months.
It is a common feature in the UAE to have senior executives and teachers constrained to six months’ notice.
The decrees are intended to create a mechanism in which all employees are free to leave soon after notice is submitted.
This may call for employers to think of other mechanisms of retaining staff, such as long-term incentive plans that vest periodically, or deferred bonus schemes, highlights the expert at Taylor Wessing.