Favourable Limited Contract – Under New Labour Rules UAE (Effective From 2016)

Favourable Limited Contract – Under New Labour Rules UAE (Effective From 2016)

Based on the article published by Emirates 24/7 on “New Labour Rules: How employee services can be terminated in UAE – Rules to be effective from 2016 “ … Let us see how the NEW Labour rules affect the employee.

LIMITED CONTRACT:

6 grounds or ways of terminating a fixed period contract:

1. SAME : Automatically at the end of term as agreed upon by the two parties and is not renewed.
2. NEW but it is legal/common sense: In order to exercise earlier termination during the course of its term a provision must be made in the labour agreement signed by both parties.
3. NEW but it is legal/common sense: Anytime at the will of the employer or employee however the terminating party bears the legal consequences if any.
4. NEW: It is IMPORTANT to give written notice of not less than ONE month and not more THREE months before terminating the contract and if the parties do not agree to a mutual notice period, then the notice period is THREE months and money (***Not more than 3 months’ salary if the parties had not agreed on the amount of total compensation previously***) be paid in exchange for the termination of the employer-employee relationship, as agreed by the parties.THUS under the new rule the Employee will have to pay not 45 days salary but Maximum 3 MONTH Salary for terminating a limited contract.
5. NEW but it is legal/common sense: The service can stand cancelled if the employer alone decides or the employee alone decides to terminate the contract without adhering to legal procedures referred to above. Thus implying that if one walks away the agreement stands cancelled.
6. SAME: An employee’s service can be terminated if the employee commits an offence as per Article 120 of the Labour Relations Regulatory Act, such as assault on employer, etc.

UNLIMITED CONTRACT

Four grounds of termination:

1. NEW but it is legal/common sense: If both the parties mutually agree to cancel the contract.
2. SAME: If one of the parties desires to terminate the contract after notifying the other party but must continue to honour contractual obligations for the duration of notice period. The notice period in such case should not be less than one month and not more than three months.
3. NEW but it is legal/common sense: Similarly, if one party (employer or employee alone) decides to terminate the contract without complying with legal proceedings as mentioned above and without the knowledge of the other, then the service can stand terminated and the terminating party bears consequences.
4. SAME: Also, a working relationship with an employer stands cancelled if the employee commits an offence as per Article 120 of the Labour Relations Regulatory Act, such as physical assault on employer, etc.

MOVING COURT:

Both the parties have the right to move court seeking compensation on termination.

1. SAME: When an employer breaches his obligations (such as non-payment of wages for more than 60 days, etc).
2. NEW and good for the Employee: If employees file complaints against the facility of not letting them work or in case the facility shuts down. Within two months of such an instance, employees need to file a complaint with the Ministry. And the Ministry’s inspection team should confirm this.
3. NEW: The Ministry may refer the complaint to court, and if the final judgment comes in favour of the employee, then the latter has the right to TWO months’ wages as compensation under arbitrary termination or termination of limited contract. 

CONCLUSION

1. Under limited contract 1 to 3 months’ notice period  (NEW) with 45 days salary to 3 MONTH salary as compensation (for both employer and employee) and if without legal notice then bear the legal consequences. What will pinch more… giving notice with compensation payment or no notice with legal consequences only time will tell…keeping in mind legal consequence could imply a vast range of consequences.
2. And under unlimited contract notice is a must otherwise bear the legal consequences.
3. Under the old rule arbitrary termination has 3 months compensation while the new rule says 2 months.
4. The new rules says “Under Moving the Court – The Ministry may refer the complaint to court, and “IF” the final judgment comes in favour of the employee, then the EMPLOYEE has the right to TWO months’ wages as compensation under arbitrary termination or termination of limited contract.” While 4 (b) and (c) states …”In the event, the parties do not agree to a mutual notice period, then the notice period should be taken as 3 months AND money be paid in exchange for the termination of the employment relationship, as agreed by the parties. c. In which case, the amount should not be more than THREE months’ salary if the parties had not agreed on the amount of total compensation previously. ****Clarification is required as it is somehow conflicting.
5. Therefore I find the LIMITED contract more lucrative (considering the current job situation). Job is secured for the term and possibly besides getting 45 days salary to 3 MONTH for early termination I could ALSO get an ADDITIONAL TWO months’ wages as compensation (for termination of limited contract) under Moving Court 1b…needless to mention it will work the other way round for the employer too, so the employee really needs to consider this while terminating the contract before term.

Disclaimer: The following information does not and is not intended to constitute legal advice of any kind. Although I have made every effort to be accurate, but I cannot not warrant the legal accuracy of the information contained in this information as I relied on the publication of the law appearing in Emirates 24/7.