‘Can I avoid paying a penalty to my employer for ending my contract before time?’

If an employee resigns before the end of the agreed term of employment, they are legally obliged to compensate the employer

Termination of employment document

I need some clarity on my employment contract. I am on a Jebel Ali Free Zone labour contract, which does not mention whether it is limited or unlimited.

I plan to resign from my current company and have been asked to pay 45 days’ worth of salary. Does this rule apply to me? If it does, is there a way I can avoid paying it, say by serving a longer notice period? RN, Dubai

RN sent me a copy of his employment contract, which states that it is for a period of three years. This means it is a limited contract. Jafza follows the provisions of the UAE Labour Law as does this contract, which has been signed by both the employer and RN on each page.

As RN wishes to resign long before the end of the agreed term of employment, Article 116 of the law will apply. This states that “should the contract be rescinded by the worker … the worker shall be bound to compensate the employer for the loss incurred thereto by reason of the rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract”.

Fifty per cent of one's salary for three months is broadly equal to 45 days’ worth of salary, so the employer can impose this penalty in accordance with the law.

The notice period and the penalty are different issues. A penalty is applied when an employee breaks the terms of their contract. The usual notice period, as stated in the employment contract, still stands and is 30 days in this case.

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With regard to an employment ban, fewer of these are issued these days, especially where someone is on an unlimited employment contract
Keren Bobker

I want to quit my current job where I have been working for eight months because the employer is not being fair. Our salary is paid two months late.

The company is also moving premises soon. It is now based near Al Qusais in Dubai. This suits me as I live in Sharjah with my family and my children go to school here. My employer is expected to move to a new place in Ras Al Khaimah.

I do not want to shift my family or commute every day. I have found a new job but am worried my current employer might issue a ban against me. Is there a way to change jobs without the threat of a ban? SK, Sharjah

I understand that this is a mainland employer, so the UAE Labour Law applies. Article 36 of the law states that “the employment contract shall determine in particular the date of conclusion thereof, the date of commencement of work, the type, location and duration thereof, should it be of a determined period, as well as the amount of the wage”.

This states that the place of work is agreed. Since the contract mentions the location is Dubai, the employer cannot force an employee to work elsewhere. This applies unless the contract states that the employee can be asked to work elsewhere and it has been signed by both parties.

Assuming the contract does not state this, the employer would be in breach of the contract by forcing an employee to move. SK can resign without notice in accordance with Article 121, which states that the employee can leave immediately “should the employer breach his obligations towards the worker as set forth in the contract or the law”.

With regard to an employment ban, fewer of these are issued these days, especially where someone is on an unlimited employment contract. The failure to pay salary on time shows the employer is not following obligations. This means there should be no reason to apply a ban and the employer’s request should not be upheld.

This situation is further confirmed in Ministerial Decree No 766 of 2015, Article 1, which states that “an employee may be granted a new work permit if it is determined that the employer has failed to meet his legal or contractual obligations, including but not limited to when the employer fails to pay the worker’s wages for more than 60 days”.

As the employer may breach contract terms by moving to a new office and also by failing to pay salaries on time, SK should be able to leave the company's service without a ban. However, he should speak to the Ministry of Human Resources and Emiratisation on how to register a case to protect himself and ensure that he will not face any difficulties when he starts at his new job. The telephone number to contact the ministry is 800 60.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only

Updated: July 10th 2021, 1:02 PM
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