Key Considerations for Employment Termination Under DIFC Law

During the last decade, Dubai International Financial Center (“DIFC”) has become a cornerstone of the region’s financial and commercial landscape, offering a trusted jurisdiction for global businesses and an attractive environment for top talents and qualified employees. To support this dynamic workforce, the DIFC enforces its own employment regulations as it differs in several key respects from the UAE Federal Labor Law.

The DIFC Employment Law No. 2 of 2019, as amended (the “Employment Law”) is the governing law which is applied to any employer operating in the DIFC, any employee who works in or from the DIFC or agrees to be governed by its laws, and individuals working under alternative arrangements such as secondments. It sets out clear guidelines regarding the rights and obligations of both employers and employees, including the grounds and procedures for termination of employment. For employers, understanding these rules is essential to ensure compliance, avoid disputes, and maintain fair workplace practices. As for employees, awareness of their rights can help safeguard entitlements and ensure transparency in the termination process.

Accordingly, whether a termination is based on performance, business reasons, misconduct, or occurs during probation, the Employment Law provides specific rules addressing notice periods, end-of-service benefits, settlement of dues, and the employee’s right to bring a claim before the DIFC Courts.

In this article, we will highlight the key rules and practical considerations surrounding termination of employment in the DIFC, and what both sides should keep in mind when dealing with the end of an employment relationship.

First of all, the Employment Law differentiates between termination with cause and termination without cause. Termination with cause refers to situations where either the Employer or the Employee may terminate the employment immediately when the other party’s conduct is serious enough that a reasonable person in their position would consider termination to be the appropriate response. For example, an employer can terminate the employment relationship immediately due to the employee’s misconduct or serious breach of contract. On the other hand, termination without cause occurs where the employer or employee decides to end the employment relationship for business or personal reasons not related to any type of misconduct.

1. Notice Period

Notice Period refers to the minimum period of time that an employer or employee must provide to the other party before ending the employment relationship, unless the termination is for cause. Nevertheless, the Employment Law denotes that if the termination was made without cause, the minimum written notice period depends on the employee’s length of continuous service.

It is worth mentioning that the above-mentioned periods are not applicable if the termination occurs during the probation period or if the Employment Agreement denotes that the Employment will expire on a fixed term. Moreover, if the termination was made for a cause, no notice period is required and ends immediately on the termination date.

Regardless of the above, the Employment Law permits Employers and employees to agree on longer notice periods in the employment contract

In addition, the Employer has the right to instruct the Employee to stay away from work or cease performing their duties for all or part of the notice period. In other words, this is called as “Garden Leave”. During this leave, following the request of the employer, the employer is still required to pay an employee.

Furthermore, Payment in lieu of Notice is stipulated in the Employment Law as the Employer may pay an Employee their wages in place of all or part of the notice period either as permitted legally or if the Employee has expressly agreed to it under the employment agreement.

2. Termination Payments

If the termination was made without cause, the employee is entitled to receive the following payments as per Article 19 of the Employment Law:

On the other hand, when termination is made with cause, the Employment Law draws a distinction based on who initiates the termination. If an employee terminates for cause, they remain entitled to receive wages in lieu of notice, a gratuity calculated as though the notice period had been worked, and payment for any accrued unused leave including the notice period. However, if the employer terminates the employee for cause, the employee is not entitled to notice pay, and their gratuity and unused leave are calculated only up to the actual termination date.

It is worth noting that, in all scenarios, the employer is required to settle all monetary entitlements due to the employee within 14 days from the termination date.

In addition, where the termination is formalized through a settlement agreement, the Employment Law does not prohibit an employee from waiving certain rights or claims under the Law, provided that the employee was given the opportunity to obtain independent legal advice on the agreement’s terms, or the parties engaged in a mediation process.

Nevertheless, in the event of a dispute, or if an employee does not receive their full entitlements on time following termination, they may file a claim with the DIFC Courts within six (6) months from the termination date. In such cases, the employee may also be entitled to a penalty equal to their daily wage for each day the payment remains outstanding.

At Rasma Legal, we offer top-notch expertise in advising on employment termination matters governed by UAE labor regulations, including the DIFC Employment Law discussed above. Whether you are an employer seeking to ensure compliance and mitigate legal risks, or an employee looking to understand and protect your rights, our team provides extensive guidance throughout every stage of the process. We assist in reviewing employment contracts, assessing the validity of termination grounds, preparing notices and settlement agreements, and representing clients in dispute resolution proceedings.