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Understanding employment contracts.

Summary: Dr.Reyadh Al Kabban, Founder and Managing Director, Al Kabban & Associates looks at the legal aspects of gratuities, labour bans and non-complete clauses

As a result of the Expo 2020 and stabilisation of the UAE economy, the job scenario in the region has improved and the demand for talented professionals has increased. While the government's initiatives has proven successful in attracting foreign professionals, it has also introduced various initiatives to productively utilise local professionals through its Emiratisation programme. However, unethical treatment of employees, non-compete clauses in the employment contracts and the failure to provide the promised benefits often result in employees reluctance to taking up the employment in various companies. Through this article, I would like to touch upon some of these issues.

While the government has provided employees with a forum like that of the Reconciliation Committee and the Dubai Courts to resolve issues such as unethical treatment of employees in terms of excessive working hours, non- payment of dues, unfair dismissal and the fear of a ban being imposed on them by the employer and/or immigration often compel employees to either adjust to their current working conditions or alternatively resign from their jobs while forfeiting the end of service benefits and other applicable entitlements.

The Government understands the position of the employee and has setup a judicial system that is that understands that the employee is the weaker party in the labour dispute in comparison to the employer. While most labour disputes are resolved at the Reconciliation Committee involving a mediation between the concerned parties, the judicial system encourages an aggrieved employee to file a case against his employer by waiving the court fee payable by the employee at all stages of the case. However, the most disputed issues in relation to the employment contracts are as follows:


The fear of a labour ban is a major concern amongst employees wishing to register a dispute against the employer, however, they were only introduced to prevent employees from job--jumping as opposed to preventing them from taking up a favourable job opportunity. If an employee has a better offer from his prospective employer, they are allowed to terminate their agreement with their previous employer and get the ban lifted by their prospective employer provided the employer has completed at least one year of service with his current employer. However, the employee will be entitled to his gratuity subject to the type of the employment contract (limited or unlimited contract) and the number of years the employee has been associated with the employer as stated in Article 137 and Article 138 of the Labour Law.

Article 137 of the Labour Law which deals with gratuity under unlimited contracts states as follows:

"If an employee under a contract with unlimited period has left his work at his own option after a continuous service of not less than one year and not more than three years, he shall be entitled to one third of the end of service gratuity"

"If the period of his continued service is more than three years and less than five years he becomes entitled to two-third of the said gratuity, but if his continued service exceeds five years, he becomes entitled to the entire gratuity."

Article 138 of the Labour Law which deals with gratuity under limited contracts states as follows:

"If an employee under a contract with limited period leaves his work at his own option before the end of the contract period he shall not be entitled to end of service gratuity unless the period of his continuous service exceeds five years."

With regards to passport retention by the employers, employees must know that the passport is the personal document of an individual issued to him by the government authorities of his country. As such, no employer is allowed to retain the passport of his employees. In the emirate of Dubai, an employee can file a petition before the Dubai Court requesting the release of his passport held by the employer and in the other emirates, the employee will be required to file an urgent case before the Federal Courts seeking the release of his passport which is in the custody of the employer.


With regards to the inclusion of the non-compete clauses in employment contracts, both employers and employees must realise that while they can include such clauses in the contract, the said clause will be binding upon the employee only if the employee's scope off work exposes them to sensitive information the disclosure of which can affect the employer's interest. Additionally, such clauses will be binding on an employee provided the clause stipulates the duration, geographical territories and the nature of work that the employee may take up with his their prospective employer. The relevant provisions which deal with the non-compete clause are stipulated in Article 127 of the UAE Labour Law and Article 909 of the UAE Civil Transactions Laws.

Article 127 of the Labour Law states as follows:

"Where the work assigned to a worker allows him to become acquainted with the employer's clients or to become familiar with the secrets of the business, the employer may require him to refrain, after the termination of his contract, from competing with the employer or participating in any enterprise that is in competition with the employer's own business. Such agreement shall be valid only on condition that the worker is at least 21 years of age at that time of the agreement is entered into and that the agreement is limited as to time, place and the nature of the business, to the extent necessary to safeguard the employer's lawful interests"

Article 909 (1) and (2) of the UAE Civil Transactions Laws states as follows:

(1) "If the work of the employee is such as to permit him to have access to work secrets or to make acquaintances with the customer of the business, it shall be permissible for both parties to agree that it shall not be permissible for both parties to agree that it shall not be permissible for the employee to compete with the employer or to engage in an employment which competes with him after the termination of the contract.

(2) Provided that such agreement shall be valid unless it is limited in time, place and type of work to such extent as may be necessary to protect the lawful interest of the employer.

(3) It shall not be permissible for the employer to rely on that agreement if he terminates the contract without any act on the part of the employee justifying that course, and likewise it shall not be permissible for him to rely on the agreement if he commits any act which justifies the employee in terminating the contract."

Any dispute in relation to the non- compete clause will be decided by the UAE Courts on a case to case basis duly considering the circumstances surrounding the case, the sensitivity and value of the information the employee was exposed to, the position held by the employee and the damage caused to the employer's business if the information is disclosed. Additionally, an employer cannot enforce the clause on an employee if they terminate the employee for an unjustifiable cause or if the employee resigns due to an act of the employer justifying such termination.


With regards to claiming entitlements offered to an employee in their offer letter and not in their employment contracts, there are two ways to deal with this issue. Usually, in addition to the standard labour contract, companies execute a separate employment contract with the employee reflecting detailed terms and conditions of employment together with the benefits. Such a contract is considered valid and an employee can claim for the benefits stipulated in this contract. If the benefits are restricted only to the offer letter and not mentioned in the employment contract, the employee will be required to prove to the Court that the employer provided the said benefits. Employees must know that an offer letter is merely a preliminary agreement between the parties and a formal employment contract supersedes all previous written or verbal agreements between the parties. We advise employees to ensure that a summary of their entitlements or a reference to the offer letter must be made in the formal employment contract.

Based on the above, employees are encouraged to trust the UAE judicial system and take the initiative to stand up against any ill treatment at the hands their employers.


Al-Kabban & Associates was founded in 1993 with a strong vision of providing exceptional legal representation in the UAE. With over 20 years of experience the firm has proven success and understanding of the legal system and its framework. This success is founded on the philosophy of offering support and professional advice to clients whilst still dealing with each case in a culturally sensitive manner that will end in favourable results.

Al-Kabban & Associates pride themselves on being extensively knowledgeable and specialists in several areas of practice within the Middle East. These areas include Property & Real Estate, Maritime & Aviation, Dispute Resolution, Banking & Finance, Corporate & Commercial, Construction & Infrastructure, Employment, Compensation, Criminal, Cyber Law, Insurance, Intellectual Property, Iraqi law, Litigation & Arbitration and Shariah law.

Since inception the firm has had great privilege in representing several high profile clients reflecting the integrity and high proficiency of the work accomplished at Al-Kabban & Associates.

In addition to the standard labour contract, companies execute a separate employment contract with the employee reflecting detailed terms and conditions of employment together with the benefits

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Date:Jul 31, 2015
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