In the United Arab Emirates (UAE) labor market, two main types of employment contracts are utilized as outlined in UAE Labor Law No. 8 of 1980: Limited Term Contracts and Unlimited Term Contracts. Each of these categories has distinct characteristics that influence factors such as termination clauses and end-of-service gratuity.

Limited Term Contracts (Fixed Term)

Limited Term Contracts, also known as fixed-term contracts, establish a predetermined duration for employment. This timeframe is mutually agreed upon by both the employer and the employee. These contracts are typically used for specific projects or one-time jobs.

In accordance with recent reforms implemented in 2018, the maximum permissible duration for a Limited Term Contract is two years.

Unlimited Term Contracts (Open Ended)

Unlimited Term Contracts, often referred to as open-ended contracts, specify a start date for employment but lack a designated end date. This implies the employment relationship can continue indefinitely unless terminated by either party following the legal guidelines set forth in UAE Labor Law.

A well-drafted employment agreement in the UAE serves as a cornerstone for a smooth working relationship between employer and employee. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector outlines the minimum contractual requirements, but additional clauses can be included to enhance clarity and address specific needs.

Parties to the Agreement

This section identifies the employer and the employee by their full legal names and details.

Contract Type and Duration

Specify whether the agreement is a Limited Term Contract (fixed term) or an Unlimited Term Contract (open ended) as defined by UAE Labor Law. For Limited Term Contracts, the start and end date of employment should be clearly stated.

Job Title and Description

Clearly outline the employee's job title and a detailed description of their duties and responsibilities.

Remuneration and Benefits

Specify the employee's basic salary, along with any allowances, bonuses, and their frequency of payment. Additionally, detail any benefits offered, such as health insurance, vacation entitlements, and sick leave, ensuring compliance with UAE Labour Law's minimum requirements.

Working Hours and Overtime

Define the standard working hours per week and overtime pay calculations, adhering to UAE Labour Law regulations.

Termination Clause

Outline the grounds and notice periods for contract termination by both employer and employee, as stipulated by UAE Labour Law.

Confidentiality and Intellectual Property

If applicable, include clauses protecting the employer's confidential information and intellectual property rights.

Dispute Resolution

Establish the process for resolving any disagreements arising from the employment contract, such as mediation or arbitration.

The UAE labor market incorporates a mandatory probationary period within most employment agreements. This initial period serves as a trial phase for both the employer and the employee to assess suitability and ensure a good fit. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector (the "UAE Labour Law") governs the parameters of the probationary period.

Key Points Regarding Probation in the UAE

• Mandatory: All new employees in the UAE must undergo a probationary period.
• Maximum Duration: The probation period cannot exceed six months from the commencement of employment. Any period exceeding this is considered unlawful.
• Notice for Termination: During probation, employers must provide the employee with 14 days written notice before termination. Similarly, employees on probation must give 14 days' notice if they intend to leave the country or join another company within the UAE.

Considerations During Probation

• Performance Evaluation: The probationary period allows employers to assess the employee's skills, knowledge, and work ethic to determine if they meet expectations.
• Employee Suitability: Employees can also use this time to determine if the role and company culture align with their career goals.
• Limited Rights: It's important to note that employees on probation may have certain limitations on their rights compared to those with confirmed employment contracts. This may include restrictions on benefits or severance pay.

Confidentiality and non-compete clauses are often included in UAE employment agreements to protect the employer's legitimate business interests. These clauses are subject to specific regulations outlined in the UAE Labour Law.

Confidentiality Clauses

Confidentiality clauses are designed to safeguard the employer's confidential information, such as trade secrets, client lists, and business strategies. The UAE Labour Law, specifically Article 16, emphasizes the employee's obligation to preserve the confidentiality of work-related information.

These clauses should clearly define what constitutes confidential information and the restrictions placed on employee disclosure during and after their employment.

Non-Compete Clauses

Non-compete clauses restrict an employee's ability to work for a competitor or engage in similar activities for a specific period after leaving the company. However, UAE law imposes limitations on the enforceability of non-compete clauses:

• Justification: A non-compete clause can only be included if the employee's role grants them access to confidential information or the potential to harm the employer's business through competition.
• Reasonable Scope: The clause's restrictions on geographic location, duration (not exceeding two years after employment ends), and type of work must be reasonable and proportionate to protecting the employer's interests.
• Employer Termination: If the employer terminates the employment contract unlawfully, the non-compete clause becomes invalid.