Apr 9, 2019

Can an employee lose his end-of-service gratuity entitlement?

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Generally speaking, an employee cannot lose his right to end-of-service gratuity. This right is mandatory and cannot be excluded in the employment contract or any Addendum hereto.

The only exception is if the employee breaches his employment contract in a manner that allows the employer to terminate the employment for cause. The reasons for a termination for cause are exhaustively provided in Article 120 of the UAE Labour Law.

According to Article 120 UAE Labour Law an employer can terminate an employment contract without notice only if the employee:

  • assumes a false identity or nationality or if he submits forged documents or certificates;
  • is engaged on probation and is dismissed at the end or during the probation period;
  • commits an error causing substantial material loss to the employer provided that the employer advises the labour department of the incident within 48 hours from having knowledge of the same;
  • disobeys instructions on the safety of work provided that such instructions are displayed in writing at conspicuous places or verbally informed to an illiterate employee;
  • fails to perform his basic duties under the employment contract and persists in violating them despite formal investigation with him in this respect and warning him of dismissal if the same is repeated;
  • divulges any secrets of the establishment where he is employed;
  • is finally convicted by a competent court of crime against honour, honesty or public morals;
  • is found drunk or under the influence of prohibited drugs during working hours;
  • in the course of his work, commits an assault on the employer, the manager or any of his colleagues;
  • is absent without lawful excuse for more than 20 intermittent days or for more than 7 successive days during one year.

It has to be emphasized that the employer has to prove the existence of a cause and fulfillment of all requirements provided in Article 120 UAE Labour Law, e.g. notice to the labour department or warning letter. If the employer fails to prove the cause for the termination, the termination will be considered as a ‘normal’ termination with the consequence that the employer has to pay the end-of-service gratuity and the salary for the termination notice period.

 

Some employers, however, send their employees a termination for cause, just to avoid payment of the end-of-service gratuity and to safe the salary for the termination period. In this case, an employee has the following claims against his employer:

 

  • end-of-service gratuity
  • salary for notice period (minimum 1 month)
  • compensation for arbitrary dismissal (depending on the circumstances)