Drafting an Employment Settlement Agreement in the UAE: Everything You Must Know

Employment settlement agreements are vital in resolving employment disputes and ensuring a fair resolution for employers and employees in the United Arab Emirates (UAE). These agreements, also known as settlement agreements or separation agreements, allow parties to reach mutually acceptable terms without resorting to lengthy and costly legal proceedings.

This article will explore everything you need to know about drafting an employment settlement agreement in the UAE.

1. Understanding Employment Settlement Agreements

An employment settlement agreement is a legally binding contract between an employer and an employee outlining the settlement terms reached in a dispute. It resolves issues such as termination, severance, unpaid wages, discrimination claims, or any other employment-related conflicts.

2. Key Elements of an Employment Settlement Agreement

When drafting an employment settlement agreement, certain essential elements should be included:

1. 1. Identifying Parties: Clearly state the names and contact details of the employer and the employee involved in the agreement.
   2. Agreement Details: Specify the nature of the dispute or issue being resolved, including any claims or allegations made by either party.
   3. Payment and Benefits: Outline the agreed-upon settlement amount, severance pay, unpaid wages, or other financial compensation. Additionally, address the continuation or termination of benefits, such as healthcare coverage or pensions.
   4. Confidentiality and Non-Disclosure: Include provisions ensuring that both parties maintain confidentiality regarding the settlement terms, facts, and circumstances leading to the dispute.
   5. Release and Waiver: Include a release clause where the employee agrees to waive any future claims against the employer arising from the dispute settled in the agreement.
   6. Governing Law and Jurisdiction: Specify the applicable law and jurisdiction under which the settlement agreement is governed, typically the laws of the UAE.

3. Mediation and Arbitration:

   In the UAE, mediation and arbitration are commonly used for resolving employment disputes. Including the settlement agreement provisions requiring parties to attempt mediation or arbitration before resorting to litigation can help expedite the resolution process.

4. Non-Disparagement and Non-Competition Clauses:

   Employment settlement agreements often include clauses prohibiting both parties from making negative comments or engaging in actions that could harm the other party’s reputation. Non-competition clauses may also be included to restrict employees from working for a competitor for a certain period after the settlement.

5. Language and Translation: 

   In the UAE, Arabic is the official language, and contracts drafted in Arabic are generally given more weight in legal proceedings. However, it is common to include a clause stating that the settlement agreement can be executed in multiple languages for convenience. If the agreement is translated, ensure that all versions are accurate and reflect the same meaning.

6. Timeframe and Revocation:

   Specify a timeframe within which the settlement agreement must be executed, ensuring both parties have sufficient time to review and consider the terms. Additionally, include a provision addressing the revocation of the agreement, stating that it can only be revoked or modified in writing and by mutual consent.

7.  Severability Clause:

   Include a severability clause to ensure that if any provision of the agreement is deemed unenforceable, the remainder of the agreement remains intact and enforceable.

8. Consideration of Future Employment:

   If the employee is transitioning to a new job, consider including provisions that address the disclosure of the settlement agreement to future employers and whether the employer will provide a reference or employment verification.

9. Consultation with Legal Professionals:

   While drafting an employment settlement agreement, consulting with experienced employment lawyers in the UAE is highly advisable. Legal professionals can provide guidance on local labour laws, ensure compliance, and help protect the interests of both parties involved.

10. Compliance with UAE Labor Laws:

    Employment settlement agreements in the UAE must comply with the provisions outlined in the UAE Labor Law. These provisions safeguard employee rights and ensure fair treatment. Ensuring that the terms of the settlement agreement align with the requirements of the labour law.

11. Execution and Enforceability: 

    To make an employment settlement agreement legally enforceable, both parties must voluntarily agree to its terms and sign the document. It is recommended to have the agreement signed in the presence of witnesses or notary public to strengthen its legal validity.

12. Post-Agreement Considerations: 

    Once an employment settlement agreement is executed, it is essential to adhere to its terms. Employers should ensure timely payment of settlements, benefits, or any other agreed-upon compensation. Employees should respect confidentiality provisions and refrain from making negative statements about the employer or the settlement.

Read more about: Employment Agreement Drafting And Notarization

Drafting an employment settlement agreement in the UAE

Drafting an employment settlement agreement in the UAE requires careful consideration of the legal framework and the specific circumstances of the dispute. Employers and employees can effectively resolve employment-related conflicts by including essential elements, complying with labour laws, and seeking legal advice while safeguarding their rights.

An appropriately drafted settlement agreement can provide the following:

• A fair and amicable resolution.
• Saving time.
• Cost.
• Potential damage to professional reputations.

Find more about: Drafting A Lease Agreement In The UAE: Key Considerations And Best Practice

Notary Public Dubai help in drafting and notarizing employment settlement agreements

Are you looking to draft a robust and legally sound employment settlement agreement in the UAE? Look no further! Our team of experienced drafting lawyers is here to assist you. With our in-depth knowledge of UAE labour laws and expertise in employment dispute resolution, we can guide you through creating an effective agreement that protects your interests. At Notary Public Dubai, we offer comprehensive legal services, including drafting and notarizing employment settlement agreements.

Our skilled drafting lawyers will work closely with you to understand the unique aspects of your case and tailor the agreement to address your specific needs. With our attention to detail and commitment to excellence, you can have peace of mind knowing that your settlement agreement will fully comply with the UAE legal framework.