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Wrongful Termination in UAE: Compensation for Employees Under Arbitrary Dismissal

The revised labour legislation of the United Arab Emirates, Federal Decree-Law No. 33 of 2021 Regulating Labor Relations, was implemented on February 2, 2022. This updated law encompasses numerous regulations that employers in the private sector must comply with.

Among the various provisions outlined in the legislation is Article 47, which addresses the circumstances surrounding an employee's arbitral termination. This article focuses on the concept of arbitrary dismissal, wherein workers' rights are safeguarded if their employer terminates their employment without a valid and justifiable reason. Following the new labour law, if an employee can substantiate their claim of arbitrary dismissal by filing a complaint with the Ministry of Human Resources and Emiratization (MOHRE), and if the Ministry verifies the validity of the complaint, the employee is entitled to receive compensation for the arbitrary dismissal.

Let's examine the provisions outlined in the new labour law that details the appropriate course of action to be taken against unjust termination by an employer.

Find out more info: Arbitrary Dismissal: Employee Contract Termination by Employer

What amounts to Arbitrary Dismissal?

According to Article 47, if an employer terminates an employee's contract due to the employee filing a complaint with the Ministry of Human Resources and Emiratization (MoHRE) or initiating a lawsuit against the employer, provided the validity of such actions is proven, the termination is considered illegal.

Employees who believe they have been unlawfully dismissed can file a complaint with the Ministry of Human Resources and Emiratization. The Ministry will make efforts to resolve the matter through amicable means. If an amicable settlement cannot be reached, the case will be referred to the appropriate Court.

If arbitrary dismissal is substantiated, the Court will mandate the employer to compensate the employee. The compensation amount will be determined by considering various factors. It is important to note that the compensation granted should not exceed the employee's wages for three months, based on their last entitled salary. Furthermore, the employee can claim their end-of-service gratuity, any outstanding notice period dues, or any other unpaid entitlements from their employer.

Read More: Labor Ban Under Unlimited Contract in UAE

Article (47) Arbitral Dismissal: Legal Provision Top of Form

  1. The termination of an employee by their employer shall be deemed unjustified if the employee lodges a substantial complaint with the Ministry or successfully pursue legal action against the employer, thereby proving the validity of their claim.
  2. If the termination is unjustified, as per paragraph (1) above, the employer must provide the employee with fair compensation as determined by the competent Court. This compensation amount shall be calculated based on factors such as:
  1. the nature of the work,
  2. the extent of harm suffered by the employee, and
  • The duration of their service.

However, the compensation shall not exceed the equivalent of three months' wages based on the employee's most recent salary.

  1. The provisions outlined in paragraph (2) above do not diminish the employee's entitlement to receive payment in lieu of notice and severance pay, as stipulated in the relevant provisions of this law.

Termination of an employee without Notice by the Employer

Article 44 of the UAE Labour Law outlines the circumstances in which an employer can terminate an employee's contract without notice. These circumstances include:

  • If the employee assumes a false identity or presents counterfeit documents or certificates.
  • If the employee's actions result in significant financial loss to the employer or if they intentionally cause damage to the employer's property and acknowledge their wrongdoing. The employer must inform the Ministry of Human Resources and Emiratization (MoHRE) within seven working days of becoming aware of the incident.
  • If the employee violates safety instructions clearly displayed in writing or verbally communicated to illiterate employees regarding the well-being of workers and the workplace.
  • If the employee fails to fulfil their fundamental obligations as stated in the employment contract and continues to violate them despite receiving two warnings of dismissal for the same offence.
  • If the employee discloses confidential information about the establishment, resulting in financial losses or missed opportunities for the employer, or if they use the information for personal gain.
  • If the employee is found to be intoxicated or under the influence of illicit substances during working hours or engages in workplace actions that breach public morality.
  • If the employee physically assaults the employer, manager, or colleagues while performing their duties.
  • If the employee absences themselves from work without a valid reason for more than 20 intermittent days or more than seven consecutive days within a year.
  • If the employee unlawfully exploits their position to obtain personal benefits and gains.
  • If the employee joins another establishment without adhering to the rules and procedures regarding such matters.

Find more info: Role of the Arbitration Lawyers

Legal Remedies for Arbitrary Dismissal: 

Employees who believe they have been arbitrarily dismissed have the right to challenge their termination. They can file a complaint with the Ministry of Human Resources and Emiratization (MOHRE) within a specific timeframe. The MOHRE will investigate the complaint and attempt to resolve the issue through mediation or conciliation. They can pursue legal action if an employee's complaint is not resolved through mediation or conciliation. This involves filing a case in the labour courts, which will review the evidence presented by both parties. If the Court determines the dismissal was arbitrary, it may order the employer to reinstate the employee or provide appropriate compensation.

If you want to know more regarding arbitrary dismissal and wrongful termination, talk to HHS Labour lawyers in UAE and employment lawyers in Dubai.

Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.