Illegal Termination of Employment under the new law (33/2021)
The employee's entitlements in the case of termination of the employment relationship have always been a key issue of high relevance. In particular, in the event of an unlawful termination, the question of the employee's claims for compensation generally arises.
In this context, the legislator has – presumably intentionally – made a minimal change in the wording of the law compared to the previous regulations, which – on one hand – provides clarity in regard to the interpretation and therefore probably also corresponds to the purpose of the law. At the same time, this change is likely to have far-reaching consequences to the detriment of employees and thus could significantly restrict employee protection and their entitlements.
Initial situation
Before delving into the actual topic of entitlements and compensations of employees in the UAE in case of arbitrary dismissals, it must first be clarified that in the UAE, as well as in most of the GCC Countries, for foreign employees, no legal remedy for the reinstatement of the employment relationship comparable to known in German-speaking countries is existing. Consequently, an employee's legal remedy in the event of illegal termination, at least in the complaint, is not aiming to the reinstatement of the employment relationship, but only for compensation.
The legal requirements of such a compensation for an unlawful termination have now been redefined by the legislator within the new Labour Law (Federal Decree Law No. 33/2021) and, at least from a first point of view, largely restricted within the requirements of such claim to the detriment of the employee.
Legal situation under the old Labour Law (Federal Law No. 8/1980)
In the past, Article 123 a) of the old Labour Law provided the basis for the compensation in the event of arbitrary dismissal. Accordingly, the court could have ordered the employer to pay a compensation not exceeding a three months' salary, whereby the basis for the calculation this is the gross salary, and not the basic salary as in the case of the end-of-service gratuity. The amount of the compensation is determined considering factors such as the duration of the employment, the employee's position and the extent of damage incurred to the worker.
However, the question arises what must be considered as an “arbitrary dismissal” in this regard, which gives rise to such a claim. Therefore, Article 122 provided a legal definition of the arbitrary dismissal. According to this, an employer's dismissal was to be deemed as arbitrary if the cause for the dismissal was not related to the work, in particular, if the dismissal was made as a result of filing a serious complaint against the employer at the competent authority – such a complaint is in general mandatory before an action is submitted to the competent court – or if the dismissal was preceded by a valid claim by the employee against the employer.
Certainly Article 122 provided two standard examples for the legal definition with the "filing a serious complaint at the competent authorities" on the one hand, and the "valid claim against the employer" on the other, in which the reason for termination was to be considered as "not related to the work" and therefore as arbitrary. However, this was not intended to be an exhaustive list of examples, so that the court had scope to interpret the wording and could also exercise this scope in favour of the employee, as the court was not bound by the (non-exhaustive) examples mentioned within the law. Therefore, other cases were not excluded in which a reason for dismissal was to be considered as "not related to work" and therefore arbitrary.
Legal situation under the new Labour Law (Federal Decree Law No. 33/2021)
In Article 47 No. 2, the new Labour Law also provides the right of compensation in the event of illegal termination. The amount of this compensation is again limited to a maximum of three months' salary, whereby (as already before) factors such as the length of the employment relationship, the type of work and the damage sustained by the employee must be taken into consideration when determining the amount.
Furthermore, Article 47 No. 1 also provides a legal definition of the term "illegal termination", which on a first point of view hardly differs from the previous wording. So far so good!
However, when examining the wording of Article 47 No. 1 in detail, it is noticeable that it now lacks the characteristic "related to work" and the termination is only to be considered as illegal if it is due to filing a serious complaint with the Ministry of Human Resources and Emiratisation or filing a lawsuit against the Employer that has been proven to be valid. Consequently, the legislator has (probably intentionally) refrained from giving the courts further room for employee-friendly interpretation. Instead, an illegal termination and therefore the existence of the claim requirements shall be expressly restricted to the two cases mentioned within the scope of the exhaustive enumeration of Article 47 No. 1.
In this respect, the legislator requires, as it were, a certain moment of retaliation on the part of the employer for an intrinsically lawful measure by the employee. In practical terms, if the wording is applied accurately, there should hardly be any more circumstances under which such a claim of compensation will arise.
