The following article looks at discrepancies between the new laws on unfair dismissal and recent precedents.
"Pacta sunt servanda," which means "agreements must be kept," is a fundamental principle of law in both common and civil jurisdictions. This principle indicates that agreements should be binding for the signatory parties and executed in good faith. When a party fails to comply with its contractual obligations or acts in bad faith toward the other party, the latter should be entitled to compensation.
Article 246 of Federal Law No. 5/1985 on the Civil Transaction
Law adopted this principle. According to this law, "the
contract shall be implemented according to the provisions contained
therein and in a manner consistent with the requirements of good
faith." Additionally, Article 267 of this law asserts that
neither party has the right to revoke, modify or rescind a valid
and binding contract outside of mutual consent, court order, or
provisions of the law.
Prior to the issuance of Federal Decree-Law No. 33/2021 on the
Regulation of Labor Relations (New Labor Law), which came into
effect on February 2, 2022, an employee who had their employment
agreement terminated by an employer without just cause was entitled
to compensation of up to three months' salary. However, the
introduction of the New Labor Law caused confusion regarding when
an employee is entitled to compensation in the event of
termination, as Article 47 of the New Labor Law states that an
employer's termination of an employment agreement is considered
"illegal" if it is due to the employee filing a serious
complaint with the Ministry of Human Resources and Emiratization
(MOHRE) or filing a valid claim against the employer.
The term "arbitrary dismissal" was replaced with
"illegal termination" under the New Labor Law, and the
scenarios in which an employee is entitled to compensation were
limited to the two situations stipulated in Article 47. These
scenarios were only mentioned as examples of arbitrary dismissal
under the previous labor law.
In addition, the New Labor Law grants both the employer and the
employee the right to terminate the employment agreement
individually. Paragraph 3 of Article 42 states that "the
employment agreement shall be terminated at the request of either
party."
However, due to the wording of Article 47 as mentioned above,
onshore Courts in the UAE are refraining from awarding employees
any compensation in cases where the employer terminates the
employment agreement outside the two scenarios stipulated in
Article 47. As a result, employees will not be able to obtain
compensation through the courts in cases where the employer acts in
bad faith to terminate the employment relationship.
It is important to note that the New Labor Law only applies to
the private sector, which includes entities fully owned by
individuals or jointly with federal or local government, as well as
entities wholly owned by federal or local government unless their
establishment laws stipulate that they are subject to the
provisions of another law. This law applies equally to both
nationals and foreigners. However, it should be noted that the New
Labor Law does not apply to employees of federal and local
government entities, members of the armed forces, police and
security personnel, and domestic workers.
In an employment relationship, the employee is often considered the
weaker party and may agree to the terms of the employment agreement
as imposed by the employer. As a result, employees are deserving of
legal protection. However, in practice, employees may be hesitant
to seek recourse through MOHRE or Courts while their employment
agreement is still in effect. Therefore, we recommend that the New
Labor Law be amended to grant UAE onshore Courts greater discretion
in examining cases of early termination by employers, particularly
in situations where such termination is deemed abusive. This would
provide employees with better legal protections and compensation in
cases of arbitrary dismissal.
This article was written for and originally published by Economy Middle East: Disciplinary action and Arbitrary Dismissal in the UAE.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.