Introduction
Some of the employers we meet in the UAE believe that the labour courts are naturally inclined to rule against them in disputes against their employees. Their argument goes that no matter how compelling their arguments, they will fall on the deaf ears of the courts which often grant generous compensation to aggrieved employees.
It is contended here that there is a great deal of exaggeration in the above statement and that it stems from the lack of understanding of the labour law and, when it comes to dismissal of employees, the misapplication of the pre-termination steps by some employers.
That being said, a judgment that has been issued recently by the
Dubai Cassation Court will be discussed below whereby the Court
ruled in favour of the employer in a controversial matter, being
disclosure of confidential information, by depriving the employee
of his end-of-service gratuity and other benefits.
Work secrets and confidential information that an employee gains
during his work are protected under UAE law and its disclosure is
banned.
Article 120/6 of the UAE Labour Law (ULL) allows the employer to
dismiss the employee immediately without notice:
if he divulges any secrets of the establishment where he
is employed.
Furthermore, more protection is afforded to work secrets and confidential information in the following articles of the Civil Transactions Code of the UAE under the heading 'Obligations of the Employee'.
Article 905/5 of the Code stipulates that the employee
must:
Keep the industrial or trade secrets of the employer, including
after the termination of the contract, as required by the agreement
or by custom.
Article 909/1 states:
If the work of the employee is such as to permit him to have
access to work secrets or to make acquaintance with the customers
of the business, it shall be permissible for both parties to agree
that it shall not be permissible for the employee to compete with
the employer or to engage in an employment which competes with him
after the termination of the contract ...
The Case
By way of background, the case concerned an employee who was
dismissed immediately by his company when it discovered an email
wherein the employee diverted the clients of the company to a
competitor company run by his brother who held 49% of its
shares.
The employee filed a lawsuit against the company to claim his
'arbitrary termination' compensation amounting to AED
211,079, which included, inter alia, compensation for annual leave,
end-of-service gratuity, termination notice, and return ticket.
The Court of First Instance granted the employee his relief. The Court of Appeal upheld the judgment in part, observing that the employee had not been dismissed arbitrarily and consequently he was not entitled to the annual leave and return ticket. Thus it reduced the compensation to AED 196,079.
The company appealed before the Court of Cassation on the ground
that that while the decision of the Court of Appeal established
that the employee had not been arbitrarily dismissed, the said
Court erred in its decision to grant him end-of-service gratuity
and notice period on the grounds that the company had failed to
warn him and to conduct a written investigation as per Article
120/5 of the ULL.
The Court of Cassation observed that the employee had breached his
obligation not to divulge the secrets of the company that came to
his knowledge during his employment. The Court elaborated:
... the intention of the legislator behind this ban was to prevent moral or material harm to the employer due to the disclosure of his establishment secrets to third parties which may be used by competitors in the same business to fight him economically, psychologically or publically which may negatively affect his industry, trade or economic activity that the employer practices if such secrets were published. In this respect, a secret means all the information that relates to the establishment which may if disseminated shake the trust in the establishment or its owner or to harm his trade or industry with economic stagnation which may lead to the enterprise incurring losses ...
The Court concluded that the employee had breached Article 120/6 of the ULL and as a result he had not been arbitrarily dismissed and there was no requirement for a notice or an investigation of the breach prior to his dismissal. It then applied the provisions of Article 139/(a) so as to deprive the employee of his end-of-service gratuity if he was dismissed pursuant to Article 120. The sum awarded to the employee was reduced from AED 211,079 before the First Instance Court to AED 4,500.
Conclusion
The above ruling demonstrates that UAE courts are equally keen to protect the rights of both employers and employees pursuant to the law. In this case, the employee had acted expressly against his employer by diverting one of the company's clients to his brother's company.
It appears that the breach committed by the employee is not
explicitly mentioned under Article 120 of the ULL. The
employee's actions cannot be considered a mistake (Article
120/3) because he committed an intentional breach with the aim to
gain illicit profit. His breach is also deemed to be more severe
than a mere failure to perform basic duties (Article 120/4).
Although the action of the Employee does not fall technically in
the category of divulgement of work secrets, it appears that the
Court of Cassation classified the breach as such because it was
closest, out of the other breaches enumerated under Article 120, to
the breach committed by the employee. It is submitted that the
Court deemed, justly, the employee's action to be serious and
to merit a punishment that deprived him of his end-of-service
gratuity.
Furthermore, the Court provided a remarkable definition of the
kind of work secrets that are protected under the law and has
extended it to include secrets that may be used to fight the
employer psychologically, and which may lead to undermining
confidence not only in the enterprise itself but also its owner. It
is submitted that this extended definition of secrets goes in line
with the modern interpretation of trade secrets that does not limit
the confidential information to those of the business itself only,
but it would include also those related to the persons undertaking
that business if the disclosure took place in the context of
business and to harm the business of the company.
First published 2016-11-01
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.