On February 2, 2022, the Federal Decree-Law No. 33 of 2021, the new UAE Labor Law, was enforced. The 1980 legislation was superseded by the new Labor Law (Federal Law No. 8 of 1980, as amended). In the UAE, employment ties in the private sector are mainly subject to the new Labor Law (excluding the DIFC and ADGM free zones).
In accordance with the new Labor Law, either party may end an employment contract for any “legitimate cause” by notifying the other party in writing. The previous Labor Law included a similar clause. In the UAE, the definition of “valid reason” was hotly contested and frequently the source of labor disputes. A claim for damages would be made in the event that an employment contract was terminated abruptly or for a cause other than a “legitimate reason.”
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In addition, “arbitrary” termination (arbitrary dismissal) may give rise to a claim for damages. According to the outdated Labor Law, an employer’s decision to terminate an employee who has filed a complaint or legal action is arbitrary. It further said that if the reason for termination is unrelated to employment, it will be arbitrary on the part of the employer. It was widely debated what “not linked to employment” meant. It wasn’t obvious if a dismissal for a “valid reason” might still result in damages even if it was determined to be unrelated to the job.
The definition of what constitutes an arbitrary termination (arbitrary dismissal) has been changed by the new Labour Law. The retaliatory aspect is still present: If an employee files a complaint with the Ministry of Human Resources and Emiratization or files a lawful lawsuit against the employer, the employer’s decision to terminate that employee’s employment shall be arbitrary.
In contrast, the “not linked to work” component is no longer included in the new Labor Law. Therefore, only when the retaliatory element is present may an employee rely on a claim for arbitrary termination and thereafter request three months’ income as compensation.
The employee must contend that the termination was made without notice or for an unjustified cause if there was no retaliation. This limits the potential for an unhappy employee to recoup more so than previously. By limiting the grounds for a claim of arbitrary termination, the legislative authorities may have hoped to lower the frequency of employment disputes.
The “valid purpose” criteria have been kept; therefore, the amendment might not have this impact. The UAE courts are renowned for being welcoming settings for employee disputes, and whether a given case’s termination was lawful always depends on the unique facts. As previously, when a termination is disputed, an employer must be ready to provide documentation of its justifications.
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