Dubai: Is termination following 'best employee' award considered an arbitrary dismissal?

Question: I received two 'best employee' awards from my company in Dubai this year. However, I was shocked when I was given a termination letter last month. The letter states it's a cost-cutting measure. Considering that I have exceeded all my targets and received recognition from the company for my work, will I have a strong case if I file for arbitrary dismissal?

Answer: Pursuant to your queries, it is assumed that you were employed in the mainland of Dubai. It is assumed that your employer has terminated you by serving a stipulated notice period as mentioned in your employer contract, and you are currently serving the notice period. Therefore, the provisions of Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations are applicable.

In the UAE, an employer may terminate an employee by serving a stipulated notice period as mentioned in the employment contract. This is by Article 43 (1) of the Employment Law, which states, "Either party to an employment contract may terminate the contract for good cause by giving the other a notice in writing. The employee shall perform his duties during the notice period agreed upon in the contract, provided that the notice period is not less than 30 (thirty) days and not in excess of 90 (ninety) days."

However, an employer may not terminate an employee without a valid reason. If an employer terminates an employee's employment without a valid reason, such termination may be considered arbitrary termination. This is in accordance with Article 47 of the Employment Law, which states,

"1. A dismissal of an employee by his employer shall be arbitrary if the employee submits a serious complaint to the Ministry or files an action proven to be valid against the employer.

"2. The employer shall pay the employee fair compensation estimated by the competent court if it is found that the dismissal is arbitrary pursuant to paragraph (1) above.

The amount of compensation shall be determined based on the type of work, the extent of harm sustained by the employee and the length of his service. In any case, the amount of compensation shall not exceed (3) three month's salary of the employee calculated based on the last salary received by him.

3. The provisions of paragraph (2) above shall not prejudice the right of an employee to the pay in lieu of notice and severance pay due to him under the provisions hereof."

Based on the aforementioned provisions of law, the termination of your employment by your employer on the grounds of cost-cutting may be considered an arbitrary termination, as a mere unilateral decision by the employer that it is facing an economic crisis may not be considered a valid reason for termination of employment of an employee. However, if an employer is facing a severe financial crisis, it may have to wind up its operations by obtaining an order from a local authority/court which has jurisdiction in the UAE and may terminate an employment contract of an employee. This is in accordance with Article 25 (1) (b) of the Cabinet Resolution No. 1 of 2022, read with Article 42 (8) of the Employment Law, which states, "Subject to the provisions of Federal Decree-Law No. 9 of 2016 on Bankruptcy, Federal Decree-Law No.19 of 2019 on Insolvency and the provisions of Clause (8) of Article 42 of the Decree Law:

1. The employment contract shall be terminated by:

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