Introduction
In a significant and instructive judgment, the Abu Dhabi Court of Cassation has provided much-needed clarity on the interpretation of arbitrary dismissal and employee entitlement to discretionary benefits under Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations.
This decision, issued on 15 April 2026, serves as an important precedent for employers and employees alike, particularly in relation to the strict application of Article 47 and the evidentiary burden associated with bonus claims.
Case Overview
The dispute arose from an employment relationship in which the employee claimed multiple entitlements, including:
- Unpaid wages and allowances
- Compensation for alleged arbitrary dismissal
- Annual performance bonus
- End-of-service related benefits
The employer contested these claims and filed a counterclaim alleging unjust enrichment. The matter progressed through the Court of First Instance and Court of Appeal, before being finally adjudicated by the Court of Cassation.
Key Legal Issue 1: Arbitrary Dismissal under Article 47
Court’s Position
The Court of Cassation adopted a strict and exhaustive interpretation of Article 47, holding that compensation for arbitrary dismissal is limited to only two scenarios:
- Where the employee is dismissed for filing a serious complaint with the Ministry of Human Resources and Emiratisation (MOHRE); or
- Where the employee is dismissed for initiating legal proceedings against the employer, provided such proceedings are valid.
The Court explicitly rejected any broader interpretation that would include situations such as:
- Termination without valid reason
- Delay in salary payments
- Absence of notice
- General unfairness
Application to the Case
The employee failed to establish that his termination was connected to either of the two statutory grounds. Furthermore, the Court noted that the employment relationship had effectively ended following the employee’s resignation, thereby eliminating any basis for claiming arbitrary dismissal.
Legal Impact
This judgment confirms that:
Not every unfair or unjustified termination qualifies as “arbitrary dismissal” under UAE law.
The decision reinforces a narrow statutory interpretation, significantly limiting the scope for such claims.
Key Legal Issue 2: Entitlement to Bonuses and Discretionary Benefits
Court’s Analysis
The Court reaffirmed that entitlement to bonuses or additional financial benefits must be clearly established through one of the following:
- Express provisions in the employment contract;
- Company policies or internal regulations; or
- A consistent and established practice amounting to a binding custom.
Findings in the Case
Relying on the court-appointed expert report, the Court concluded that:
- There was no contractual entitlement to a bonus;
- The company had no formal policy guaranteeing bonus payments;
- No consistent practice existed that would convert the bonus into a contractual right;
- A prior payment relied upon by the employee was not proven to be a performance bonus.
Legal Principle Established
Discretionary payments do not create enforceable rights unless clearly supported by contractual terms or consistent practice.
Judicial Approach: Deference to Expert Evidence
The judgment also underscores the Court’s long-standing principle that:
- Trial courts retain full discretion in assessing facts and evidence;
- Expert reports, when properly reasoned, carry substantial evidentiary weight;
- The Court of Cassation will not interfere unless there is a clear error in law.
This principle is particularly relevant in employment disputes involving financial claims.
Key Takeaways for Businesses
- Limit Liability Exposure: Employers benefit from a clearly defined and limited scope of arbitrary dismissal under Article 47.
- Contractual Clarity is Critical: Employment contracts should explicitly state whether bonuses are discretionary or guaranteed.
- Policy Consistency: Avoid inconsistent bonus payments that may inadvertently create enforceable expectations.
- Documentation: Maintain clear internal records of compensation structures and policies.
Key Takeaways for Employees
- Understand Legal Thresholds: Not all terminations—even if perceived as unfair—qualify as arbitrary dismissal.
- Evidence is Essential: Claims for bonuses or benefits must be supported by contractual documents or clear evidence of consistent practice.
- Preserve Records: Employees should retain employment contracts, policy documents, and payment records.
Conclusion
This judgment represents a pivotal development in UAE labour law, reaffirming a strict statutory interpretation of Article 47 and clarifying the legal framework governing employee benefits.
By narrowing the scope of arbitrary dismissal and reinforcing evidentiary standards, the Court has enhanced legal certainty while emphasizing the importance of precision in employment contracts and internal policies.
How KH Legal Can Assist
At KH Legal, we advise employers and employees on all aspects of UAE labour law, including:
- Drafting and reviewing employment contracts
- Advising on termination strategies and risk mitigation
- Representing clients in labour disputes and court proceedings
- Structuring compensation frameworks and internal policies
For legal advice or assistance, please contact our team.
If you require further clarification or legal assistance concerning the matters discussed in this article, please do not hesitate to contact Kh legal Advocates & Legal Consultants LLC. Our lawyers would be happy to assist you.
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