In response to an inquiry about the possibility of filing a lawsuit for unjustified dismissal after termination due to cost reduction, it is assumed that the employee works in mainland Dubai. It is also assumed that the employer notified the dismissal in accordance with the contract terms and the employee is currently serving the notice period.
The applicable provisions are Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (Labour Law) and Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021. In the UAE, an employer has the right to terminate an employment contract by notifying the employee within the stipulated period, as stated in the employment contract. This corresponds to Article 43 (1) of the Labour Law, which states: 'Either party to the employment contract may terminate the contract for a valid reason by notifying the other party in writing. The employee must perform their duties during the agreed notice period, provided that the notice period is not less than 30 days and not more than 90 days.'
However, an employer cannot dismiss an employee without a valid reason. If the dismissal occurs without legal grounds, it may be considered an unjustified dismissal. According to Article 47 of the Labour Law:
'1. The employee's dismissal by the employer shall be considered unjustified if the employee files a serious complaint with the Ministry or initiates legitimate legal proceedings against the employer. 2. The employer must pay the employee fair compensation, assessed by a competent court, if it is established that the dismissal is unjustified according to paragraph (1) above. The amount of compensation is determined based on the type of work, the extent of damage caused to the employee, and the duration of their service. In any case, the compensation amount must not exceed three months' salary of the employee, calculated based on the last salary received by them. 3. The provisions of paragraph (2) above do not prejudice the employee's right to receive compensation in lieu of notice and end-of-service gratuity due under these provisions.'
Based on the aforementioned legal provisions, dismissal due to cost reduction may be recognized as an unjustified dismissal. However, if the employer faces a serious financial crisis, they may be forced to cease operations upon receiving a corresponding resolution from a local authority or court with jurisdiction in the UAE, thereby terminating the employment contract.
This is stipulated in Article 25 (1) (b) of Cabinet Resolution No. 1 of 2022, which states: 'Taking into account the provisions of Federal Decree-Law No. (9) of 2016 on Bankruptcy and Federal Decree-Law No. (19) of 2019 on Insolvency, as well as the provisions of paragraph (8) of Article (42) of the Decree-Law: 1. The employment contract is terminated in the following cases: (b) Issuance of a decision by the relevant authorities stating that the employer cannot continue its operations for exceptional economic reasons beyond its control.'
Consequently, if an employee believes they were dismissed without legal grounds, they can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) seeking compensation for unjustified dismissal, as well as for other end-of-service payments. After filing a complaint with MOHRE, the authority may attempt to settle the dispute between the employee and the employer amicably. If an amicable settlement is not reached through MOHRE, the employee may file a labour lawsuit against the employer in a court having jurisdiction in the Emirate of Dubai.