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Cost-cutting dismissal: Can UAE employees claim compensation for arbitrary termination?
A dismissal of an employee shall be arbitrary if the employee submits a serious complaint to the Ministry or files an action proven to be valid against the employer
- PUBLISHED: Sun 2 Aug 2026, 10:05 AM
Question: I was recently dismissed as part of what my employer described as a cost-cutting exercise, and I am considering filing a claim for arbitrary termination. I worked for the company for six years and consistently received exceptional performance appraisals. Could these records help strengthen my case?
Answer: Pursuant to your queries, it is assumed that you are employed by an employer located in the mainland of Dubai. Further, it is assumed that your employer has terminated you by serving stipulated notice period as mentioned in your contract and you are currently serving your notice period.
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Therefore, the provisions of Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’) and Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree -Law No. 33 of 2021 Regarding the Regulation of Employment Relations (the 'Cabinet Resolution No. 1 of 2022’) are applicable.
In the UAE, an employer may terminate employment of an employee by serving stipulated notice period as mentioned in the employment contract of an employee. This is in accordance with 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 days and not in excess of 90 days.”
However, an employer may not terminate an employee without a valid reason. In the event, an employer terminates employment of an employee without a valid reason, such termination may be considered as arbitrary termination. This is in accordance with Article 47 of the Employment Law, which states,
“1. A dismissal of an employee by the 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 a 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 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 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 as arbitrary termination.
However, if an employer is facing severe financial crisis it may have to wind up its operations by obtaining an order by 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 states that, “Subject to the provisions stipulated in Federal Decree-Law No. (9) of 2016 concerning Bankruptcy, and Federal Decree-Law No. (19) of 2019 concerning Insolvency and the provisions of clause (8) of Article (42) of the Decree-Law:
1. The employment contract shall be terminated in any of the following events:
(b) Issuance of a decision by the concerned authorities to the effect that the employer is unable to continue his activity for exceptional economic reasons beyond his control."
Therefore, if you feel that your employer has terminated your employment without a valid reason, you may consider filing a complaint with the Ministry of Human Resources & Emiratisation (Mohre) seeking compensation for arbitrary termination along with other end of service entitlements from your employer.
Based on your complaint with Mohre, the authority may attempt to amicably settle the dispute between you and your employer. In the event there is no amicable settlement with your employer before the Mohre, then you may file an employment case against your employer in the court which has jurisdiction in the emirate of Dubai.
Ashish Mehta is the founder and managing partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm are on www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.
Disclaimer: The information provided above is intended for general guidance and does not constitute legal advice. It is recommended to seek formal legal counsel.