UAE Labor Law Limits Arbitrary Dismissal Compensation to Three Months’ Salary

Under Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022, mainland UAE employers may terminate an employment contract for good cause by providing written notice between 30 and 90 days, according to legal guidance published in Khaleej Times.

Terminating an employee without a valid reason may be classified as arbitrary dismissal. In accordance with Article 47(1) of the Employment Law, dismissal is deemed arbitrary if an employer terminates a worker for submitting a serious complaint to the Ministry of Human Resources and Emiratisation (Mohre) or filing a validated legal claim against the company.

Employees subject to arbitrary dismissal may file a complaint with Mohre seeking compensation alongside statutory end-of-service entitlements. Mohre initially attempts to facilitate an amicable settlement between the parties; if conciliation fails, the dispute is formally transferred to the competent court in the UAE.

Where the court determines that dismissal was arbitrary, Article 47(2) authorizes it to order fair compensation assessed on the employee's role, duration of service, and harm suffered. The statutory compensation is capped at a maximum of three months' salary based on the worker's last drawn wage.

Article 47(3) of the Employment Law explicitly specifies that arbitrary dismissal compensation does not prejudice the employee's entitlement to payment in lieu of notice and statutory severance pay.