New Precedent in UAE Labor Law

Supreme Court Nullifies 1.33 Million Wage Repayment Claim

A recent court ruling in the United Arab Emirates created a defining precedent, altering the decisions of lower courts in an 18-month labor dispute. The Abu Dhabi Court of Cassation, in its final verdict, ruled in favor of the employee and rejected the employer's demand for a refund of 1.33 million dirhams.

Case Background

The employee had been in contractual employment with the employer since February 2014 under an indefinite contract, with a basic salary of 35,937 dirhams per month and a total benefits package of 95,630 dirhams. The employer terminated the employment contract in October 2024, prompting the worker to file a lawsuit over unlawful dismissal, claiming among others, back wages, severance pay, salary for the notice period, compensation for unused vacation, moral and material damages, as well as a 12% late interest.

Simultaneously, the company filed a counterclaim alleging that the employee received wages during an unauthorized absence and demanded repayment.

Decisions of Lower Courts

In March 2025, the court of first instance awarded the employee only 103,665 dirhams (for notice period and unused vacation), while granting the employer's claim and obligating the employee to repay 1,338,833 dirhams for wages paid during the absence.

The employee appealed, but the appellate court in April 2025 upheld the lower court's decision, leading the case to reach the Supreme Court.

Supreme Court’s Rationale

The Supreme Court found that lower courts committed significant procedural errors and failed to consider critical evidence. For example, an official certificate from the Ministry of Health confirming the employee was on state-sponsored health leave abroad as a companion for a patient.

Further shortcomings included the employer's failure to conduct an official investigation into the alleged unauthorized absence as wages continued to be paid during the disputed period. The court deemed this as tacit approval, especially given that the employee had pre-submitted necessary documents and had not concealed the reasons for their absence.

Final Judgment and Consequences

On June 18, 2025, the Supreme Court ruled that the employee cannot be penalized for an administrative error beyond their control, especially if acting in good faith, with the company's payroll system automatically generating the payments.

According to the ruling, the employer's repayment request was entirely dismissed, meaning the employee does not have to repay the 1.33 million dirhams. However, the Supreme Court maintained the lower court’s ruling that the employee is entitled to 103,665 dirhams for vacation and notice period.

Additionally, the employer was ordered to cover the court costs, including a 1,000 dirham attorney fee and the appeal deposit.

What This Decision Means for Other Workers

This verdict is a crucial milestone in UAE labor law as it reinforces that employees cannot be held accountable for payment errors they are not responsible for, especially if they acted in good faith and documented their absence. It also serves as a warning to employers: responsible administration is required for wage payment and documenting employee attendance.

(Source of the article: Abu Dhabi Court of Cassation statement.)