Businesses in the UAE are more varied, intelligent, and agile than they have ever been. As a result, in order to respond to economic events, UAE enterprises frequently require assistance with reorganization, restructuring, and cost-cutting operations. When discussing such matters, redundancy is a crucial consideration.

Because redundancy is not a statutory term, there is often a great deal of ambiguity and confusion in the UAE regarding the legal approach to redundancy. Although there is no statutory concept of redundancy, the UAE courts have previously recognized that corporations dismissing employees for cost-cutting reasons can amount to legally legitimate and valid grounds for dismissal under Article 117 of the UAE Labour Law.

Article 117 of the UAE Labour Law states that a corporation may terminate an unlimited term employment contract at any time for a justifiable reason by giving the employee at least 30 calendar days’ notice of termination (or longer if the employment contract provides for a longer notice period). It’s worth noting that Article 117 only applies to the provisions of an unlimited-term employment contract, not a fixed-term contract.

When a corporation fires an employee from an unlimited-term employment contract for a redundancy-related reason, the employee should receive the following payments:

• Pay for notice (minimum of 30 days, contingent on the employee successfully completing the probationary period);
• End-of-service gratuity, if the employee has worked for one year;
• Payment for yearly leave that has accrued but has not been used;
• Any other contractual compensation comes from the cessation of employment, assuming the employee returns to his or her home country.

In addition to the aforementioned amounts, employees may be entitled to compensation for “arbitrary dismissal” by the Labour Courts. When the Labour Court rules that an employee’s dismissal was unfair and/or unlawful, it also rules that the dismissal was arbitrary. In such cases, the employee may be entitled to up to three months’ pay as compensation for wrongful dismissal.

There will always be a risk in redundancy type dismissals of employees refusing to cancel their visas and/or pursuing labor claims of arbitrary dismissals because there is no statutory concept of redundancy and where a company fails to engage in a reasonable process or there is insufficient evidence to support the dismissal.