Dubai Court of Cassation, Labour Appeal No. 25 of 2025, judgment of 29 April 2025
Under Article 51 of the Labour Relations Law (Federal Decree-Law No. 33 of 2021), a foreign full-time worker with at least one year of continuous service is entitled to an end-of-service gratuity when his service ends. Rights that arise only when the contract ends are governed by mandatory rules of public order, so a worker's acknowledgment that he has received his gratuity before the right arose is void; only an acknowledgment made after the employment has ended is valid. Amounts deducted from a worker's pay and paid to him during his employment as a 'retirement pension' are not a pension and do not replace the gratuity.
An employee worked from February 2010 under a fixed-term contract for companies of a group, latterly through the branch of one of them in the Dubai Multi Commodities Centre free zone, at a monthly salary of about USD 22,750, until his service was ended in January 2023. After the DMCC Authority could not settle his complaint, it was referred through the Ministry of Human Resources and Emiratisation to the court. He claimed salary deductions, housing allowance, bonuses, an end-of-service gratuity of about USD 236,900 and a ticket. The Court of First Instance awarded the gratuity and the ticket against the branch. The Court of Appeal held both respondent companies jointly liable and awarded a performance bonus, but rejected the gratuity: under a 2017 assignment letter the employee had agreed to a 'retirement pension' of 10 per cent of his annual basic salary as an alternative to the gratuity, had received about USD 306,000 under that arrangement since 2010, more than the gratuity of about USD 259,500 it calculated, and had therefore chosen a better benefit rather than waived his right.
The Court of Cassation quashed that part of the judgment. A retirement pensioner is a person whose service has ended and who receives a pension under the pensions and social security legislation; amounts deducted from a person's pay and paid to him during his employment as a 'pension' do not fall within that concept in any way and contradict it. Under Article 51 the gratuity is due when service ends. Rights that arise only at the end of the contract are governed by mandatory rules of public order, so an acknowledgment of receipt made before the right arises is void, and only one made after the employment relationship has ended is valid. The Court of Appeal had also disregarded an email from the DMCC free zone stating that it had no pension scheme option at that time and that the company had to pay end-of-service benefits.
Deciding the merits, the Court rejected the employer's appeal on the gratuity, restored the award of about USD 236,900 and, adding the bonus awarded by the Court of Appeal, fixed the total at about USD 373,400 or its equivalent in dirhams at the time of enforcement.
The judgment shows that an employer cannot substitute its own in-salary 'pension' payments for the statutory end-of-service gratuity, even where the employee agreed in writing and the payments exceeded the gratuity: the gratuity remains payable in full when employment ends. The court relied on the DMCC Authority's confirmation that no pension scheme was available in that free zone at the time.
| Article 51 of Federal Decree-Law No. 33 of 2021 Regulating Labour Relations — text of article 51 |
“ما يخصم من أجر الشخص ويصرف له أثناء عمله كمعاش تقاعدي لا يدخل تحت مفهوم ومعنى المعاش التقاعدي بأي شكل من الأشكال”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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