Covid-era pay cuts accepted by the employee bind him, and RAK courts must follow RAK cassation precedent on interest

The principle

Wage includes only amounts that are fixed and regular; payments due only when their cause arises are not wage unless the law says otherwise. An employment contract is consensual, so the parties may agree to reduce pay, and the employee's acceptance may be express or implied, including during the Covid-19 precautionary measures. Legal interest runs from the date of the claim at the 9% rate settled in Ras Al Khaimah practice. As the apex of the emirate's judicial system, the RAK Court of Cassation's precedents bind the lower courts, which may not follow the case law of other emirates' courts instead.

The case and the decision

The employee sued his employer in the Ras Al Khaimah labour court for AED 584,375 in unpaid entitlements, with legal interest. During the Covid-19 period the employer had paid him AED 20,000 a month from February to September 2020 and nothing from October 2020 to early January 2021. The employee argued that the reductions were not valid because no addendum to his contract had been signed as Ministerial Resolution No. 279 of 2020 on employment stability in the private sector required. The Court of Appeal accepted the employer's position on the reduced pay and, relying on case law of the Dubai courts, altered the interest awarded. On the employee's appeal, the Court of Cassation held that wage under Article 1 of the Labour Relations Law covers what is paid for the work and grants that have become customary, but not amounts lacking permanence that are due only when their cause arises. It discussed the hardship doctrine in Article 249 of the Civil Transactions Law and the Covid-19 resolution, which allowed employers to reduce pay for non-national workers by agreement and in stages. An employment contract is consensual, and the parties may agree to reduce pay; the worker may accept expressly or impliedly, the change takes effect once validly agreed, and whether the worker impliedly accepted it is for the trial court, which had reasonably found acceptance here. On interest, legal interest runs on civil and commercial debts from the date of the claim if the amount is not left to the court's discretion, and the settled practice of the Ras Al Khaimah courts is to award it at 9% a year. The Court of Cassation is the final stage and summit of the emirate's local judicial system, and its principles bind the lower courts, which may not rely instead on the case law of courts outside the emirate. The judgment was quashed on interest, and the first-instance award of 9% interest from 13 March 2021 was restored; the rest of the appeal was dismissed.

Laws applied

In the court’s words

“الأجر. مفهومه. لا يدخل في مفهوم الأجر ما يعطى للعامل من مبالغ ليست لها صفة الثبات والاستقرار ولا تستحق إلا بتحقق أسبابها”

Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.

Related judgments