A groundbreaking ruling from Abu Dhabi’s Court of Cassation has awarded an employee Dh59,290 compensation for 13 years of unused annual leave, setting a significant precedent for employment law across the UAE. This landmark decision emphasises employers’ responsibilities for proper leave documentation and could reshape how companies manage employee entitlements.
The Case That Changed Employment Law
The case involved an employee who worked for the same company from 2009 until June 2022. Following contract termination, the employee claimed never having taken entitled annual leave during the entire 13-year tenure and sought financial compensation. The employer failed to provide documentation proving the employee had taken leave or received compensation, according to Habib Al Mulla and Partners.
This documentation failure proved costly. The Court of Cassation overturned a lower court’s decision that had limited compensation to just two years’ worth of unused leave, instead granting full compensation for the entire period.
Legal Framework Supporting Employee Rights
Navandeep Matta, Senior Associate at Kochhar & Co. Inc. Legal Consultants, described the decision as a landmark in UAE employment law. “This ruling has sent shockwaves through the employment sector, as the court awarded compensation for 13 years of unused leave,” he explained.
The ruling draws upon Article 29 of Federal Decree-Law No. 33 of 2021 and Cabinet Resolution No. 1 of 2022, which establish that employees are legally entitled to compensation for unused leave upon termination. This includes limited portions of leave carried forward from previous years.
Burden of Proof Lies with Employers
The court emphasised a crucial principle: employers bear the legal responsibility to prove employees either took their leave or received compensation. In this case, company records showed only one vacation over a decade, with no evidence of payments in lieu of leave.
“Based on this, the court ruled in favour of the employee, using the final basic salary to calculate the owed compensation,” Matta noted. The calculation method established by this ruling could influence future compensation awards across the UAE.
Wake-Up Call for HR Departments
Dr Habib Al Mulla, founder of Habib Al Mulla and Partners, stated that this ruling sets a significant precedent in labour disputes related to unused leave. The decision carries substantial implications for employers regarding leave management, recording systems, and potential financial obligations.
Matta emphasised the broader message for employers: “This judgment should serve as a wake-up call to HR departments and company leadership. Accurate leave tracking and timely settlement of entitlements are not just best practices — they are essential for compliance.”
Practical Steps for Employers
The ruling highlights critical areas where employers must strengthen their practices:
Documentation Systems: Companies must maintain comprehensive records of all leave taken and compensation paid. Poor record-keeping cannot excuse non-compliance with employee entitlements.
Policy Reviews: Employers should immediately review and update leave policies to prevent similar situations. Regular audits of leave balances and proper documentation procedures are now more crucial than ever.
Proactive Management: Rather than reactive responses to claims, employers must proactively manage leave entitlements and provide timely settlements.
Financial Implications for Businesses
The Dh59,290 compensation award, calculated using the employee’s final basic salary, demonstrates the substantial financial risks employers face when failing to manage leave properly. For companies with multiple employees and years of poor documentation, the potential exposure could be significant.
The court’s decision to award full compensation rather than limiting it to two years shows the judiciary’s commitment to protecting employee rights, regardless of administrative oversights by employers.
Setting New Standards
This landmark case establishes important precedents for future employment disputes. The ruling demonstrates that accrued rights cannot be ignored due to poor record-keeping, and employers must maintain proper documentation or face significant financial consequences.
“Ultimately, the judgment strikes a balance between legal entitlements and evidentiary fairness,” Matta concluded. “Employers must act proactively or risk being caught on the wrong side of the law.”
Moving Forward
The December 2024 verdict marks a turning point in how accrued leave is interpreted under UAE labour law. Companies operating in the UAE must now prioritise accurate leave tracking systems and regular policy reviews to avoid similar costly disputes.
For employees, this ruling reinforces their rights to proper compensation for unused leave and establishes clear legal protection against employers who fail to maintain adequate records.
Key Takeaway: The Abu Dhabi Court of Cassation’s Dh59,290 compensation award for 13 years of unused leave sets a crucial precedent requiring employers to maintain proper documentation and proactively manage employee leave entitlements or face significant financial liability.
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