The Abu Dhabi Court of Cassation has ruled that an employer must compensate a former employee for 13 years of unused annual leave, departing from the two-year limit typically applied by lower courts.
Court of Cassation Decision
The case was brought by an employee who had worked for the same employer from 2009 until June 2022, and upon termination of employment, argued that he had not taken any statutory annual leave and sought compensation. The employer was unable to present any documentation to evidence any leave taken by the employee during employment.
Prior to this decision, the usual approach of the courts has been to limit compensation for accrued but untaken annual leave to the two years prior to termination. The Court of First Instance and the Court of Appeal both adopted this approach in the earlier decisions of this case. However, the Court of Cassation decision indicates that it may be possible for an employee to claim accrued but untaken annual leave for a far longer period—in this particular case, the employee claimed that they had not taken any leave during the 13 years in which they were employed and was awarded compensation in lieu of the untaken leave for the entire period.
This case is particularly notable as the decision was made by the Court of Cassation in Abu Dhabi, which is the highest appeal court in the Emirate and therefore persuasive on lower courts.
The difference in approaches appears to derive from the interpretation of Article 29(8) of UAE Federal-Decree Law No. 33 of 2021, as amended (the Labour Law), which prohibits an employer from preventing an employee from taking annual leave for more than two years, unless the employee wishes to carry it over or obtain payment in lieu. Rather than this having the effect of limiting the right of any claim to two years, in this case it served to underline the employer’s failure to allow the employee to take leave. A key factor in the judgment appears to be that the employer was unable to demonstrate that any leave had been taken or paid out during the period of employment.
Implications for Employer
While it has always been the case that an employer must maintain records of any leave taken or paid out (and holds the burden of proof in the event of any dispute before the courts), the importance of doing so is underscored by this judgment, where the consequences of failing to do so can be a much greater liability than two years’ annual leave accrual. It is therefore crucial that employers maintain clear, documented records of annual leave taken (or paid out in lieu).
In addition to maintaining adequate records, employers ought to monitor the amount of leave accrual being built up and encourage employees to take leave from time to time to limit this liability. The Labour Law includes a right of an employer to specify days on which the employee should take leave, provided that they have given the employee at least one month’s notice. Where an employee fails to take leave, despite encouragement from an employer to do so, the employer could remind the employee that they have the right to determine the dates of leave (and will do so if the employee is unable to choose the dates).