United Arab Emirates: Court Of Cassation Awards Employee Outstanding Monies After More Than One Year In Case Of Acknowledgement By Employer

Last Updated: 21 July 2017
Article by Imad Kassir and Samer Abou Said

Introduction

UAE law, like many other laws around the world, provides for limitation periods which preclude the bringing of a claim after a certain period. Although this doctrine appears to be harsh, it is premised on the need to ensure stability in civil and commercial transactions. The law presumes that if a claimant does not bring his claim within a reasonable time, the claimant does not wish to pursue it.

Limitation of time is usually invoked by the defendant to request the dismissal of the claimant's claim.  UAE courts have established that the limitation of time is not related to public policy and has to be raised by the defendant. Moreover, the courts deem the defence of limitation as a substantive one and thus it cannot be raised for the first time before the Court of Cassation if it was not raised before the lower courts.

UAE Labour Law No 8 of 1980 stipulates in Article 6: "In all cases no claim for any rights due according to the provisions of this Law will be heard after lapse of one year from the date of its maturity."
Thus an employment claim related to an employee's salary would be time-barred if brought after one year. The legitimate question here is, would this limitation apply if the employer had acknowledged the employee's outstanding debt but refrained from paying it (for example, by signing a termination settlement or an end-of-employment statement)?

The Case

The Court of Cassation of Abu Dhabi had the opportunity to consider this very matter in its 2014 ruling in Petition No 11 of 2013 (Civil).

By way of background, the employee had filed an action against his employer to claim outstanding salaries and other benefits. The employer raised the defence of limitation on the ground that the claim had been filed more than one year after the employee's employment was terminated, a fact that was undisputed. Evidence adduced showed that the employer had issued a statement setting out the monies owed to the employee and drew a bank guarantee in that respect. However, the employer declined to pay it to the employee eventually.

Both the Court of First Instance and the Court of Appeal decided in favour of the employee that the actions of the employer constituted an acknowledgement of the debt and consequently the claim did not fall under the ambit of Article 6 of the Labour Law because it became subject to Article 477 of the Civil Transactions Code which makes the limitation of time 15 years. The said Article stipulates:

"(2) If there is a written acknowledgement or paper proving any of the rights set out in Articles 474, 475 or 476, the claim shall not be heard upon the lapse of fifteen years from their becoming due."
 
The employer appealed before the Court of Cassation and raised the following points concerning the prescription time:

  • Article 477 is not applicable to the dispute because it is a labour dispute subject to the law of specific application, the Labour Law. and the applicable limitation period is one year as provided for in Article 6 thereof.
     
  • Article 477 concerns the rights set out in Articles 474, 475 and 476, and therefore it has no relation to labour debts.
     
  • The alleged acknowledgement of the outstanding debt may interrupt the prescription time of one year, meaning that a new period of one year only shall start from the date of that alleged acknowledgement in accordance with Articles 483 and 484 of the Civil Transactions Code rather than a period of 15 years.

  • The Court of Cassation confirmed the Judgment of the Court of Appeal and rejected the arguments of the employer as follows:
  • The Civil Transactions Code was passed in 1985, five years after the passing of the Labour Law in 1980. The Civil Code has regulated the prescription period and how it is suspended and interrupted in Articles 473 to 488, and these were not regulated by the Labour Law specifically in its Article 6. Thus, the provisions of the Civil Code shall be applicable to the circumstances which are not regulated by Article 6 of the Labour Law.
     
  • Article 477 provides for extending the prescription time to 15 years in respect of the rights set out in Articles 474, 475 and 476, which include the rights of employees.
     
  • The employer's execution of a statement of account that shows amounts outstanding to the employee and sending it to the Labour Department is an acknowledgement that satisfies the conditions of Article 477.

Conclusion

The Court of Cassation has observed that the later adoption of the Civil Transactions Code is to be taken into account when discussing matters dealt with under the provisions of two laws, thereby indicating that a more recent legislation will carry more weight than an older one.

It has asserted in its reasoning the generality principle of the Civil Code that suggests its provisions will apply if no other provisions are provided for under other specific laws which would usually supersede the application of the Civil Code provisions.

In the said case, the documents issued by the employer were quiet clear in the acknowledgement of the amounts due to the employee, which is not often the case in such disputes; however, the court might not decide in the same way if the employee relies on documents of a lower probative value such as such as emails from an unauthorized employee or unsigned statements of accounts.

Finally, the decision highlights a practice of UAE courts not to strictly apply the doctrine of limitation due to the potential harsh results, particularly in relation to sumes owed to an employee that are granted a privileged position vis-à-vis other debts under UAE law.

First published 2016-11-01

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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