Do I get end-of-service benefits if the company I work for closes down?

 khaleejtimes.com  03/17/2019 12:27:41  6  Ashish Mehta

Question: 

I have been working at an entity incorporated as a limited liability company in mainland Dubai for the last 21 years. Unfortunately, however, one of the shareholders in the share-capital of the entity is now in a state of coma, and I am apprehending that the entity will shut down. The family of the shareholder concerned has informed me that they will not be able give me my end-of-service benefits. What legal recourse can I take?  

Answer: 

It may be noted that your employment is subject to the provisions of UAE's Federal Law No 8 of 1980 on the Regulation of Labour Relations (the "Employment Law") and its amendments and the corresponding by laws and order.

Insofar as the family of the shareholder concerned had informed you that they will not be able to give you the end-of-service entitlements in furtherance of your job, it may be noted that your employment relationship is with the entity and not with a shareholder or with the family of a shareholder of the entity. Pursuant to this, all your claims shall also lay against the entity that you are employed with. And, it may further be noted that all such claims shall have first charge over your employer's assets, including movable and immovable properties, and therefore have priority over other claims. This is in accordance with the provisions of Article 4 of the Employment Law, which reads as follows:  

"Article 4

Any amounts of money payable to an employee or his beneficiaries under this law shall constitute a first charge on all the employer's movable and immovable property and shall be paid immediately after any legal expenses, sums due to the public treasury and Sharia's alimony awarded under Islamic Law to the wife and children."

The amount of your end-of-service benefits shall essentially include severance pay and leave salaries (if applicable) and unpaid salaries (if any). The severance pay shall be calculated in accordance with the provisions of Article 132 of the Employment Law, read with the provisions of Article 133 of the Employment Law, which are quoted hereinafter for your reference.  

"Article 132

A worker who has completed a period of one or more years of continuous service shall be entitled to severance pay on the termination of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:

1. 21 days' remuneration for each year of the first 5 years of service.

2. 30 days remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed 2 years' remuneration."

"Article 133

A worker shall be entitled to severance pay in respect of fractions of a year in proportion to the time actually worked, on conditions that he has completed one year of continuous service."

In addition to the severance pay, your end-of-service entitlement shall also include the payment of leave salaries for the days of your entitled leaves not availed by you. This is in accordance with the provisions of Article 79 of the Employment Law, which reads as follows:

"Article 79

Where a worker is dismissed or leaves his job after the period of notice prescribed by law, he shall be entitled to remuneration in respect of any days of annual leave not taken. Such remuneration shall be calculated on the basis of the remuneration that he earned on the date on which the leave became due."

It is further noted that you have not mentioned if the decision regarding shutting down of the entity has been formally adopted by competent persons and formally notified to all employees or the same is just an apprehension following the illness and comatose state of one of the shareholders of the entity. As such, it may be noted that an entity may not 'shut down' as a direct consequence of one of the shareholders being in a state of coma, unless the other shareholders adopt a resolution to that effect. 

Nevertheless, regardless of the circumstances at the entity that you are employed in, your claims for end-of-service entitlements shall still be valid and enforceable against your employer. In pursuance of the same, you may consider approaching the Ministry of Human Resources and Emiratisation and file a complaint for non- payment of your end-of-service entitlements.

Know the law

Any amounts of money payable to an employee or his beneficiaries under the law shall constitute a first charge on all the employer's movable and immovable property and shall be paid immediately after any legal expenses, sums due to the public treasury and Sharia's alimony awarded under Islamic Law to the wife and children. 

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom, Singapore, and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, P.O. Box 11243, Dubai. 

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