Recent Landmark Sharjah Cassation Court Judgments Secured by Al Tamimi & Co on Manager’s Personal Criminal Liability for Non-Payment of Employee Wages in Insolvency-Related Scenarios
Since the enactment of UAE Federal Decree-Law No. 33 of 2021 concerning the Regulation of Employment Relations (the “Employment Law“), the Ministry of Human Resources and Emiratisation (MoHRE) has intensified its enforcement actions against companies and their managers for non-payment of wages, relying on the Wage Protection System to monitor compliance and referring non-compliant establishments for criminal prosecution. Managers of limited liability companies have increasingly faced personal criminal charges — including fines and potential imprisonment — for their companies’ failure to pay employee salaries, even where the non-payment stems from the company’s financial distress rather than any deliberate withholding of wages.
In this context, Al Tamimi & Company successfully secured several landmark judgments from the Sharjah Court of Cassation on behalf of the manager of certain limited liability companies who had been convicted at first instance for non-payment of wages in violation of Articles 22/1, 22/2, 62, and 63 of the Employment Law. Our team argued that the lower courts had: (i) mischaracterised the defendant’s explanation of financial hardship as a criminal confession; (ii) failed to apply the mandatory pre-prosecution procedures under Ministerial Resolution No. 598/2022; (iii) disregarded the defence that non-payment resulting from force majeure negates criminal intent; and (iv) improperly attributed personal liability to a manager whose role was limited to administrative and technical affairs. The Court of Cassation accepted these grounds, quashed the convictions, and remanded the cases for rehearing.
Background
The cases arose from several criminal proceedings initiated following complaints filed by MoHRE after its Labour Inspection Department identified, through the Wage Protection System, the company’s sustained non-compliance with wage payments for a workforce of approximately 200 employees. Despite repeated warnings and notices to settle the outstanding wages, the company failed to rectify the situation or submit any documents proving its continued operations. MoHRE accordingly referred the matter to the Sharjah Public Prosecution.
Throughout the proceedings, the manager maintained that the non-payment was not deliberate but rather the consequence of a cascade of financial difficulties beyond the company’s control. Specifically, the company’s clients had defaulted on substantial sums owed to it, creating a severe budget deficit that rendered it unable to meet its payroll obligations. These financial difficulties ultimately led the company to initiate proceedings before the UAE Bankruptcy Court. The manager further contended that he was not personally liable, as his role was limited to administrative and technical affairs, with the obligation to pay wages resting with the company as a separate legal entity.
At first instance, the Sharjah Federal Court of First Instance convicted the manager and imposed fines exceeding the total of the relevant unpaid monthly wages. The court treated the manager’s explanation of the company’s financial difficulties as a confession to the charge, and held that workers’ wages are vested rights that do not depend on the employer’s profit or loss. On the question of personal liability, the court invoked Article 66 of the UAE Penal Code, holding that while juridical persons may be held criminally liable for offences committed by their representatives or managers, such liability does not exclude the personal criminal liability of the individual concerned. The court further identified the defendant as the actual manager of the establishment and the person directly responsible for disbursing wages, thereby rejecting the argument that he bore no personal liability.
On appeal, the Sharjah Court of Appeal upheld the first instance judgments and adopted their reasoning in full. The Court of Appeal considered that the MoHRE report confirming the non-payment of wages, together with the defendant’s own statements, was sufficient to sustain the conviction — without engaging with the substantive defences raised by the manager.
Grounds of Appeal
- The manager challenged such judgments before the Sharjah Court of Cassation on several substantive and procedural grounds.
- Absence of criminal intent. Our team argued that the failure to pay wages did not arise from deliberate conduct but from force majeure. The company was in financial distress due to its inability to recover substantial debts owed by third parties, which severely impacted its cash flow and operational liquidity. It had also formally initiated proceedings with a view to restructuring its liabilities. The non-payment was therefore an inevitable consequence of financial distress, not a criminally culpable act.
- Improper attribution of personal liability. The manager maintained that he acted solely in the capacity of a manager with responsibility limited to technical and operational supervision, and that he did not exercise the level of authority or control necessary to attract personal criminal responsibility for the company’s financial obligations. We argued that the obligation to pay wages rested with the company as a separate juridical entity, and that any criminal proceedings should have been directed against the company within the limits of its legal personality and capital structure, rather than against the manager in his individual capacity.
- Premature initiation of criminal proceedings. We argued that the Employment Law, read together with Ministerial Resolution No. 598/2022, requires the competent authority to undertake specific preliminary investigative and administrative steps before referring a matter to the Public Prosecution. These mandatory procedures were not complied with, rendering the referral defective and the resulting proceedings procedurally invalid.
Court of Cassation Reasoning
The Sharjah Court of Cassation found the manager’s arguments meritorious in several judgments and quashed the appealed judgments based on fundamental deficiencies in the lower courts’ reasoning.
As a threshold matter, the Court clarified the correct legal standard for the offence. It held that the offence under Article 22(2) of the Employment Law requires that the employer’s failure to pay wages be in violation of the systems approved by the Ministry and the conditions, controls, and procedures set out in the Implementing Regulations. Mere cessation of wage payments, without more, is insufficient to establish criminal liability — the non-payment may be attributable to legally justifiable reasons, and determining this falls within the trial court’s discretion based on the circumstances of each case.
The Court further held that the lower courts had mischaracterised the manager’s statements as a criminal confession. The manager’s explanation that the company could not pay wages due to financial difficulties arising from clients defaulting on their contractual obligations was not an admission of guilt but rather a defence that negated the intent to withhold wages. The Court emphasised that a valid confession must be an explicit, unambiguous admission of committing the offence, and must not be susceptible to alternative interpretation.
Applying these principles to the substantive defences, the Court found that the lower courts had failed to engage with several material arguments. On the question of personal liability, while the first instance court had relied on Article 66 of the Penal Code to establish dual liability, it did not examine the nature and scope of the manager’s role to determine whether he exercised actual decision-making authority over wage payments, or whether his role met the threshold for personal criminal liability. On the defence of force majeure, the Court held that the manager’s reliance on the company’s financial distress and its pending bankruptcy proceedings constituted a substantive defence requiring judicial consideration, particularly in assessing whether the non-payment was a deliberate act or an unavoidable consequence of circumstances beyond the company’s control. The Court noted that if it is established that the company was unable to pay wages due to force majeure, the criminal intent required for the offence would not be present. On the procedural defence, the Court found that the allegation of premature referral — on the basis that the mandatory administrative steps under Ministerial Resolution No. 598/2022, which are specifically designed to ascertain the real reasons behind non-payment, had not been followed — was equally a substantive argument warranting examination.
The Court emphasised that a valid judgment must demonstrate that the court has examined all material arguments and defences raised by the parties. Any substantive defence that could potentially affect the outcome of the case must be expressly addressed with adequate reasoning. The failure to do so constituted a deficiency in reasoning and a violation of the right of defence.
Accordingly, the Court of Cassation quashed the appealed judgments and remanded each of the cases for rehearing before differently constituted panels, leaving all substantive issues open for determination.
Significance
These judgments carry significant implications for employers, company managers, and legal practitioners in the UAE.
Criminal liability is not strict liability. The rulings establish that courts must look beyond the mere fact of non-payment and examine the underlying reasons, including whether the employer’s default was deliberate or the result of circumstances beyond its control. This marks an important departure from the lower courts’ approach of treating MoHRE reports as effectively conclusive of guilt.
Personal liability requires fact-specific inquiry. While the principle of dual criminal liability of companies and their managers under Article 66 of the Penal Code remains intact, the rulings make clear that its application demands careful examination of the manager’s actual role, authority, and decision-making power — rather than purely formal reliance on title or trade licence position. This provides meaningful protection for managers whose functions are limited to operational or technical oversight.
Force majeure and financial distress are legally relevant defences. While not automatically exculpatory, these circumstances bear directly on the assessment of criminal intent. Where a company’s inability to pay wages is attributable to external factors such as client defaults or insolvency, courts must weigh these circumstances in determining whether the requisite mens rea is present.
Adequately reasoned decisions are mandatory. The Court of Cassation’s insistence that failure to address material defences constitutes a breach of the right of defence sends a clear signal that summary convictions in wage non-payment cases — particularly those involving complex factual backgrounds — will not withstand appellate scrutiny.
Conclusion
As MoHRE continues to strengthen its use of the Wage Protection System and pursue criminal referrals, these rulings provide an essential counterbalance by reinforcing the safeguards that must attend criminal proceedings in this area. For employers and managers, the judgments underscore the necessity of clearly delineating each manager’s authority and responsibilities, documenting the causes of any inability to pay wages, pursuing available legal remedies such as bankruptcy proceedings, and engaging proactively with MoHRE to demonstrate good faith. For legal practitioners, the rulings offer a robust framework for defending managers and employers charged under the Employment Law. Most fundamentally, these judgments reaffirm the UAE judiciary’s commitment to procedural fairness, the protection of the right of defence, and the rule of law.
Key Contacts
Naief Yahia, Partner, Head of Dispute Resolution, n.yahia@tamimi.com
Stephany Malhame, Legal Director, s.malhame@tamimi.com
Jyothi Venugopal, Associate, j.venugopal@tamimi.com