Case study based analysis is one of the most effective ways to understand the dynamics of Employment Litigation for Employers, and executive termination litigation in the UAE is a particularly high stakes example where contractual rights, board dynamics, incentive plans and reputation converge. This case study outlines a fictional but realistic scenario involving the dismissal of a C level executive in a UAE headquartered group, examining how decisions were made, how the dispute escalated and which strategic lessons employers should draw from the outcome.
The executive, a Group Chief Commercial Officer, had been employed for six years by a diversified holding company operating across real estate, logistics and technology. His package included a substantial base salary, housing and schooling allowances, an annual bonus linked to EBITDA and a long term incentive plan based on three year performance cycles. The employment contract was governed by UAE law, with jurisdiction in the mainland labour courts, and contained confidentiality and non compete clauses but no arbitration or DIFC opt in.
Over two years, the group pursued an aggressive expansion strategy that stretched cash flows. The board began to question certain commercial decisions and the pace of new commitments. Internal tensions emerged between the executive and the group CFO over revenue recognition and pipeline reporting, with emails revealing increasingly sharp exchanges about whether forecasts were realistic.
Following a disappointing quarter and a covenant breach close call with the group lenders, the board convened an emergency meeting. The CCO was not invited but was criticised heavily in the minutes. Without prior performance warnings, the board resolved to terminate his employment on the basis of alleged underperformance and loss of confidence. The next day, he was called to a brief meeting, informed that his role was terminated with immediate effect and escorted from the building. His company email access was cut and a generic termination letter was handed to him, citing contractual notice pay but making no reference to bonus, long term incentives or detailed reasons.
The executive believed the dismissal was procedurally unfair, reputationally damaging and designed to avoid paying a significant bonus and vested portion of his long term incentives. His attempts to seek clarification and negotiation through informal channels were rebuffed. Within weeks, he filed a labour complaint and subsequently a labour court claim.
The executive’s claim included several elements. First, he sought payment of notice and end of service benefits, which the employer had partially paid but not fully reconciled. Second, he claimed his annual bonus for the prior financial year, arguing that performance targets had been achieved and that bonus decisions had historically followed a consistent formula. Third, he claimed vested tranches of the long term incentive plan, arguing that the plan rules made vesting dependent on performance and time, not continued employment up to the payment date. Finally, he sought additional compensation for arbitrary and reputationally harmful termination, pointing to the lack of prior warnings and the abrupt manner of his removal.
The employer argued that the executive was an at will senior manager whose role required the full confidence of the board, and that the company had the contractual right to terminate with payment of notice without further justification. They contended that the annual bonus was discretionary and conditional on board approval, which had not yet been granted. For the long term incentive plan, they argued that unvested awards lapsed automatically on termination and that board discretion allowed reduction even of vested components in light of the group’s deteriorating financial position. They further argued that the executive’s projections had been overly optimistic, contributing to lender concerns, and that the board was entitled to act decisively.
The court focused heavily on contemporaneous documents. The executive produced his contract, plan rules, historic bonus communications and a series of performance review emails in which the CEO and board praised his contribution and confirmed that targets had been met the previous year. He also produced board pack extracts referencing commercial wins and internal messages indicating that bonuses would be paid subject to cash flow planning. Several emails showed that he had raised concerns about unrealistic expansion timelines, undermining the narrative that he alone drove aggressive commitments.
The employer provided the board minutes criticising the executive, financial reports showing stress in cash flows and the formal incentive plan documents, which labelled the bonus as discretionary. However, they could not produce any written performance warnings, improvement plans or prior letters indicating dissatisfaction with his conduct or results. Nor could they show clear board resolutions denying the bonus before termination.
On termination itself, the court accepted that the employer had a contractual right to end the relationship with notice and that underperformance need not reach misconduct standards. However, the court criticised the lack of progressive performance management and the abrupt, humiliating manner of the dismissal, which it considered relevant to assessing fairness and discretionary decisions.
On the bonus, the court held that although the plan used discretionary language, historic practice and the existence of objective performance metrics meant the employer could not arbitrarily withhold a bonus where targets were demonstrably met and there was no clear, prior decision to deny it. The court awarded the prior year’s bonus based on the agreed formula.
For the long term incentive, the court distinguished between unvested and vested components. It upheld the lapse of unvested awards based on clear language tying them to continued employment, but found that a portion of the award had effectively vested at the end of the last performance cycle. The employer’s attempt to reduce that portion retrospectively was rejected, particularly as no misconduct or fraud had been proven.
The court awarded the executive unpaid salary elements, full notice, corrected end of service benefits, the previous year’s bonus and the vested portion of the long term incentive, plus modest compensation for arbitrary aspects of termination. It declined to award separate reputational damages, noting the absence of public defamation, but expressly criticised the employer’s handling of the dismissal and failure to document performance concerns over time. The case settled shortly after judgment, with additional confidentiality undertakings and mutual non disparagement commitments.
For senior executives, employers sometimes assume that trust based relationships and board level conversations reduce the need for formal documentation. This case illustrates the opposite. Where there are concerns about performance or judgment, contemporaneous warnings, agreed objectives and tracking of outcomes are essential, especially before considering termination.
Labeling a bonus or incentive as discretionary does not allow employers to disregard consistent formulas, performance metrics and past practice. Courts will scrutinise whether discretion was exercised in good faith and in line with legitimate business reasons, particularly when large sums are at stake and termination coincides with payable awards.
Board decisions about executive removal should be synchronised with HR and legal processes, including proper termination letters, calculation of entitlements and thought through communication. Abrupt, poorly staged exits may satisfy internal emotion but create adverse optics and litigation risk.
Executive contracts and incentive plans should be drafted with clear definitions of good leaver and bad leaver categories, vesting rules, notice provisions and dispute resolution mechanisms. Ambiguity about when incentives vest or how discretion is applied is a common source of disputes that can often be eliminated at drafting stage.
This case study on executive termination litigation shows how quickly a board level decision can transform into a complex employment dispute when documentation is weak, discretion is exercised abruptly and incentives are not handled transparently. For UAE employers, the key lesson is to approach executive exits as structured legal and governance projects, not just leadership decisions, ensuring that performance management, termination protocols and incentive schemes are all aligned and capable of withstanding judicial scrutiny.
