Abdullah Al Nabhani
If an Omani court finds that an employee was wrongfully dismissed, the employer may face more than one financial consequence.
Article 11 of the Oman Labour Law, issued by Royal Decree 53/2023, allows the court either to reinstate the employee or award compensation. Where compensation is awarded, it must be between three and twelve months of the employee’s final gross wage.
The court must also consider the employee’s circumstances and length of service.
This article deals with compensation. Whether a dismissal is wrongful in the first place is considered separately in our article, Wrongful Dismissal in Oman: What Employers Should Know.
What Can the Court Award?
If the court finds that a dismissal was arbitrary or contrary to the Labour Law, Article 11 provides for reinstatement or compensation.
Compensation is separate from other amounts that may also be due, including end-of-service gratuity and other contractual or statutory benefits, notice pay and the social insurance contributions referred to in Article 11.
For employers, the compensation figure may therefore be only part of the total exposure.
How Much Compensation Can Be Awarded?
Article 11 sets compensation at between three and twelve months of the employee’s final gross wage.
The amount is not automatic. The court must consider the employee’s circumstances and length of service when deciding where within that range the award should fall.
This differs from the previous Labour Law. Article 106 allowed the court to award “fair compensation” but did not set a minimum or maximum.
The 2023 Labour Law therefore gives the court a defined range while retaining discretion over the amount within it.
What Does the Court Consider?
Earlier Oman Supreme Court decisions help explain how compensation has been assessed.
In Supreme Court Appeal 64/2002, Decision 9, dated 1 January 2003, the Court was cited as treating the length of the contract, the employee’s wage, the period without work and the opportunity to obtain other employment as relevant factors when assessing compensation.
In Supreme Court Appeal 43/2002, Decision 26, dated 15 January 2003, the principle relied upon in later employment cases was that compensation should not be excessive or become a means of enriching one party at the expense of the other.
These decisions were issued under the previous Labour Law. They must therefore be read with Article 11 of the current law, which now fixes the three-to-twelve-month range and expressly requires the court to consider the employee’s circumstances and length of service.
The older decisions remain useful in understanding the factors that may influence the assessment, but they do not override the current statutory limits.
Does Finding Another Job Affect Compensation?
The current Labour Law does not say that finding another job automatically reduces compensation.
Earlier Supreme Court authority did, however, treat the period without work and the opportunity to obtain other employment as relevant factors when assessing compensation.
Those factors may therefore still be relevant when the court considers the employee’s circumstances, but the current law sets a minimum award of three months where compensation is awarded.
For employers, the question is not simply whether the employee found another job. The wider circumstances and the effect of the dismissal may also matter.
Is Compensation the Employee’s Only Entitlement?
No.
Depending on the case, the employee may also be entitled to end-of-service gratuity, contractual or statutory benefits, notice pay and the social insurance contributions referred to in Article 11.
Other unpaid employment entitlements may also be claimed.
Employers should therefore distinguish between compensation for wrongful dismissal and amounts that may already have been due on termination.
What Does This Mean for Employers?
The statutory range gives employers a clearer starting point, but not every wrongful dismissal claim will result in the same award.
Length of service is expressly relevant. So are the employee’s circumstances. Earlier Supreme Court decisions also indicate that the effect of the dismissal and the employee’s employment position may matter.
A claim for twelve months’ compensation should not therefore be treated as the automatic outcome simply because twelve months is the maximum. Equally, where wrongful dismissal is established and the court awards compensation, the current law sets a minimum of three months.
Wrongful Dismissal and Compensation Are Different Questions
The first question is whether the dismissal was arbitrary or contrary to the Labour Law. The second is what remedy should follow.
Article 12 deals with particular cases of arbitrary dismissal. We consider those separately in Wrongful Dismissal in Oman: What Employers Should Know.
Dismissal without notice under Article 40 and redundancy or termination for economic reasons are also governed by separate provisions.
Bait Al Qanoon advises employers on termination decisions, employment disputes and wrongful dismissal claims under Omani law.