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UAE: Can employees get banned for violating non-compete clause?

A KT reader asks a legal expert of the consequences of accepting a job offer in such a situation

Question: Is non-compete clause enforced in Dubai? I had signed the clause when I took up my current job. Now, I have a better offer from another company. What happens if I take the new job? Will I get a ban? Is there anything I can do to prevent this or any other consequence?

Answer: Pursuant to your queries, it is assumed that you are currently employed by a mainland employer in Dubai. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 on the implementation of Federal Decree-Law No. 33 of 2021 regarding the Regulation of Employment Relations are applicable.

In the UAE, an employer may include a non-competition clause in an employment contract of an employee to avoid him or her joining a competitor upon termination or resignation of an employment contract. A non-competition clause mentioned in an employment contract of an employee is valid for not more than two years from the last working day of the employee with an employer. This is in accordance with Article 10(1) of the Employment Law, which states, “Where the employee performs a work which gives him access to employer's customers or business secrets, the employer may make a provision in the Employment Contract that the employee shall not compete with or be engaged in any business which competes with him in the same sector after the expiry of the contract. Such clause shall specify the place, time and type of work to the extent necessary to protect the legitimate business interests, and the non-competition period shall not exceed (2) two years after the expiration of the contract."

In the event of a breach of the non-competition clause mentioned in an employment contract by an employee, an employer may file a complaint with the Ministry of Human Resource and Emiratisation and/or commence legal proceedings within one year of detection of breach of the non-competition clause of an employment contract by an employer. This is in accordance with Article 10(3) of the Employment Law.

However, certain employees may be exempted from the non-competition clause even though a non-competition clause is mentioned in an employment contract due to their profession/designation. This is under Article 12(5) (c) of the Cabinet Resolution No.1 of 2022, which states, “The employee shall be exempted from the non-competition clause stipulated in Article 10 of the Employment Law if:

– Any professional categories that are in demand in the national employment market and determined by the resolution of the Minister in accordance with the employees' classification approved by the Cabinet.”

Based on the aforementioned provisions of law, you may join the prospective employer if it is not a competitor of your current employer. Further, you may also join the prospective employer on another role or designation which is not similar to your current role or designation with the current employer. Moreover, even if you join a competitor of your current employer, the onus will be upon your current employer to prove in court that you have been employed by the competitor which has caused financial loss. This is under Article 12(2) of the Cabinet Resolution No.1 of 2022, which states, “If a dispute arises over the non-competition clause and it is not settled amicably, the matter shall be referred to the judiciary and the burden of proving the alleged damage shall lie with the employer.”

The Employment Law and its subsequent ministerial resolutions are silent on banning an employee if it is proved in the court that the employee has breached the non-competition clause of an employment contract with his or her previous employer. However, the breach may be quantified by the court in way of monetary compensation to be paid by the employee to his or her previous employer.

Moreover, the non-competition clause is enforceable in the UAE based on the geographical area, nature of work and terms of the non-competition clause in an employment contract. This is under Article 12(1) of the Cabinet Resolution No. 1 of 2022, which states, “Subject to the provisions of Article 10 of the Decree Law, the following shall be observed in the application of non-competition clause stipulated therein:

a. The geographical scope of application of the clause.

b. The term of the clause, provided that it does not exceed two years from the contract expiry date.

c. The nature of the work, such that it causes significant harm to the legitimate interest of the employer.”

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom 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, PO Box 11243, Dubai.

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