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UAE: What kind of legal actions can employer take against me under non-competition clause?

Such clauses are included to prevent employees from engaging with a competitor on termination of the employment contract for a period of two years

Question: I have just been offered a job in a Dubai-based company. I have signed a non-competition clause with my present employer. What kind of legal actions can be taken against me, and can I protect myself?

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 prevent him or her from engaging with a competitor upon the termination of the employment contract. Such a non-competition condition may not exceed for more than two years.

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 it 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 two years after the expiration of the contract."

Moreover, in the event of a breach of a non-competition clause mentioned in an employment contract by an employee, then an employer may have to file a complaint with the Ministry of Human Resource & Emiratisation in the UAE and/or commence legal proceedings within one year of detection of breach of non-competition clause of an employment contract by an employer. This is 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 under the following conditions:

· 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. As an employee, while resigning from your current employment it is recommended to hand over and/or delete all the documents/information contacts of the clients, customers, dealers, suppliers, and colleagues and obtain a written acknowledgement from your employer that you have handed over/deleted all the documents and/or information which are in your possession

· Further, even if you join the prospective employer, you may consider joining in a different role/designation which is not similar to your role/designation with your current employer

· However, even if you join a competitor of your employer, the onus is on your current employer to prove it in court stating that you have been employed with 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.”

In the event, you join the competitor of your current employer and the current employer is able to prove in the court which has jurisdiction in the UAE that you have been employed with the competitor has caused financial loss to your current employer, then you may have to pay compensation to your current employer as decided by the court in its judgement.

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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