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Enforceability of Non-Compete Provisions in the Employment Agreement in the UAE

What is non-compete post-termination of the employment restriction?

“Non-compete” is a clause in an employment contract specifying that an employee must not enter into competition with an employer after the employment period is over. These agreements also prohibit the employee from revealing proprietary information or secrets to any other parties during or after employment.

Position of Non-Compete clauses in the UAE.

The Federal Decree-Law No. (33) of 2021 regarding the Regulation of Employment Relationships governs the provisions of non-compete in the UAE (“Law”). As per the Law, if the work assigned to the employee allows him to gain knowledge of the employer’s clients or have access to its work secrets, the employer may require that the employee under the employment contract shall not, after the expiry of the contract, compete with the employer or be engaged in any competing project in the same sector,

Important elements in order for a non-compete to be enforceable.

In order for the non-Compete clauses to be enforceable in the UAE, the following conditions are required to be fulfilled:

1. A stipulated period during which employee is not required to work for the competitor of the existing employer and such period shall not exceed two years and such period is required to be clearly outlined in the employment contract.
2. The employment contract must clearly outline the geographical location within which the employee shall be restrained from taking up employment. Such restriction is required to be reasonable in nature. For example: restricted to the Emirate of Dubai.
3. The types of work which the employee is not required to take up for the restricted period in order to safeguard the interest of the former employer.

UAE Courts, typically, reviews following points prior to giving the judgement in the cases on non-competition:

1. Court is going to determine whether your potential employer is in competition with your previous employer. If they are not competitor to each other, court will not enforce the non-compete clause on the employee.
2. Court will decide whether your existing designation at the job is similar to that of previous one.
3. If the employee joins a competitor of current employer’s business, the onus shall be on employee’s current employer to prove in court that employee has been employed by the competitor which has resulted in financial loss. The documentary evidence such as balance sheet, financial documents are required to be provided.

Conclusion:

Courts in the UAE have adopted a liberal approach in deciding the cases of non-competition against the employees.  In the event that the breach of the non-compete provisions are proved, liquidated damages are charged on the employees to cover the losses of the employer.

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