The United Arab Emirates (UAE) is emerging as a significant business hub. Many expatriates come to the UAE for better jobs. Looking at the influx of foreigners in the country, the government of the UAE revises the clauses in the labour laws. Though the employee is given a chance to switch to another job in the UAE, they have to fulfill the legal requirement.
Understanding the Non-Competition Clause in the UAE
A non-competition clause in the UAE means that the employee cannot work for another employer who is a competitor to their present company. Under this clause, the employee is not allowed to operate in the same business industry after leaving the job. However, the non-competition clauses are governed under certain rules:
- Federal Decree-Law No. 33 of 2021
This law ensures employment relations and guides the regulation of the non-compete clauses whenever and wherever they are permissible.
- Cabinet Resolution No. 1 of 2022
The resolution further provides details on how the non-compete clauses are applied in the UAE.
- Federal Law No. 5 of 1985 (UAE Civil Code)
Articles 909 and 910 talk about the enforcement of the non-compete clauses to safeguard the employer’s business.
Under these laws and regulations, the non-competition clauses are operated in the UAE.
Enforcement of Non-Competition Clause in the UAE
The non-competition clause in the UAE is made to protect the employer’s legitimate business. However, to implement the non-competition clause, it has to meet certain criteria:
1. Legitimate Business Interest
Under this clause, the employer’s relationships with customers, their confidential information, and trade secrets shall be protected.
2. Employee’s Role and Access
If the employee has any information that can harm the employer or disclose any sensitive information to the competitor, then the clause can be implemented.
3. Reasonable Restrictions
The restrictions of the clause need to have a specific duration, geographical factor, and scope of work in the UAE. The non-competition clause can be exercised for two years after the employment contract has been terminated. The business idea should not be operated where the employer is already operating. Activities that could directly impact the employer’s business shall be avoided.
Enforceability and Legal Considerations
Though the non-competition clauses are legal in the UAE, the need for implementation depends on the jurisdictions in the UAE. The courts, however, do not want to have harder ways for the employees, therefore the employer has to prove that the clause of non-competition shall be exercised to protect their business interests.
Further, if the employer terminates the employment contract without any solid reason, the non-compete clause may not be enforced. However, the clause does not apply if the employee is on probation period.
Waiver and Compensation
The non-competition clause may be significant for the employer but it can be waived off, too. The waiving of the clause can be done through mutual agreement, whereas it can also be compensated by the new employer by giving three months’ salary to the previous employer. In these circumstances, the employees can find new jobs for their professional growth, whereas the employers can be compensated for their potential losses.
Role of Dubai Law Firms and Lawyers in Dubai
Many individuals may not understand the non-competition clause and so they need legal guidance on that. Dubai law firms have played a vital role in making employers and employees understand their rights as well as clauses mentioned in employment contracts. Moreover, the lawyers help individuals in drafting clauses that can be enforced during employment.
Sometimes, employers need help in managing clauses and legal professionals assist them. Meanwhile, if the employee has any dispute at work, the legal professionals with represent the clients in legal proceedings. The lawyers in Dubai provide legal aid to both, business owners and labours to ensure legal compliance with the UAE Labour Law.
Effect of Non-Competition Clauses on Business Stakeholders
The employers will need to define a duration and geographical limitation to enforce the non-competition clause. They will have to ensure that the clause is essential to safeguard the corporation’s interests. However, Dubai law firms can guide employers about enforceable clauses in the UAE as per labour laws.
As for the employees, they should review the employment contract that has a non-competition clause. Secondly, the lawyers in Dubai can help them with negotiations if they want to make changes to their contracts. However, the repercussions shall be told to the employees so they ensure legal compliance.
FAQs
The enforcement of the non-competition clause is not possible if the employment contract is terminated without any cause.
Compensation can be paid by the new employer, which is equal to three months’ salary. However, the clause can be waived off as well.
The employer can go for legal aid through lawyers in Dubai.
The non-compete clauses are only applied to employees who have sensitive information about the employer and disclosing those secrets can harm the employer.
The non-compete clause is enforceable if only it complies with the UAE labour law. The lawyers in Dubai can help you to draft the clause. A non-disclosure agreement (NDA) is also signed in some workplaces in the UAE.
