Enforcement of Non-Compete Clauses for Employees in the UAE

If you have signed a non-compete clause in Dubai as part of your current job, and you now have a more enticing offer from another company, it’s important to understand the potential consequences and available options.

In Dubai, non-compete clauses are indeed enforceable under certain circumstances. These clauses are intended to protect an employer’s legitimate business interests by preventing employees from joining direct competitors or engaging in similar activities for a specified period after leaving their current employment.

If you decide to take the new job without adhering to the terms of the non-compete clause, there can be consequences. These may include legal action by your existing employer, financial penalties, or even a potential work ban in the UAE. The specific repercussions can vary based on the details of your contract, the industry you work in, and the discretion of the relevant authorities.

If you are presently hired by a mainland employer in Dubai, the relevant laws governing non-compete clauses are Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 on the performance of Federal Decree Law No. 33 of 2021.

In the UAE, employers have the chance to contain a non-competition agreement in a worker’s agreement to control them from joining competitors upon termination or resignation. As per Article 10(1) of the Employment Law, this non-competition clause is useful for a max of 2 years from the worker’s last working day.

The non-competition clause may be included when an employee has access to the employer’s customers or business secrets. It should specify the location, duration, and type of work to the extent necessary for protecting the employer’s legitimate business interests. The non-competition term cannot exceed two years after the end of the employment contract.

Therefore, based on the applicable laws, the non-competition clause in your employment contract would be enforceable for a maximum of two years following the end of your contract.

If an employee breaches the non-competition clause stated in their employment contract, the employer has the right to take action. They can file a complaint with the Ministry of Human Resources and Emiratisation and/or initiate lawful proceedings within one year from the date of detecting the violation, as stipulated by Article 10(3) of the Employment Law.

It is important to note that certain employees may be exempt from the non-competition clause, even if it is included in their employment contract, based on their specific profession or designation. This exemption is outlined in Article 12(5)(c) of Cabinet Resolution No.1 of 2022, which states… “Under the provisions of Article 10 of the Employment Law, workers may be free from the non-competition clause. This exemption applies to specific skilled classes that are in great need in the federal employment market. The determination of these categories is made by a resolution from the Minister, based on the employees’ classification approved by the Cabinet.”

Considering the provisions of the aforementioned laws, you may proceed to join the prospective employer if they are not a direct competitor of your current employer. Additionally, you can accept a role or designation with a prospective employer that is different from your current position.

Even if you choose to join a competitor of your current employer, the burden of proof lies with your current employer. They would need to provide evidence in court to substantiate that their employment with the competitor has caused them financial harm. This is stated in Article 12(2) of Cabinet Resolution No.1 of 2022, which states that if a dispute regarding the non-competition clause arises and remains unresolved through amicable means, the matter will be directed to the court, and it is the employer’s responsibility to prove the alleged damages.

Based on the mentioned legal provisions, you are permitted to join the prospective employer as long as they are not a direct competitor of your current employer. Additionally, you have the option to take on a different role or designation with the prospective employer, one that is unrelated to your current position.

Actually, if you choose to join a competitor of your present employer, the responsibility to demonstrate in court that your career with the opponent has resulted in financial losses rests with your present employer. As per Article 12(2) of Cabinet Resolution No.1 of 2022, if a dispute arises regarding the non-competition clause and an amicable resolution cannot be reached, the matter will be referred to the judiciary. The employer then must indicate the alleged damages caused by your employment with the competitor.

Regarding the consequences of breaching a non-competition clause in an employment contract, the Employment Law and relevant ministerial resolutions do not explicitly address the imposition of a work ban on the employee. However, if the breach is proven in court, the court may quantify the damages by ordering the employee to pay monetary compensation to their previous employer.

Enforceability of the non-competition provision in the UAE is contingent upon several factors, including the geographical area, qualities of work, and specific terms outlined in the employment contract. Article 12(1) of Cabinet Resolution No. 1 of 2022 stipulates the following considerations for applying the non-competition clause:

a. The geographic scope covered by the clause. 

b. The duration of the clause, which should not exceed two years from the contract’s expiration date. 

c. The nature of the work, ensuring that it poses substantial harm to the legitimate interests of the employer.

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