The UAE has become a destination for many investors as a result of the many facilities provided by the state. This has led to an increase in the number of workers and an increase in the number of job opportunities, and thus increased competition between companies to hire the most qualified employees.
In this article, we will discuss the conditions and obligations for applying the non-competition clause in light of UAE law, which protects the worker from employer arbitrariness on the one hand and protects the employer from disclosing his work secrets and unfair competition on the other hand.
Article content:
Legal articles regulating the non-competition clause:
Article No. 10 of Federal Decree-Law No. 33 of 2021 stipulates:
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If the work assigned to the worker allows him to know the employer’s clients or to know the secrets of his work, the employer may stipulate that the worker shall not, after the end of the contract, compete with him or participate in any project competing with him in the same sector in the same sector, provided that the condition is specific. In terms of time, place, and type of work to the extent necessary to protect legitimate business interests, the period of non-competition should not exceed two years from the date of expiration of the contract.
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This condition shall be invalidated if the employer terminates the employment contract in violation of the provisions of this decree.
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The lawsuit filed by the employer for the worker’s violation of the provisions of this Article shall not be heard after one year from the date on which he discovered the violation.
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The executive regulations of this Decree-Law determine the provisions regulating this article and the skill levels or job professions that may be excluded from the provisions of Clause (1) of this article, by the conditions and controls specified by the regulations.
Article No. 12 of the executive regulations of Federal Decree-Law No. 33 of 2021 stipulates:
Taking into account the provisions of Article No. (10) of the Decree-Law, to apply the non-competition condition stipulated therein, the following must be specified:
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The geographical scope of application of the condition.
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The duration of the condition provided that it does not exceed two years from the date of expiration of the contract.
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The nature of the work is such that it seriously harms the legitimate interests of the employer.
If a dispute arises over the non-competition clause and it is not settled amicably, the matter will be referred to the judiciary, and the burden of proving the harm will fall on the employer. The non-competition clause does not apply if the reason for terminating the contract is due to the employer or the breach of his legal or contractual obligations. It may be agreed in writing not to implement the non-competition clause after the expiration of the employment contract.
What are the cases in which the worker is excluded from the non-competition condition stipulated in Article No. (10) of the Decree-Law according to the following conditions:
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The worker or the new employer pays compensation not exceeding three months of the worker’s wage agreed upon in the previous employer’s last contract, and the previous employer’s written approval is required for this.
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If the contract is terminated during the trial period.
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Any professional categories according to the needs of the labor market in the country shall be issued by a decision of the Minister under the employment classification approved by the Council of Ministers.”
What is the scope of application of the non-competition clause:
The existence of a labor relationship is the basis for obliging the worker to this condition, but the legislator indicated that the work assigned to the worker must allow him to know the employer’s clients or to know the secrets of his work and that the condition be related to working for another employer who works in the same activity, and therefore it is not correct to set this. The requirement is generally for all employees of the employer.
The legislator also clarified that the use of this condition is only in the event of termination of the labor relationship on the part of the worker (whether by his resignation or by the worker not adhering to the terms of the employment contract, which will lead to the termination of the labor relationship).
The important point that the legislator touched on is that a labor lawsuit can be registered for a worker’s violation of the non-competition condition starting from the date the employer discovers this violation and not from the date of termination of the labor relationship.
What are the conditions for the validity of the non-competition clause:
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The first condition is geographical location: It must be limited to a maximum of 3 emirates within the country.
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Second condition: Period: The maximum is two Gregorian years starting from the termination of the employment contract. A shorter period can be agreed upon.
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The third condition: The worker’s enrollment with a competing employer will cause serious harm, and the extent of the seriousness of the harm is up to the court to estimate.
What are the cases where the non-competition clause is not applied:
Considering that the non-competition condition came to protect the employer in the first place, the legislator allowed some exceptions to the application of this condition, as follows:
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The first case: the case when both parties to the labor relationship agree to stop work on the condition of non-competition (must be in writing)
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The second case: The worker or the new employer pays compensation to the old employer with a maximum value of 3 months’ salary (the old employer’s approval is required).
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The third case: If the labor relationship ends during the trial period (it does not matter who is the party that terminated the labor relationship)
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Fourth case: Special cases are decided by the Minister according to the needs of the labor market.
What are the consequences if a non-compete clause is violated?
If the conditions of non-competition are fulfilled, as I explained previously, and the worker violates this condition, the legislator states that the employer has the right to resort to a court to demand appropriate compensation for the harm he has suffered.
The court will review it within one year from the date the breach was discovered, and therefore the employer must prove:
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The date on which it became aware that the employee had violated the non-compete clause
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Proof of serious harm resulting from the worker’s breach of the non-competition condition
The work environment in the UAE is characterized by continuous development and faces many challenges as a result of increased investments. Therefore, it is necessary to maintain stability in the labor market by protecting the rights of the parties to the labor relationship. The non-competition clause is considered one of the legislator’s tools to maintain this stability.
Thus we reach the end of our article entitled The Non-Competition Clause in Employment Contracts, and at Al Dhaheri & Co. Law Firm, the private notary and through the Litigation and Legal Representation Department is your legal destination to obtain the best results for your judicial claims by seeking the assistance of the best lawyers and specialized consultants in our office to provide sound and correct legal solutions following the best Legal and judicial practices, you can contact us or visit us at one of our branches in the cities of Al Ain and Abu Dhabi.
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