UAE Labour Law: Non-Compete Provisions

Under the changes enacted in the New Labour Law in effect from 2nd February 2022, specific changes have been made to provisions governing non-compete restrictive covenants that protect employers’ business once an employee leaves the company. These protections are designed to offer employers some rights to prohibit harmful repercussions when an employee leaves the business such as breach of confidentiality and solicitation of business.

Specifically, this subject, the provisions of the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’) and those of Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Cabinet Resolution No. 1 of 2022) are applicable.

These provisions provide greater clarity to this scenario and in this blog, we seek to answer the most common questions affecting employer and employee obligations.

When Do Non-Compete Terms Apply?

An employee may only be compelled to honor non-compete terms only if these terms are mentioned in the employment contract. These terms should be agreed to and signed by the employee either in a long-form or a short-form contract. This provision is also only applicable for a period of two years from the date the contract is terminated. Article 10(1) of the Employment Law the legislation 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 him 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-compete period shall not exceed (2) two years after the expiration of the contract.”

It should be noted that any non-compete clause may not apply under certain conditions:

1. If the employer terminates employment. Under Article 10(2) of the Employment Law: “This clause shall be void in the case of termination of the employment contract by the employer in violation of the provisions hereof.”
2. Under Article 12(5) of Cabinet Resolution No. 1 of 2022, an employee shall be exempted from the non-compete clause under the following conditions:

• If compensation is made by the employee or the new employer pays not exceeding three (3) months of the employee’s wage agreed in the last contract to the former employer. The former employer must provide written consent to this settlement to waive their rights of enforcement.
• If the contract is terminated during the contracted probation period.
• If the employment adheres to any professional categories deemed important to the needs of the employment market in the UAE. These categories are determined by the decision of the Ministry under the employment classification approved by the Cabinet.

If an employee resigns – It is possible to seek an exemption from the former employer to the non-compete clause. This does not necessarily require any written undertaking confirming there will be no breach of confidentiality, however, it is prudent to seek written acceptance of this release from the former employer.

Employers can enforce their rights – by filing a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).  Subsequently, they can start civil case proceedings. This is under Article 10(3) of the Employment Law, this process must be conducted within one year from the date of discovering the violation.

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