The United Arab Emirates has become a preferred destination for investors due to its flexible economic environment and government facilitation. This growth has led to a significant increase in employment opportunities and heightened competition among companies to attract top talent. Within this context, the importance of the non-compete clause in employment contracts has emerged, aiming to protect the employer’s interests and prevent the disclosure of trade secrets or engagement in unfair competition.
What is a Non-Compete Clause?
A non-compete clause is a legal provision included in an employment contract that restricts the employee from working for a competing company or establishing a similar business after the contract ends. This clause is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labor Relations, specifically Article 10, as well as Article 12 of its Executive Regulations.
Key Conditions for Enforcing a Non-Compete Clause
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Geographic Scope: The clause must specify the geographical area of restriction, not exceeding three Emirates.
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Time Period: The restriction period must not exceed two years from the date of contract termination.
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Nature of Work: The employee must have had access to trade secrets or direct dealings with clients, and the violation of the clause must cause serious harm to the employer.
When is the Clause Considered Invalid or Unenforceable?
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If the employer terminates the contract without a legal justification.
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If the clause fails to specify the time, location, or nature of the restricted work.
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If no actual and serious harm resulted from the breach.
Exceptions to the Non-Compete Clause
The employee may be exempt from the clause under the following conditions:
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A written agreement between the parties to cancel the clause after contract termination.
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The employee or new employer pays a compensation not exceeding three months’ salary to the former employer (with their consent).
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The contract is terminated during the probationary period.
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Special exemptions issued by the Minister of Human Resources and Emiratisation.
Legal Consequences of Breaching a Non-Compete Clause
If the clause is valid and the employee breaches it, the former employer may file a compensation claim within one year from the date of discovering the breach, provided that they can prove:
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The date of discovering the breach.
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That serious and actual damage occurred due to the violation.
Conclusion
The non-compete clause is a crucial legal tool to safeguard employers’ business interests and support a stable labor market in the UAE.
At Alia Salem Al Nuaimi Law Firm, we offer specialized legal advice in employment contracts and compliance matters, along with professional legal representation to ensure the best possible outcomes for our clients.
For consultations or appointments, visit our main office in Abu Dhabi or contact us through our official channels.
