Ask the Law questions are answered by lawyer Mohammad Ebrahim Al Shaiba of Al Shaiba Advocates and Legal Consultants
Non-competition clause
Question 1: A reader from Dubai asks: I have been working for one of the big companies in Dubai for more than 18 months as a sales manager. I have contributed greatly to the company’s profits and the company’s name is well known in the market. I worked in return for a salary and the percentage of sales that I achieved. My labour contract was limited to two years, with an expiry date of December 2014. The company’s management sent me a letter expressing its willingness to increase my sales’ annual premium from five per cent to ten per cent, as well as to increase my salary by 20 per cent, provided that the new contract included a non-competition clause for three years. They wanted me to sign the new contract immediately and if I refused the company would dismiss me without issuing my labour dues, on the basis that my refusal on the said condition would be considered a violation of the labour law. In my offer letter it is mentioned that the company has the right to put a competition clause in the labour contract. Note that the company had not put the non-competition clause in my current labour contract and that an offer letter was also not signed by me. The company might ask the Ministry of Labour to impose a one-year ban as a penalty for the said violation.
Does the company have the right to treat me this way, and am I obliged to sign the non-competition clause? If I do not sign, does the company have the right to deprive me of my end-of-service gratuity, and impose the ban?
Answer 1: According to the UAE Labour Law article No. 127 which states the following: “Where the work assigned to a worker, allows him to become acquainted with the employer’s clients or to become familiar with the secrets of his business, the employer may require him to refrain, after the termination of his contract, from competing with him or participating in any enterprise competing with his own. Such agreement shall be valid only on condition that the worker is at least 21 years of age at the time of its conclusion that the competition clause agreement is limited, as regards the time, the place and the nature of the business, to the extent necessary to safeguard the employer’s lawful interests.”
This article has been made in favour of the employer to maintain the stability of the labour market, as well as to protect the employer’s interests. But the Labour Law does not oblige the employee to sign the aforementioned clause, as it is up to the employee to accept or reject it, and in case the company dismisses the questioner before the expiry date of his labour contract, then such a dismissal will be considered an arbitrary dismissal, whereby, the questioner is entitled to all his rights and compensation for the arbitrary dismissal, from the employer, for his violation of the Labour Law, and no ban will be imposed on the questioner.
Limited contract
Question 2: A reader from Dubai asks: I’m a civil engineer. I have received a job offer from one of the big construction companies in Dubai and in the offer letter it mentions my employment contract will be a limited contract. What the advantages and disadvantages of such a contract? What happens if the employee breaks the contract before its expiry date and what type of ban will be applicable?
Answer 2: Article No 115,116 of the UAE Labour Law quotes the following; “Where a contract of employment is for a limited period of time and the employer revokes it for reasons other than those specified in Article (120) he shall be required to compensate the worker for any prejudice the latter sustains: provided that the amount of compensation shall in no case exceed the aggregate remuneration due for a period of three months or the contract contains a provision to the contrary where a contract is revoked by the worker for reason other than those specified in Article (121) he shall be required to compensate the employer for any prejudice the latter sustains as a result: provided that amount of compensation shall not exceed half the worker’s remuneration for three months or the residual period of the contract whichever is shorter unless the contract contains a provision to the contrary and also as per the UAE Labour Law Federal Law No (8) of 1980 as amended article 138 where a worker who is bound by a contract for a limited period leaves his work on his own accord before the expiry of his contract period he shall not be entitled to severance pay unless his continuous period of service exceeds five years.”
Finally the employer has the right to ask the labour ministry to impose a one-year ban on the employee in case he breaks the limited labour contract before its expiry date.
