The laws and regulations issued with regards to the non-competition clause, as well as previous court rulings on the matter, provide greater clarity on how, exactly, a non-competition clause can actually be enforced. Picture used for illustrative purposes only. Image Credit: Shutterstock

Dubai: If you just got a new job offer and are wondering if you can seize the opportunity or not, because of the non-competition clause in your labour contract, there is good news. The UAE Labour Law – Federal Decree Law No. 33 of 2021 – outlines some basic requirements that the non-competition clause should fulfil to ensure that the interests of both the employer and employee are protected.

So, if you are confused about what exactly the non-competition clause entails, and whether or not it can be applied in your case, here is all you need to know.

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1. What should the clause include?

The first thing to remember is that the non-competition clause has to fulfil some specific requirements, as per the UAE Labour Law:

1. It should specify the place of applicability – What is the location or region within which the non-competition clause is applicable? This should be clearly stated in the clause, for example, the specific emirate, city or country.

2. It should specify the time duration of applicability – this can be one or two years, with the law capping the maximum duration as two years from the contract’s expiry.

3. The nature of the work causes significant harm to the legitimate interests of the employer – clarifying on this requirement, Reda Hegazy, a senior associate and arbitrator at Dubai-based law firm Alsuwaidi and Company LLC, said: “The nature of work must be harmful to the employer. It is understood here that not every work performed by the worker is considered to compete with another employer. The acts of competition protected by the Decree-Law and its Executive Regulations are those that give rise to a serious harm to the employer which affects his business.”

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2. When can the clause be added?

According to the UAE Labour Law, this clause can be added if the employee is aware of the company’s sensitive information and knows the employer’s clients. Article 10 (1) sets out the details as follows: “Where the worker performs a work which gives him access to the employer's customers or business secrets, the employer may make a provision in the employment contract that the worker shall not compete with, or be engaged in any business which competes with him in the same sector after the expiry of the contract ....”

3. Cases when the non-competition clause is not applicable

According to Hegazy, Article 10 of the Labour Law also provides mechanisms to ensure the protection of workers in the UAE.

“This Article also provides for that the non-competition clause shall be void in the event that the employer terminates the employment contract in violation of the provisions of this Decree-Law, as in the case of arbitrary dismissal or termination of the contract by the employer for any unlawful reason,” he said.

Here are the different ways in which your rights as an employee are protected, as per the conditions stipulated in Article 10 of the UAE Labour Law and Article 12 of Cabinet Resolution No. (1) of 2022:

1. The clause is voided if the company terminates the employment contract in violation of the Labour Law.
2. A case cannot be filed after the lapse of one year from the date of discovery of the violation.
3. If the worker or the new employer pays the previous employer compensation not exceeding three months of the worker’s wages as agreed upon in the last contract, subject to the previous employer’s written consent thereto.
4. If the contract is terminated during the probationary period.
5. Any professional categories that are in demand in the national labour market and determined by resolution of the Minister in accordance with the workers’ classification approved by the Cabinet.

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4. What happens if my employer uses the non-competition clause to file a case against me?

Zeiad Yehia, Senior Legal Counsel at Kashwani Law Firm, spoke to Gulf News about how the laws and regulations issued with regards to the non-competition clause, as well as previous court rulings on the matter, provide greater clarity on how, exactly, a non-competition clause can actually be enforced.

He specifically highlighted two court rulings made by Dubai’s Supreme Court - Precedent No. 32 of 2021 - Labour - dated March 16, 2021, and Precedent No. 87 of 2017 and Precedent No. 101 of 2017 - Labour - dated June 13, 2017, as critical in understanding the enforceability of the clause.

According to Yehia, for the clause to be enforceable, it needs to fulfil certain requirements, including the ‘geographical factor’, ‘chronological factor’ and the ‘legitimate interest factor’ mentioned above.

Clarifying what exactly constitutes ‘legitimate interest’, Yehia said: “In other words, the non-competition clause cannot be invoked or enforced solely on the basis of speculation or potential harm to the employer’s business. There must be tangible evidence that the employer has incurred real and quantifiable harm due to the employee’s competitive activities. The court will carefully evaluate whether the employer’s legitimate interest has been genuinely and demonstrably impacted before considering the enforcement of the non-competition clause.”

He added that this requirement helps both the employer and employee.

“This requirement serves as a safeguard to prevent the misuse or abuse of non-competition clauses by employers. It ensures that the employer’s interests are genuinely at risk and that the restriction placed on the employee’s post-employment activities is justified based on the actual harm suffered by the employer. The principle of legitimate interest acts as a balancing mechanism to protect both the employer’s rights and the employee’s freedom to seek alternative employment opportunities.

“Therefore, to fully qualify for the provisions outlined in Article 10 of the UAE Labour Law, both the geographical factor, limiting the clause to the specific city or emirate of the workplace, and the chronological factor, imposing a maximum duration of two years after the termination of the work relationship, must be satisfied simultaneously. Compliance with these requirements is essential to ensure the enforceability and validity of the non-competition clause as per the provisions of the law,” he said.

Can your employer stop you from taking a new job in the UAE?

“It is a big question, and the answer can take various aspects into consideration. The immediate answer or rule, is ‘no’, but there are exceptions to this rule, including the proper application of the non-competition clause, and including, for example, an employee in the probation period who leaves the country without providing notice, where they shall be banned from working again in the country for a period of one year,” Yehia said.