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Legal: Non-Compete Clauses in UAE Employment Contracts

Legal: Non-Compete Clauses in UAE Employment Contracts


In the United Arab Emirates (UAE), the inclusion of non-competition clauses in employment contracts is a common practice aimed at safeguarding businesses from potential harm caused by employees joining competitors upon termination. However, adherence to specific criteria it is essential to ensure the validity and enforceability of such clauses, as outlined in Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations.
 

The non-competition clause, defined in Article 10(1) of the Federal Law, outlines three main elements: 

i. refraining from working for a competitor,
ii. conducting business with the former employer’s clientele, and
iii. avoiding solicitation of current and former colleagues.
 


The clause’s enforceability depends on its inclusion in the employment contract, a maximum duration of two years, a specified geographic scope, and compliance with the conditions set forth in the 9th point of the law. 


The Federal Decree-Law sets clear conditions for the validity of non-compete clauses.


i. The clause must be explicitly stated in the employment contract,
ii. have a duration not exceeding two years,
iii. specify the geographic area, be relevant to the employee’s sector, and adhere to the conditions specified in the 9th point of the law


Courts evaluate these criteria on a case-by-case basis, considering the employee’s position and field of work.


The 9th point introduces specific scenarios exempting the application of a non-compete clause. These include termination during the probation period, unlawful termination by the employer, a written agreement between parties to waive the clause, the timing of case filing, compensation agreements, and the determination of professional categories in demand in the national labor market.


The enforceability of non-compete clauses increases with the employee’s seniority and access to business secrets. In case of breach, the former employer may seek damages through a civil claim, but proving damages is challenging. UAE courts usually do not grant injunctions to prevent an employee from joining a competitor, emphasizing the need for clear evidence of harm.


The validity of a non-competition clause depends on various factors, including its inclusion in the standard employment contract, the specified duration and geography, its relevance to the employee’s sector, and compliance with the conditions set forth in the 9th point of the law.


The non-competition clause, defined in Article 10(1) of the Federal Law, outlines three main elements:


i refraining from working for a competitor,
ii conducting business with the former employer’s clientele, and
iii avoiding solicitation of current and former colleagues.


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