NON- COMPETITION CLAUSE UNDER UAE EMPLOYMENT LAW - WHAT YOU MUST KNOW

The Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations (after this "Employment Law") and Cabinet Resolution No. 1 of 2022 on implementing Federal Decree-Law No. 33 of 2021 regarding the Regulation of Employment Relations have introduced new regulations regarding the non-competition clause. Under these regulations, an employer may require an employee to refrain from engaging in a similar business or working for a competitor for a certain period after terminating employment. The non-competition clause protects the employer's legitimate business interests and prevents employees from using confidential information or trade secrets to compete against their former employer. However, the regulations also stipulate that the non-competition clause must be reasonable regarding its duration, scope, and geographical area. Therefore, employers and employees need to understand the provisions of the non-competition clause and its implications following the relevant UAE regulations.

What is the Non-Competition clause?

A non-competition clause, also known as a non-compete agreement, is a legal provision in an employment contract that prohibits an employee from working for a competing company or starting a competing business for a certain period of time after leaving their current employer. The purpose of a non-competition clause is to protect the employer's trade secrets, confidential information, and business interests. The duration, geographical area, and scope of activities covered by the non-competition clause can vary depending on the terms agreed upon by the employer and employee. Non-competition clauses are subject to various laws and regulations in different jurisdictions, and specific legal restrictions may limit their enforceability.

Validity of a non-compete clause

1. The validity of a non-compete clause is subject to the following conditions:
2. The employee must be at least twenty-one (21) years old when signing the agreement.
3. The clause must specify the duration of the restraint, the restricted geographical area, and the type of business activities in which the employee is prohibited from participating.
4. The specifications in the clause should be limited to the extent necessary to protect the employer's legitimate interests.
5. The compensation amount should be reasonable and not used to coerce the employee into continuing their employment with the employer.

Law Provision relating to the non-competition clause under UAE Employment Law

According to UAE's Employment Law, employers have the right to include a non-competition clause in an employment contract to prevent employees from engaging with competitors after their employment contract has ended. This condition is permissible if the employee's work provides access to the employer's customers or business secrets. To protect the employer's legitimate business interests, the non-competition clause must be specified in the employment contract, including the time, place, and type of work involved. However, such a clause must not exceed two years after the termination of the employment contract, as stated in Article 10(1) of the UAE Employment Law.

Penalty for the Violation of Non- competition Clause

In case an employee violates the non-competition clause in their employment contract, an employer may need to take action by submitting a complaint to the Ministry of Human Resource & Emiratization in the UAE and/or
Initiate legal proceedings within one year of detecting the breach. This provision is outlined in Article 10(3) of the UAE Employment Law. If the employer discovers a violation of the provisions of this Article by the worker, any claim filed by the employer regarding the violation will not be heard after one year from the date of discovery.

Employees who are exempted from the non-competition clause:

Despite a non-competition clause in an employment contract, some employees may qualify for an exemption based on their profession or designation, as stipulated in Article 12(5)(c) of Cabinet Resolution No.1 of 2022. This provision states that "under the following conditions, the employee shall be exempted from the non-competition clause as mentioned in Article 10 of the UAE Employment Law.

a. The worker or the new employer may pay compensation, not exceeding three months of the worker's wage as stipulated in the last contract, to the previous employer, subject to the written consent of the previous employer.
b. If the contract is terminated during the probationary period.
c. Professional categories in high demand in the national labour market, as determined by the Minister's resolution, following the Cabinet-approved worker classification.

Are you a business owner or executive concerned about the potential loss of confidential information or trade secrets? Look no further than HHS Lawyers and Legal Consultants in Dubai (https://hhslawyers.com/)! Our team of experienced lawyers can help you draft and implement a non-competition clause that protects your company's assets and interests.

With our expertise in business law and employment contracts, we can ensure that your non-competition clause is legally binding and enforceable in the UAE. Don't let the threat of competition compromise your business - contact HHS Lawyers and Legal Consultants today to learn more about our non-competition clause services.

Shop No. 018, Main Market, Near Lakshmi Narayan Mandir, Malviya Nagar, New Delhi, Delhi 110017

Trending European is your daily dose of trends. We provide you with the latest european trends, celebrity news and the trending TV shows.

This release was published on openPR.