Non-Competition Clause

What if an employee wants to join a competitor company but the employer refuses? Yes, the employer has a right to refuse to issue the NOC if he finds or comes to know that the employee is planning to join a competitor company or going to join a competitor company. Let’s discuss the legal interpretation here. Article 10(1), Federal Decree Law 33 of 2021, specified in Art. 12 of the Implementing Regulation (Cabinet Resolution No. (1) of 2022), is the legal base for a non-competition clause in UAE Labour Law and explains the NON-COMPETITION clause in the labour and employment contracts.

As per this clause,” if an employee of a business, works on some tasks where he gets access to customers of the company or he grabs some business strategies, the employer has right to add a non-competition clause in his employment contract. The employer has the right to add a non-compete clause in the employment contract in which it can be mentioned that the employee has to be restricted from joining the competitors or competing industry, once his contract has expired, for a reasonable time period.

A non-competition clause is usually seeking, the restriction of an employee, so he cannot join competing industries or employers. But the clause also has to be reasonable and not contradict with the law. A clause must reflect the fair time, place and work type in the contract that should not accede to the legitimate human limits and UAE Labour Law rules. The maximum non-competition time that can be added is 2 years.

If the employee is terminated then this clause or any non-competition rule may not be applicable. Article 12 of Cabinet Resolution 1 of 2022 states that the non-competition clause is not applicable, if the employee/employees are terminated. Further, the non-competition can also be exempted if:

• Contract is terminated on probation period.
• Due to some professional categories, in which non-competition does not apply. Please check with Labour and Employment Lawyers, about this category subject.
• If the new employer or employee agrees to pay a compensation of three months wage of the employee as per the employment contract, but the final consent of the former employer is required. This compensation salary is not more than 3 months as per law, but consensus with the former employer is mandatory.

When an employee resigns from the company or he is terminated, employer has to cancel the work permit as per law. Employer is obligated to follow the UAE Labour Law rules and cancel the work permit/employment contract first. Based on any suspect, he is not allowed to hold the work permit cancellation process. Article 7(3) of Cabinet Resolution No. 1 of 2022 explains that cancellation of work permit submission has to be through the recommended channels of MOHRE. The employer has no right to exploit the rights of employees. The employer has no right to hold the VISA cancellation or work permit cancellation due to non-competing matters. Law provides provisions for the employer to take legal action against the employee but holding the work permit cancellation is not allowed.

Non-Compete clause can be added to the contract if the employee has access to clients, sales, data, business etc. Employers can’t force an employee to enter into to post-contractual non-compete clause, once he enters into an employment contract. Therefore all it needs to be figured out at the time of entering into to contract.

The scope of the non-compete agreement is limited up to a fair duration, fair geographical area, and fair restrictions to join companies and competitive industries. The law states that the extent of the non-compete clause has to be fair and legitimate. Non-competition can also be exempted if both parties agree.

Lawyers and legal consultants are the legal experts for any legal dispute. Even if some legal knowledge is required then these attorneys can be hired. If you are an employer or employee, or whatever the matter is, it’s suggested to consult the legal experts and then decide the next move. Our team of advocates are well known in UAE for advising on various labour law matters.

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