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What the new UAE Labour Law states about the non-compete clause and the exceptions
Dubai: If you are changing jobs in the UAE and are planning to work for a competing company, can your current employer prevent you from moving to your new job? Are there any exceptions to the non-compete clause, as per the UAE Labour Law?
Here is a detailed guide on what the new legislation states on employees moving to competing businesses.
The provisions for a full-time employee to move to another company which may be a competing business are laid out in Article 10 of the new UAE labour – Federal Decree-Law No. (33) of 2021.
However, there are certain conditions that were further stipulated in a Cabinet Resolution issued by the Ministry of Human Resources and Emiratisation (MOHRE), to clarify the conditions that need to be met for the non-compete clause to be applicable.
According to Reda Hegazy, a senior associate and arbitrator at Dubai-based law firm Alsuwaidi and Company LLC., Article 10 provides some basic conditions that a non-compete clause needs to fulfil in the employee’s labour contract.
“In Article 10, 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 under specific conditions, namely that the nature of worker’s work allows him to access employer’s customers or business secrets.”
However, a non-compete clause is only valid for up to two years after the termination of the contract, as per the Labour Law.
Non-compete clause is void in case of arbitrary dismissal
Hegazy further explained under which circumstances the non-compete clause becomes invalid.
“This Article also provides for that the non-compete 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.
When can my employer take action against me?
“As per the new law, the employer shall be statutorily bound to, if it intends to protect its business interests, execute a Non-Compete Agreement with the employee.
“Above all, the former employer shall, subject to whether the employee had access to information which is regarded as sensitive, execute a Non-Compete Agreement with the latter,” he added. However, the employer should initiate such a lawsuit within one year from the date on which the violation is detected, according to Hegazy.
Rules for Non-Competition Clause
While Article 10 of the Labour Law outlines the requirements mentioned above, the rules and the implementation of the non-compete clause are further highlighted in a new decree – Cabinet Resolution No. (1) of 2022 – issued by MOHRE.
“Article 10 of the UAE Labour Law left the determination of skill levels or occupations that may be excluded from such a clause to the Executive Regulations of the Decree-Law,” Hegazy said.
According to Hegazy, Article 12 of Cabinet Resolution No. (1) of 2022 sets out the following conditions that a non-compete clause should meet:
1. The geographical scope of application of the clause should be specified.
Hegazy said: “This refers to the geographical scope in which the clause is applied, in the sense that it is not permissible to leave the clause general and to be applied everywhere.”
2. It should not exceed two years from the contract expiry date.
“The period of application of non-compete clause shall not exceed two years from the date of expiry of the employment contract, otherwise, the clause is void,” he said.
3. The nature of the work causes significant harm to the legitimate interests of the employer.
“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.”
Exemptions from non-compete clause
Article 12 of the Executive Regulations also provides details on when the non-compete clause will not be applicable. These include the following:
- If the worker or the new employer pays the previous employer compensation not exceeding three months of the worker’s wage as agreed upon in the last contract, subject to the previous employer’s written consent thereto.
- If the contract is terminated during the probationary period.
- 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.