Can UAE firm demand non-competition clause on resignation?

UAE labour law permits such clauses as a way of protecting a business, and while they are legitimate, such post-termination restrictions can be difficult to enforce.

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I was working for a free-zone company and have recently resigned from my job. Now that my resignation has been accepted by the employer, they are asking me to sign a non-compete agreement prohibiting me from working with a competitor for the next one year. The agreement will be applicable in the UAE with a penalty of Dh100,000. Am I required by law to sign this agreement, considering that they have brought it up at the time of resignation? No such clause was mentioned at the time I started employment, or at any other time. WT, Abu Dhabi

It is not unusual to see a non-complete clause in a contract of employment, but I do not believe that such a clause can be added retroactively without the employee’s agreement and an employer cannot force an employee who is leaving to sign such a clause. UAE labour law permits such clauses as a way of protecting a business, and while they are legitimate, such post-termination restrictions can be difficult to enforce.

Article 127 of UAE labour law specifically states that when an employee performs a role that allows him to become familiar with confidential information, the employer may put in place an agreement with provisions that prevent an employee from working with a competing business after leaving service – but there are limitations. There are articles in the civil code that contain guidance as to how these clauses can be used. Any non-compete clauses must be reasonable and must only limit conduct in a way that are necessary to protect legitimate business and legal interests. With this in mind, the clauses must be limited in duration, geographical scope and the nature of the restriction. Restrictions of more than six months are unlikely to be upheld and the employer would have to prove that they have been disadvantaged in some way to make a monetary claim. A fixed penalty is not a reasonable request, and also unlikely to be upheld as a flat penalty if the employer takes an employee to court. Note that the penalty can only be enforced by way of a court ruling.

If the employer should refuse to cancel a visa or not pay any end of service benefits because of WT not agreeing to these terms, the employer would be in breach of labour law, as they cannot stop an employee from leaving, and in this situation a complaint can be made to the Ministry of Labour.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with more than 20 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice.

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