UAE non-competition clauses in employment contracts have legal limitations

Labour law permits non-competition clauses to be included in a contract of employment as a way of protecting a business.

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I am a sales manager of a company that produces and sells a product to a specific type of business. I have had a job offer from a company that is our main competitor in certain product lines, although the offer is to work on a different product and I would not be working in exactly the same field. My contract has a non-competition clause. Is there any risk in accepting this new offer? Should I disclose the name of new company to my current employer or would it affect my end-of-service payment? BV, Dubai

Labour law permits non-competition clauses to be included in a contract of employment 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 where an employee performs a role which 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. But there are limitations. Any non-compete clauses must be reasonable and must only limit conduct in a way that is necessary to protect legitimate business and legal interests. 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. I have seen the clause in BV’s contract and this refers to a non-competition period of 12 months, which is excessive. Any penalty can only be enforced by way of a court ruling and the employer would have to bear the cost of making a legal claim. If BV changes job and would be working with different products, the current employer’s claim would be weakened. An employee is not obliged to disclose the name of a new employer and provided they give the appropriate period of notice, the end-of-service gratuity entitlement is pay­able in accordance with UAE Labour Law, albeit reduced if the current period of service is less than five full years.

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

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