You may have encountered a competitor clause in employment contract UAE in 2024.
This clause restricts an employee from joining a competitor company or starting a competitive business for a certain period after the termination of their employment contract.
However, implementing this clause in the UAE is governed by specific laws and regulations.
This article details the non-compete clause in the UAE, explaining how it operates, the penalties associated with breaking such clauses and providing a sample non-competition clause for clarity.
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Competitor clause in employment contract UAE
As per the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations, a non-compete clause can only be enforced if it is mentioned in the employment contract.
- The clause is applicable for two years after the termination of the employment contract and must specify the place, time, and type of work to be restricted.
- Employees can be exempted from the non-compete clause if they pay compensation to their former employer not exceeding three months of their last agreed-upon wage, and the former employer’s written consent is required.
- The clause is also void if the contract is terminated during probation.
- Additionally, some professional categories may be exempted from the non-compete clause as determined by the Ministry under the employment classification approved by the Cabinet.
Penalty for breaking a non compete clause
Suppose an employer believes an employee has breached the non-compete clause.
In that case, they may file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) and initiate a civil case against the employee.
However, the court may only consider a violation if the employee’s actions have caused financial loss to the former employer and if any confidential information is misused.
Non-Competition Clause Sample.
Within the context of employment in the United Arab Emirates, a competitor clause in employment contract UAE may take the following form:
The Employee agrees that for a period of twenty-four months following the termination of their employment contract.
Whether by mutual agreement or otherwise, they shall refrain from engaging in any activities that directly or indirectly compete with the Company’s business interests within the geographic boundaries of the United Arab Emirates.
This restriction includes but is not limited to initiating, participating in, or financing any enterprise that directly competes with the Company’s products, services, or business model.
The Employee further agrees not to solicit clients, customers, or employees of the Company for purposes of diverting business or recruitment to a competing entity.
The Employee acknowledges that violation of this clause may result in legal proceedings and financial liabilities in accordance with applicable laws and regulations governing employment relations in the UAE.
This sample clause outlines the temporal and geographical scope of the restriction, the prohibited activities, and the potential consequences of breaching the non-compete agreement.
It provides clarity and protection for both the employer and the employee involved.
FAQs about Competitor Clauses in UAE Employment contracts
Conclusion.
A competitor clause in employment contract UAE is a crucial aspect of the employment relationship in the UAE.
Understanding the legal provisions related to the clause is essential to avoiding future legal disputes.
Specific laws and regulations also govern exemption from the clause and legal action for breach.
Seeking the guidance of an experienced labour lawyer like Al Mulla can help employees navigate legal disputes related to their employment contracts.
Contact Al Mulla Lawyers today! Click the Whatsapp icon below or visit our Contact Us page.
Find us at these locations:
– Dubai: Deira, Port Saeed, Street 8, City Avenue Building, Office 705-708.
– Abu Dhabi: Corniche Street, Golden Tower, Office 22.
– Ras Al Khaimah: Al Nakheel, Al Maamoura Building (Emirates NBD Bank Building), Fourth Floor.
We recommend you learn about the Best Non compete agreement attorney in Dubai UAE and read about Hiring the Best Employment Agreement Lawyer in Dubai.
A legal consultant specializing in UAE labor law. He regularly publishes articles on the website and writes on various areas of UAE law, with a specific focus on labor law.