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Competitor clause in employment contract UAE Dubai

competitor clause in employment contract uae

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 will delve into 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.

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.

  1. 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.
  2. Employees can be exempted from the non-compete clause if they pay compensation not exceeding three months of their last agreed-upon wage to their former employer, and the former employer’s written consent is required.
  3. The clause is also void if the contract is terminated during probation.
  4. 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, as well as the prohibited activities and potential consequences for breaching the non-compete agreement.

It provides clarity and protection for both the employer and the employee involved.

FAQs about competitor clause in employment contract uae.

A non-compete 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.
The non-compete 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.
If an employee breaches a non-compete clause in the UAE, the employer may file a complaint with MOHRE and initiate a civil case against the employee. The court only consider a violation if the employee's actions have caused financial loss to the former employer and if confidential information is misused.
Yes, a non-competition clause is legal in the UAE, but its enforceability is subject to specific conditions and regulations outlined by Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations.

Conclusion.

The non-compete clause in employment contracts is a crucial aspect of the employment relationship in the UAE. It is essential to understand the legal provisions related to the clause to avoid any legal disputes in the future.

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 the office of Al Mulla via Whatsapp. Click here. Or visit us at our law firms: Dubai. You can also call us on phone: 00971501961291.

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.

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