Question: Can you explain the non-compete clause in a contract? If I get a job in a firm with similar responsibilities as my current role, can my company use the clause against me? How does it work? What can the company do? Can I take up the new job if there is some way for me to testify that company secrets will not be shared? Please help, as the employment offer I have received has considerably more benefits than my current job.
Response: Pursuant to your queries, it is assumed that you are employed by a mainland private company based in the UAE. Therefore, the provisions of the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Employment Law') and those of Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Cabinet Resolution No. 1 of 2022) are applicable.
In the UAE, an employee may have to abide by the non-compete terms only if they are mentioned in the employment contract. Further, the clause is valid for the period of two years from the date of termination of the employment contract. This is in accordance with Article 10(1) of the Employment Law, which states: "Where the employee performs a work which gives him access to employer's customers or business secrets, the Employer may make a provision in the employment contract that the employee shall not compete with or be engaged in any business which competes with him in the same sector after the expiry of the contract. Such clause shall specify the place, time and type of work to the extent necessary to protect the legitimate business interests, and the non-compete period shall not exceed (2) two years after the expiration of the contract."
A non-compete clause may not be applicable if the employer terminates the employment. This is in accordance with Article 10(2) of the Employment Law, which states: "This clause shall be void in the case of termination of the employment contract by the employer in violation of the provisions hereof.”
According to Article 12(5) of Cabinet Resolution No. 1 of 2022, an employee shall be exempted from the non-compete clause under the following conditions:
"1. If the employee or the new employer pays compensation not exceeding three (3) months of the employee's wage agreed upon in the last contract to the former employer, and the former employer's written consent thereto is required.
2. If the contract is terminated during the probationary period.
3. Any professional categories according to the needs of the employment market in the UAE, as determined by decision of the Ministry under the employment classification approved by the Cabinet.”
Based on the aforementioned provisions of law, even though you are joining your prospective employer who is engaged in similar activities as your current one, you may seek exemption from the non-compete clause. Further, there may be no requirement to provide an undertaking to your current employer, stating there will be no breach of confidentiality.
In case your current employer feels that you have breached the non-compete clause, it may file a complaint with the Ministry of Human Resources and Emiratisation (the ‘MOHRE’) and thereafter may initiate a civil case against you. The employer needs to do this within one year from date of discovering the violation. This is in accordance with Article 10(3) of the Employment Law.
However, generally in the UAE, the courts have taken a liberal approach in this regard, considering the right of employment and livelihood of an employee. The court may consider a violation only if the employee’s actions have caused financial loss to the former employer and if any confidential information is misused.