What are Non-Compete Clauses & How do they Work?

By Ahmed Odeh • In EmploymentNo Comments

Many UAE employers have woken up to the concept of enforcing non-compete clauses on their employees. This movement can be useful in protecting the employer’s interests so long as it does not jeopardise the employee’s rights as well. So let’s take a look at how non-compete clauses work.

Definition of a Non-compete clause

A non-compete clause is a statement that can be included in an employment contract or in a side contract.  This clause would make the employee declare that he or she will not engage in competitive business dealings with the employer after leaving the employer. Such competitive dealings can be as simple as working for a competitor or disclosing trade secrets to the competition.

Validity & Enforcability of a Non-compete Clause

As per the law, in order for a non-compete clause to be valid and enforceable, the employer must make sure that all the below conditions are satisfied:

  1. The duration of the clause must be confined. A term of one year is ideal. Anything more than two years may be subject to question for unfairness by the Labour courts.
  2. The clause must be confined to a particular Emirate. The employer cannot legally enforce a clause on an employee not to work anywhere in the UAE.
  3. The clause must clearly state the nature of the business which the employee shall not be allowed to perform. The nature of business must be specific to the employee’s job description and the target market of the employer’s business. For example, an employee working in a PR job cannot be forbidden to work anywhere in the PR industry as the scope of PR is too broad.

In addition, if the employer wishes to lodge a claim in the courts to enforce this clause, the employer must show that it has suffered loss as a direct consequence on the employee breach of obligations.

Important Note: The law does not permit non-compete clauses to be enforceable against professionals such as lawyers, accountants or doctors.

Conclusion

If employers wish to enforce non-compete clauses, they must make sure that the clauses are limited in terms of duration, scope and geographical location. And if employees are signing on such declarations, they must at least review the declarations in light of their professions and decide on the potential impact of such clauses on the employee in the future.

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