Wednesday, July 27, 2011

Non-competition clause in UAE Labour Law

A labour contract may contain a condition specifying that after the completion of the contract, the employee shall not work with a competitor of the employer. This is to protect the interests of the business of the employer.
The UAE Labour Law states that if the job allotted to the employee allows him to know the employer’s clients or to know the secrets of the job, the employer may stipulate that after the end of his contract, the employee shall not compete with him or share information in any competing project.
A non-competition agreement may be signed before or during the term of the employment, but as per the law, it will only come into effect on termination of the employment contract. The employers may include a clause in the labour contract or sign an additional agreement banning the employees from working for competitors for a certain period. In order to apply non-competition clause certain conditions have to be fulfilled. The employee has to be 21 years old or more at the time of signing the contract. The agreement shall be, as far as time, place and nature of work are concerned, limited to what is necessary to protect the legal interests of the employer. If the job assigned to the employee allows him to know the secrets and know-how of the employer’s business dealings, then the employer may impose non-competition clause.

In the event that the employee works in a company, where such secrecy nature does not apply then the non-competition clause cannot be used.
To impose a non-competition clause against an employee, the non-competition agreement signed between the parties is to be restricted as per the provisions mentioned in the UAE Civil Code and the Labour Law.

Such a stipulation shall not be valid unless it is clearly restricted to certain time, place and type of work, in a sufficiently determined manner so as to constitute a real protection of the legitimate employer’s interests.If the employer terminates the employee or the employee terminates the contract due to a reason that is ascribed to the employer’s fault, then the non-competition conditions shall not be applied against the employee.