Business owners in the UAE often find themselves questioning their rights when an employee unexpectedly resigns to join a competitor. This concern is particularly relevant when a former employee, especially one in a similar position, transitions to a competing firm nearby. Employers may wonder about the validity of non-compete clauses and their options for legal action.
As outlined in Article 10 of Decree-Law No. 33 of 2021, UAE employers can incorporate non-compete clauses in employment contracts to safeguard sensitive business interests. These clauses prevent former employees from working for competitors for a designated period and within a specific geographic area. In this instance, the employer established a two-year non-compete duration along with a Dh50,000 penalty for any violations.
“Employers certainly have the right to pursue legal action if they feel their business interests are at risk,” states Mohammad Ebrahim Al Shaiba, a legal expert in the UAE. If a former employee violates the agreed terms, the previous employer can seek compensation for any damages incurred. However, to enforce a non-compete clause, the employer must demonstrate that the former employee’s new role poses a genuine threat to the business. The responsibility to prove this lies with the employer, who must show that the move has caused or is likely to cause financial harm.
When the new position involves the use of proprietary information or existing client relationships, the employer’s case may be more compelling. In such scenarios, Al Shaiba recommends that business owners consult with a legal professional to explore their options, which could include suing the employee and, in some instances, the hiring competitor for potential damages.
The non-compete laws in the UAE aim to protect business interests while also considering employee rights. “The law stipulates that these clauses must be reasonable in both scope and duration, ensuring they do not unfairly restrict the employee’s ability to secure new employment,” Al Shaiba emphasizes. For businesses, seeking legal guidance when creating or enforcing non-compete agreements is crucial.
