A Gulf News reader's case raises concerns over broad non-compete clauses and labour bans.
Dubai: In the UAE, workers have the right to switch jobs as long as they follow the regulations outlined in the country's Labour Law. A current employer cannot prevent an employee from exercising their right to work.
However, in some cases, employers may try to stop an employee from joining a new organisation by including a non-compete clause in the job contract or by filing a labour ban. But what happens if the non-compete clause is so broad that it effectively bars you from working anywhere in the same field - even globally?
Reader's dilemma: Can they join a new company?
A reader who has been working as a fitness instructor for the past four years recently faced this dilemma and sought clarification on whether they could accept a new job without facing legal issues.
One month before my contract ended, I gave notice to my employer that I would not be renewing it, as I did not want to continue under the same salary. My contract with the fitness centre includes the following clause:
The employee confirms that neither during the employment nor for 12 months after the termination date - whether directly, through others, or on behalf of someone else - they will not compete with the company or be involved in any business offering similar services in the UAE or anywhere else.
The company is based in Dubai. I now plan to join a different fitness organisation in another emirate, with a completely different customer base.
Can you please advise whether my previous employer can stop me from joining the new company based on this clause, or file a labour ban against me?
What the UAE Labour Law says
Dr. Hassan Elhais, legal consultant at Awatif Mohammad Shoqi Advocates and Legal Consultancy, explained to Gulf News that under the UAE Labour Law, Federal Decree-Law No. 33 (specifically Article 10), it is stated that in cases where an employee has access to business secrets or is aware of the employer's clients, the employer is allowed to stipulate a non-compete clause in the employment agreement.
Therefore, from a legal standpoint, a non-compete clause is valid in the UAE for specific categories of businesses and under certain conditions.
When we look at what the Labour Law states, since the reader is in direct contact with clients and has a close working relationship, therefore a non-compete clause is applicable.
Why this clause may not be legally enforceable
In this specific scenario, the non-compete clause by the employer does not fulfil the required conditions of a valid non-compete clause as required by UAE laws. Elhais referred back to Article 10 of the Labour Law to explain why the non-compete clause in this particular case is invalid.
"However, the non-compete clause reproduced in the question does not fulfil the required conditions of a valid non-compete clause as required by the UAE laws. Article 10 of the Labour Law states that a non-compete clause must clearly define a reasonable time limit, geographic location and type of work in the clause to the extent necessary to protect the legitimate interests of the business," he explained.
This is further detailed under Article 12 of Cabinet Decision No. 1 of 2022, where the application of a non-competition clause requires the following elements to be determined:
- The geographical scope for the application of the condition.
- The term of the condition, provided that it does not exceed two years from the date of the expiry of the contract.
- The nature of the work so as such nature seriously harms the legitimate interests of the employer.
The role of the UAE Civil Code
Elhais also added further context by citing Article 909 of the Federal Law No. (5) of 1985 concerning the civil transactions law of the UAE (Civil Code), which further clarifies that a non-compete clause that does not fulfil the abovementioned conditions will be considered invalid and unenforceable.
According to the law, a non-compete clause must protect the employer's legitimate business interests while ensuring the employee is not deprived of his right to work.
The competition clause provided in the question stipulates that the employee must not be involved in any activity or business providing similar services that competes with the company's operations in the UAE or any part of the world.
"The geographic limitation provided in the clause is excessive beyond any reasonable limit. Therefore, based on the information provided, it can be argued that the non-competition clause in this scenario is invalid and unenforceable as it provides an unreasonable limit on the geographical location, covering not only the whole of UAE, but also the entire world," he added.
Also, since the reader is shifting to a job in another emirate, the clause may not apply, as it is a new geographic location and customer base.
"It is fair to assume that the change in the geographic location will expose the employee to a new client base, thus not affecting the clientele of the former employer. Nevertheless, the clause in the instant scenario is invalid as it does not satisfy the conditions governing non-competition laws under both the Labour Code and the Civil Code of the UAE," he added.
Can a labour ban be imposed in this case?
In the case of a valid non-competition clause, if a dispute arises and is not settled amicably, under Article 12(2) of the Executive Regulation, the matter is to be referred to the judiciary and the burden of proving the damage shall lie with the employer. Subsequently, the employee may be required to pay damages to the employer.
"The Labour Law does not specifically provide for any labour ban in cases of non-adherence to non-competition clauses," Elhais said.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
