UAE non-compete clauses: Conditions, duration and how workers can challenge restrictions

Employers in the UAE may include non-compete clauses in employment contracts to bar former employees from joining rival companies or launching competing businesses for up to two years, provided the restrictions meet specific legal requirements, according to a legal expert.

The analysis, provided by Ashish Mehta, founder and managing partner of Ashish Mehta & Associates, examines the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the Employment Law) and Cabinet Resolution No. 1 of 2022.

Non-compete clause requirements

Article 10(1) of the Employment Law and Article 12 of Cabinet Resolution No. 1 of 2022 establish key conditions for a valid non-compete clause. The restriction must not exceed two years from the date the employment contract ends or is terminated. The two-year period is a statutory maximum, but enforceability depends on whether the duration is proportionate to the legitimate business interests at stake.

The contract must specify the geographical area where the restriction applies. A clause covering an excessively broad territory without justification based on the employer’s legitimate interests may be challenged. The nature of the work restricted must also be clearly defined and linked to activities that could cause serious harm to the employer’s legitimate business interests. A blanket ban on any employment in the same industry, regardless of the employee’s actual duties, could be disputed.

A non-compete clause is only enforceable when necessary to protect the employer’s legitimate business interests, particularly when the employee had access to clients or confidential business information. It should not function as a general restraint on the employee’s ability to earn a livelihood.

Article 12(2) of Cabinet Resolution No. 1 of 2022 adds that if a dispute over a non-compete clause cannot be settled amicably and goes to court, the employer bears the burden of proving the damages suffered and their amount.

When employees can challenge restrictions

Employees may challenge a non-compete clause if it fails to adequately define the duration, geographical scope or nature of the prohibited work, or if it extends beyond what is necessary to protect the employer’s legitimate interests. Article 10(2) of the Employment Law states that the non-compete condition becomes void if the employer terminates the contract in violation of the law.

Article 12(3) of Cabinet Resolution No. 1 of 2022 provides that the non-compete clause does not apply when the employer terminates the contract at its own will or breaches its legal or contractual obligations. Article 12(5) of the same resolution lists exemptions, including: termination during the probation period; employment in professional categories exempted under ministerial provisions; and an agreed compensation arrangement where the employee or the new employer pays the former employer a sum not exceeding three months of the employee’s last salary, provided the former employer gives written approval.

What to check before signing

Before signing an employment contract with a non-compete clause, employees should verify that the restriction clearly specifies its duration, geographical scope and the nature of the prohibited work. They should assess whether the restriction is reasonably connected to their actual duties, client relationships and access to confidential information. The clause should not prevent them from working in their profession generally, only from specific competing activities.

Employees are advised to seek clarification or negotiate if the restriction appears excessively broad. They may request a written provision excluding the non-compete restriction upon termination if agreed with the employer. They should also review any separate confidentiality, non-solicitation or intellectual property obligations that may continue independently. Reading the contract carefully to ensure no ambiguity in language is essential.

The legal analysis is based on Federal Decree Law No. 33 of 2021 and Cabinet Resolution No. 1 of 2022. The information is for general guidance only and does not constitute legal advice.