In today’s fast paced world, where employees are always on the lookout for favourable opportunities and quick career leap, employers want the employment agreements to contain water tight provisions restricting such career leaps and preventing movement of confidential trade secrets and trade contacts.

Like any other part of the world, employers in UAE have also started implementing and applying such provisions in the employment contracts, which have the effect of restricting employees from competing with the employer after they leave the employer. Such provisions, commonly known as non-compete provisions, are generally included as a statement in the employment contracts where the employee declares and undertakes that he or she will not engage in any competitive activity fter leaving the employer, or will not join any direct competition of the employer whether as an employee or as a principal, partner or owner. Such restrictions are usually limited up to a certain period of time, which generally depends upon the prevailing practices of the relevant region as well as the applicable laws.

Employment and related matters in UAE are governed by the Federal Law No 8 of 1980 (“Labor Law”) as well as certain provisions of the UAE Civil Code. Article 909 of the Civil Code provides that if the work of the employee is such as 􀀀to permit him to have access to work secrets or to make􀀀 acquaintance with the customers of the business, it shall be􀀀 permissible for both parties to agree that it shall not be􀀀 permissible for the employee to compete with the employer or 􀀀to engage in an employment which competes with him after the 􀀀termination of the contract.

Although the above article allows and permits inclusion of a non-compete clause, it adds a proviso, which states that such agreement shall not be valid unless it is limited in time, place and type of work to such extent as may be necessary to protect the lawful interests of the employer. In addition to this, it also provides that such non-compete provisions shall not be implemented if the employment is terminated by the employer without any act on the part of the employee justifying that course, and likewise it shall not be permissible for employer to rely on the agreement if he commits any act which justifies the employee in terminating the contract.

The provisions of this article have been reiterated under article 127 of the Labor Law, which makes it abundantly clear that while non-compete provisions can be included in UAE employment contracts, subject to the limitations of time, place and type of work. This would mean that an indefinite noncompete provision, where the territory of such restriction has not been defined, would be invalid and cannot be enforced. Similarly, a general non-compete clause restricting the employee’s ability to work anywhere in any other establishment, whether it is a competition to the employer or not, such as restricting the employee to take up a similar type of work in any other industry, would also be invalid. For instance, it is very likely that a noncompete clause restricting a sales personnel working in hotel industry from joining banking industry, would be held invalid and cannot be enforced against the employee. Thus, a non-compete clause, in order to be valid and enforceable must be: (i) for a definite period of time, keeping in mind the reasonableness of such time; (ii) the territory of the restriction must be defined, such as Dubai, Abu Dhabi, UAE and the likes; and (iii) the type of work must be specifically defined.

Further, apart from the aforesaid limitations, article 910 of the Civil Code protects the employees from unfair and exorbitant compensation amount fixed in their employment agreements. The said articles clearly provides that if both parties agree that the employee should be liable in the event that he is in breach of his agreement not to compete, and such liability is fixed at an􀀀 exorbitant amount in such a way as to compel him to remain with the employer, such a provision shall be invalid.

Therefore, any provision fixing an exorbitant and unreasonable amount as compensation payable by the employee for any breach of a non-compete provision by him cannot be enforced against such an employee.

Thus, while the UAE lawmakers have granted the employers a protection by allowing them to include non-compete provisions in the employment agreements, the lawmakers, at the same time, have also taken care of the employees’ rights and personal freedom by not giving the employers any undue advantage over the employees and keeping such protection restrained by providing adequate limitations.