Non-Competition Under the Federal Labour Law No. 33 of 2021

The Meaning of a Non-Compete Agreement

The simple understanding of a non-compete agreement is one that prohibits the employee from working for a competitor. It is a contractual restriction imposed on an employee as part of a job contract, to prevent the employee from working for competitors after the employment relationship with the previous employer ends.

The non-compete concept contains three main elements: working for the previous employer's competitors, conducting business with the former employer's clientele, and soliciting current and former employees of the former company.

Conditions for a Non-Competition Agreement to Be Legally Valid

Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations stipulates clear conditions for a non-compete clause to be legally valid:

• The non-competition clause must be stipulated in the employment contract itself — under Article 10 of the Decree-Law, not in any supplementary agreement, side agreement, or other document, not even an offer letter.
• The duration of the non-competition must not exceed 2 years from the end date of the employment contract.
• The geography of the non-compete must be specified clearly.
• The non-competition must relate specifically to the same sector as the employer's business.

Conditions That Make a Non-Competition Clause Unenforceable or Invalid

The non-competition clause will be void in the following events:

• The contract is terminated during the probation period.
• The employer terminates the contract in a way contrary to law (for example, without the required notice period, or because of a complaint filed by the employee — arbitrary dismissal).
• The parties agree in writing that the non-competition provision will not apply after the employment contract ends.
• The employer files the non-compete case more than one year after the date the violation was discovered or acknowledged.
• The worker or the new employer pays the previous employer compensation not exceeding three months of the worker's wage as agreed in the last contract, subject to the previous employer's written consent.
• The relevant professional category is determined by ministerial resolution to be exempt, per Cabinet Resolution No. 1 of 2022 (Executive Regulation) of the labour law.

Proving Damage Is Required to Enforce the Clause and Claim Compensation

An important condition in Cabinet Resolution No. 1 of 2022 (Executive Regulation) of the labour law is that, if a dispute arises over the non-competition clause, the burden of proving damage before the court lies with the company — meaning damage must exist and be proven by the employer, which is difficult in practice.

Even if the court finds the non-compete clause applicable and all conditions met, there remains an important and difficult point: the employer must still prove the value of the damage to claim compensation. UAE courts are strict in requiring proof of damages. For example, if an employee joins a direct competitor, the previous employer cannot claim compensation simply by showing a decrease in net profit or revenue, as this could be attributable to other causes. UAE courts consider only direct damages, not indirect ones.

Employers should understand that the UAE market is open and flexible, and the law will not prevent employees from leaving companies to join competitors for better opportunities. It is the employer's own responsibility to retain employees for the long term. Courts are unlikely to rule against employees who simply resign and join a competitor, since career mobility is treated as a basic right, but courts are expected to rule against employees who breach the clause by conducting business with the former employer's clientele or soliciting current or former employees, subject to the former employer proving damages.

It is advisable to state a reasonable compensation value in the non-compete clause in case of breach — for example, an amount equal to three months of the employee's last total salary if the employee conducts business with the former employer's clientele or solicits employees within one year of the last working day. In such a case, the employer need only prove the breach, not the damage value, since it was agreed in advance, though the court retains the right to adjust the agreed value if unreasonable.

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