Introduction to Confidentiality and Non Compete Clauses in UAE

Non compete clauses in the UAE tend to appear next to confidentiality clauses in employment agreements.

A confidentiality and non-compete clause in an employment contract are legal provisions designed to protect an employer’s business interests.

Confidentiality Clause

A confidentiality clause, also known as a non-disclosure agreement (NDA), aims to protect sensitive information related to the employer’s business. This can include (a) Trade Secrets: Proprietary processes, formulas, or practices; (b) Business Plans: Strategies, market research, and future plans; (c) Client Information: Lists, preferences, and contact details; (d) Financial Information: Revenue, profits, costs, and other financial data, or (e) Product Information: Details about products or services that are not publicly known.

Content of Confidentiality Clauses

  1. Scope of Confidential Information: defining what constitutes confidential information.
  2. Obligations of the Employee: specifying that the employee must not disclose or use the confidential information for any purpose other than their employment duties.
  3. Duration: Indicates how long the confidentiality obligation lasts, which could extend beyond the term of employment.
  4. Exceptions: Situations where disclosure is permitted, such as by law or with employer’s consent.

Non-Compete Clause

A non-compete clause in the UAE restricts the employee from working in a competing business or starting a similar business for a certain period and within a certain geographical area after leaving the employer.

Typical content of non-compete clauses:

  1. Duration: The length of time the non-compete restriction applies after the employment ends (e.g., 6 months, 1 year).
  2. Geographic Scope: The area within which the employee is restricted from competing (e.g., specific cities, states, or countries).
  3. Scope of Activity: The specific activities or types of businesses the employee is restricted from engaging in, often defined by the employer’s industry or specific competitors.
  4. Consideration: What the employee receives in exchange for agreeing to the non-compete, which could be the job itself, additional compensation, or other benefits.

In the UAE non compete clauses are regulated under Article 10 of Law No. 33 of 2021:

1- If the Work entrusted to the Worker allows him to be aware of the Employer’s clients or to access the secrets of his Work, the Employer may stipulate in the Employment Contract that the Worker shall not, after the end of the contract, compete with him or participate in any competing project in the same sector, provided that the condition is determined in terms of time, location and type of Work to the extent necessary to protect the legitimate business interests, and the period of non-compete shall not exceed two years from the date of expiry of the contract.

2- This condition shall be nullified if the Employer terminates the Employment Contract in violation of the provisions of this Decree-Law.

3- The lawsuit filed by the Employer for the Worker’s violation of the provisions of this Article shall not be heard after the lapse of one year from the date of discovering the violation.

4- The Implementing Regulation of this Decree-Law shall specify the provisions regulating this Article, and the skill levels or occupational professions that may be excluded from the provision of Clause (1) of this Article, in accordance with the conditions and rules specified by the Regulation.

It is therefore very important that:

  • the position of the employee is sufficiently relevant as to be aware of Employer’s customers and the secrets of the work;
  • it is narrow in time, location and type of Work to the extent necessary to protect the legitimate business interest.
  • The limitation does not exceed 2 years.

This Article 10 of Federal Law No. 33 of 2021 on Employment relations leads us to the following considerations with respect to confidentiality and non compete clauses in the UAE.

Purpose and Legal Considerations in Confidentiality and Non Compete Clauses in UAE

Both clauses should aim to protect the employer’s business interests by ensuring that sensitive information is not disclosed and that the employer does not face unfair competition from former employees.

Employers can invest in training and developing employees without fear that the employee will leave and use that training against them.

In terms of legal considerations, the following must be revised:

  • Enforceability: If the limitations exceed the boundaries set by Article 10 of Federal Law No. 33 of 2021 in terms of duration, geographic scope, and scope of restricted activities it may not be enforceable. Employers must balance protecting their business interests with the employees’ right to work and earn a livelihood. Clauses that are too restrictive may be deemed unenforceable by courts.
  • Reasonableness: Both clauses must be reasonable and not impose undue hardship on the employee.

Conclusion to Confidentiality and Non Compete Clauses in UAE

In the UAE, confidentiality clauses are generally enforceable, while non-compete clauses are subject to stricter scrutiny to ensure they are reasonable and protect legitimate business interests without unduly restricting the employee’s right to work. Employers should carefully draft these clauses to enhance their enforceability and consult with legal professionals to ensure compliance with UAE laws. You may contact us to assist in their drafting or revision and also in matters requiring legal action (litigation).

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We hope this publication will help you understand the scope of non compete clauses in UAE and remain available for any questions regarding this post of general application.

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*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the concepto of non compete clauses in UAE .