Tim Elliott
Welcome to Lawgical, the UAE’s first and only legal podcast. I’m Tim Elliott. As ever, Lawgical comes to you from the Jumeirah Lakes Towers-based legal firm, HPL Yamalova & Plewka. As always, the Managing Partner, Ludmila Yamalova, is here. Good to see you.
Ludmila Yamalova
Good to see you too, Tim. Thanks for having me as always.
Tim Elliott
This time, Ludmila, we’re diving into non-compete clauses. We’ve touched on the UAE employment law recently, but not much about non-competes. Before we dive into the details, can you give us a legal definition of a non-compete clause?
Ludmila Yamalova
Great question, Tim. This is important because the lack of clarity in defining non-compete clauses often leads to disputes. Generally, a non-compete clause is an agreement between an employer and an employee stating that after leaving the company, the employee will not work for a competitor.
The intent is to prevent employees from working in a space where they could unintentionally or intentionally compromise their previous employer’s interests. However, it’s not as simple as it sounds.
Tim Elliott
So, it’s not just about leaving to work elsewhere but about how that might harm the previous employer?
Ludmila Yamalova
Exactly. A non-compete clause ideally prevents an employee from using proprietary tools, confidential knowledge, or trade secrets acquired from their previous employer to compete directly against them.
But many agreements we see are overly broad. For instance, clauses that prohibit an employee from working in a similar field for a year or two, often without defining geography or reasonable restrictions, create confusion and are typically unenforceable.
Tim Elliott
How does the UAE law address these clauses?
Ludmila Yamalova
The UAE law includes provisions for non-compete clauses. Under the new employment law, specifically Article 10, these clauses aim to protect legitimate business interests. The clause must clearly define:
- The geographical scope – Where the restriction applies.
- The duration – Typically not exceeding two years.
- The specific type of work – What the employee is restricted from doing.
The law also specifies that the restrictions should be reasonable and necessary to protect the employer’s legitimate business interests.
Tim Elliott
It seems like there’s still a lot of nuance in applying these clauses.
Ludmila Yamalova
Absolutely. For example, courts often reject non-compete clauses that prohibit someone from working anywhere in the UAE. Such broad restrictions are deemed unreasonable. A properly drafted clause needs to clearly state how the employee’s new role could directly harm the employer’s legitimate interests.
Tim Elliott
It sounds challenging to draft a fair non-compete clause. How can businesses do this effectively?
Ludmila Yamalova
The key is specificity. Businesses should identify their legitimate interests and draft clauses that focus on protecting those. For example, a law firm might specify that employees cannot work with direct competitors within the same city or sector for a certain period.
The clause should focus on protecting proprietary information, trade secrets, or specialized knowledge rather than broadly restricting employment.
Tim Elliott
What about enforcing these clauses in the UAE?
Ludmila Yamalova
Enforcing non-compete clauses in the UAE can be challenging. Currently, courts cannot issue injunctions to prevent someone from working. Instead, employers can seek compensation for damages caused by a breach.
For this, employers must prove the breach and quantify the damages. While this can be a deterrent, it also highlights the importance of drafting enforceable clauses.
Tim Elliott
What if an employee takes something like a database of contacts? That feels like a clear breach.
Ludmila Yamalova
Taking proprietary information like a database is not just a breach of a non-compete clause—it’s theft or a breach of trust. This would fall under criminal law.
Non-compete clauses focus on preventing the use of acquired skills or knowledge against the employer. Proprietary theft, on the other hand, is always actionable under criminal and civil laws.
Tim Elliott
What advice would you give employers drafting non-compete clauses?
Ludmila Yamalova
Start by understanding what is critical to your business. Clearly define:
- Your core interests – For instance, clients, trade secrets, or specialized tools.
- Reasonable restrictions – Specify industries, geography, and timeframes.
- Compliance with UAE law – Ensure the clause does not exceed two years and that all restrictions are justifiable.
This clarity ensures employees know what they can and cannot do, reducing disputes and fostering goodwill.
Tim Elliott
And for employees?
Ludmila Yamalova
Read your contracts carefully. If the clause feels overly restrictive or vague, ask for clarification or seek legal advice. Employees should also know that broad non-compete clauses are often unenforceable in the UAE.
Tim Elliott
That’s great advice, Ludmila. It sounds like non-compete clauses can act as a deterrent and a reinforcement of good faith if drafted properly.
Ludmila Yamalova
Exactly, Tim. When done right, these clauses protect both parties and provide a clear framework for post-employment conduct.
Tim Elliott
That wraps up another insightful episode of Lawgical, this time diving deep into non-compete clauses. Ludmila, as always, thank you for sharing your expertise.
Ludmila Yamalova
Thank you, Tim. Always a pleasure to discuss these topics with you.
Tim Elliott
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