Non-compete clauses in the U.A.E.

Тим Эллиотт
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.

Людмила Ямалова
Good to see you too, Tim. Thanks for having me as always.

Тим Эллиотт
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?

Людмила Ямалова
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.

Тим Эллиотт
So, it’s not just about leaving to work elsewhere but about how that might harm the previous employer?

Людмила Ямалова
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.

Тим Эллиотт
How does the UAE law address these clauses?

Людмила Ямалова
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.

Тим Эллиотт
It seems like there’s still a lot of nuance in applying these clauses.

Людмила Ямалова
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.

Тим Эллиотт
It sounds challenging to draft a fair non-compete clause. How can businesses do this effectively?

Людмила Ямалова
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.

Тим Эллиотт
What about enforcing these clauses in the UAE?

Людмила Ямалова
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.

Тим Эллиотт
What if an employee takes something like a database of contacts? That feels like a clear breach.

Людмила Ямалова
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.

Тим Эллиотт
What advice would you give employers drafting non-compete clauses?

Людмила Ямалова
Start by understanding what is critical to your business. Clearly define:

1. Your core interests – For instance, clients, trade secrets, or specialized tools.
2. Reasonable restrictions – Specify industries, geography, and timeframes.
3. 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.

Тим Эллиотт
And for employees?

Людмила Ямалова
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.

Тим Эллиотт
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.

Людмила Ямалова
Exactly, Tim. When done right, these clauses protect both parties and provide a clear framework for post-employment conduct.

Тим Эллиотт
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.

Людмила Ямалова
Thank you, Tim. Always a pleasure to discuss these topics with you.

Тим Эллиотт
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