Enforcing Non-Compete Clauses Under UAE Labour Law: A Practical Legal Guide for Employers in the Private-Sector

Private-sector employment relationships in the United Arab Emirates are governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the UAE Labour Law), which came into force on 2 February 2022. The legislation establishes a structured legal framework aimed at maintaining labour market stability, while balancing an employer’s right to protect legitimate commercial interests against an employee’s freedom to pursue professional opportunities following termination.

Within this framework, Article 10 of the UAE Labour Law regulates post-termination non-compete obligations. The provision reflects a clear legislative intent to treat restrictive covenants as an exception rather than the norm. Accordingly, such clauses are permissible only in limited circumstances and are subject to strict substantive and procedural conditions. Further guidance is provided by Cabinet Resolution No. 1 of 2022, issuing the Executive Regulation to the UAE Labour Law, particularly Article 12, which sets out detailed parameters governing enforceability.

When is a Non-Compete Clause Legally Enforceable?

A non-compete clause may be enforced only where the employee’s role provided access to the employer’s clients, confidential information, or trade secrets. Under Article 10(1) of the UAE Labour Law, an employer may impose a post-termination restriction preventing a worker from competing with the employer or participating in a competing project, provided the restriction is necessary to protect legitimate business interests.

Crucially, enforceability depends not merely on the inclusion of the clause in the employment contract, but on strict compliance with statutory requirements. UAE courts and authorities assess the substance of the restriction rather than its contractual form.

Drawing the Line: Time, Territory, and Scope

The UAE Labour Law requires non-compete clauses to be narrowly tailored and precisely defined. Each clause must clearly specify:

• the type of work restricted,
• the geographical scope, and
• the duration of the restriction.
  
  

Pursuant to Article 10(1) of the UAE Labour Law and Article 12(1)(b) of the Executive Regulation, the maximum permissible duration of a non-compete restriction is two years from the date of termination or expiry of the employment contract. Any provision purporting to extend beyond this period is unenforceable as a matter of law.

 

Similarly, the geographical scope must correspond to the employer’s actual area of business operations and must not exceed what is reasonably necessary to protect those interests. Restricted activities must be limited to roles that pose a genuine competitive threat. Overly broad, vague, or generic restrictions are unlikely to survive administrative or judicial scrutiny.

Proving Competitive Harm: The “Gross Damage” Threshold

The Executive Regulation introduces a heightened evidentiary standard for enforcement. Under Article 12(1)(c), the restricted activity must be capable of causing “gross damage” to the employer’s legitimate interests.

Where a dispute arises and amicable settlement fails, Article 12(2) requires referral to the competent court. In such proceedings, the burden of proof rests entirely with the employer, who must establish:

1. the existence of a valid non-compete obligation,
2. the employee’s breach, and
3. actual or anticipated gross damage resulting from the breach.
   
   

This requirement underscores the importance of careful contractual drafting and the retention of evidence demonstrating competitive harm.

Jurisdiction and Territorial Reach

The UAE Labour Law applies to all private-sector establishments and workers operating within the State. Enforcement mechanisms, including administrative review and judicial remedies, are exercised within UAE jurisdiction.

Where an employment contract defines the restricted territory as the UAE alone—or extends it to additional jurisdictions, including other GCC states—such wording may form the basis of the employer’s claim. However, enforcement proceedings are initiated before UAE authorities and courts, and the employer must demonstrate that the breach adversely affects its UAE-based business interests.

The law does not provide for direct extraterritorial enforcement. In cross-border scenarios, the practical effectiveness of non-compete clauses depends on contractual clarity and a demonstrable nexus between the breach and the employer’s operations in the UAE.

Pre-Litigation Measures: Legal Notices and Amicable Resolution

Before commencing formal proceedings, employers often issue a legal or cease-and-desist notice to the former employee. While not a statutory requirement, such notices serve as a practical pre-litigation step aimed at achieving amicable resolution and formally notifying the employee of the alleged breach.

Typically, a legal notice requires the employee to cease competitive activities, refrain from soliciting clients or staff, and comply with the non-compete obligations. Continued violation after notice may strengthen the employer’s position in subsequent proceedings before MOHRE or the courts.

Initiating Action: MoHRE Complaints and Court Proceedings

Under Article 54 of the UAE Labour Law, any dispute arising from an employment relationship—including post-termination non-compete breaches—must first be registered with the Ministry of Human Resources and Emiratisation (MoHRE).

MOHRE will review the complaint and attempt to facilitate an amicable settlement. Where settlement is not achieved, the dispute is referred to the competent court in accordance with statutory thresholds and procedural rules. Claims seeking injunctive relief or compensation for non-compete violations ultimately fall within the jurisdiction of the courts.

Acting in Time: Limitation Periods

The UAE Labour Law imposes strict limitation periods. Under Article 10(3), a claim relating to a non-compete breach will not be heard if filed more than one year from the date the employer became aware of the violation.

Separately, Article 54(10) establishes a general limitation period of two years from the date of termination for claims arising under the Labour Law. Failure to act within these timelines results in the loss of the right to litigate.

When Non-Compete Clauses Automatically Fail

Certain statutory circumstances render non-compete clauses unenforceable by operation of law. Under Article 10(2) of the UAE Labour Law and Article 12(3) of the Executive Regulation, a non-compete becomes null and void where the employer terminates the employee unlawfully or due to the employer’s own breach of contractual or statutory obligations.

Additional exemptions apply, including termination during the probation period, as set out in Article 12(5)(b) of the Executive Regulation.

Waivers and Statutory Exceptions

Further exemptions are provided under Article 12(5) of the Executive Regulation. These include cases where the employee or the new employer pays compensation—capped at three months’ wage—to the former employer with the latter’s written consent, as well as exemptions applicable to specific professional categories identified by the Ministry in line with labour market needs.

Moreover, Article 12(4) allows the parties to mutually agree in writing, at any time, to waive the non-compete obligation altogether.

Conclusion

Enforcing non-compete restrictive covenants under UAE law demands a measured and legally compliant approach. Clauses must be precisely drafted, proportionate in scope, and supported by evidence of potential gross damage. Lawful termination, timely action, and strict adherence to statutory procedures are essential. Where these requirements are not met, non-compete restrictions are unlikely to withstand scrutiny under the UAE Labour Law and its Executive Regulation.

 

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