Can UAE Employees Start a Business While Keeping Their Jobs? What the Latest Law Says About Conflict of Interest

Employees in the UAE may establish a business or become a partner or shareholder in another entity while continuing to work for their existing employer, but they must consider several legal restrictions before doing so. For employees of mainland companies in Dubai, the UAE employment framework, together with its implementing regulations, governs issues including employer consent, conflicts of interest and non-competition.

 

An employee who wishes to establish a new business or acquire an interest in an existing UAE entity should first establish whether an No Objection Certificate (NOC) from the current employer is required and obtain the necessary approval before proceeding. The employee must also review the employment contract for any provisions that could restrict competing activities.

 

Employer Approval Can Be Important

 

An employee may establish a new entity or become a partner or shareholder in an existing business, but an employer's NOC may be required for the employee to undertake such an activity while remaining employed.

 

The NOC can be particularly important where the proposed business has activities that overlap with those of the existing employer. An employer may have legitimate concerns if an employee intends to operate a separate business that could compete for the same customers, use confidential information or otherwise create a conflict with the employee's duties.

 

Employees should therefore not assume that owning a separate business automatically falls outside their employment obligations. The proposed activity, the terms of the employment contract and the employee's actual responsibilities should all be considered before the business is established.

 

Non-Compete Clauses Remain Relevant

 

The UAE's Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations permits employers, in certain circumstances, to include a non-competition clause in an employment contract.

 

Article 10 provides that where an employee's work gives access to the employer's customers or business secrets, the employer may require the employee not to compete with the employer or participate in a competing project in the same sector after the employment relationship ends.

 

However, such a restriction is not unlimited. The clause must specify the geographical area, duration and type of work covered, and only to the extent necessary to protect the employer's legitimate business interests. The non-competition period cannot exceed two years from the expiry of the employment contract.

 

This means an employee planning to establish a business in the same sector should carefully examine the wording of the employment contract. Similarity between the proposed business and the employer's activities may create legal risks, particularly where the employee has access to customers, confidential information or business secrets.

 

Written Agreement Can Remove the Restriction

The implementing regulations provide an important possibility for employees and employers. Under Article 12 of Cabinet Resolution No. 1 of 2022, the parties may agree in writing that the non-competition clause will not apply after the employment contract ends.

 

This provides a potential route for an employee and employer to resolve the issue before the employment relationship comes to an end. A written agreement can make the position clearer and reduce uncertainty over whether the employee will be able to enter a competing business after leaving the company.

 

The regulations also provide circumstances in which an employee may be exempted from a non-compete obligation. These include an arrangement under which the employee or the new employer pays the former employer compensation of up to three months of the employee's last contractual wage, subject to the former employer's written consent.

 

Other Exemptions May Apply

 

The regulations also provide for exemption from the non-competition restriction where the employment contract is terminated during the probationary period. Certain professional categories may also be exempted where they are identified as being in demand in the UAE labour market under the applicable ministerial decisions.

 

Employees should therefore consider the circumstances surrounding the termination of employment as well as the wording of the non-compete clause itself.

 

Importantly, where a dispute arises over the application of a non-competition clause and cannot be resolved amicably, the matter may be referred to the judiciary. Under the implementing regulations, the burden of proving the alleged damage rests with the employer.

 

Conflict of Interest is a Key Consideration

 

Even where an employee receives permission to establish a business, the employee must continue to comply with contractual duties owed to the existing employer. Running a separate company should not result in the misuse of confidential information, customer lists, trade secrets or other proprietary material belonging to the employer.

 

The employee should also ensure that the new business does not interfere with existing employment responsibilities. An NOC should therefore not be treated as a blanket waiver of every contractual obligation. Its terms, together with the employment contract and applicable law, remain important.

 

For employees considering a business venture while remaining in full-time employment, the safest approach is to examine the proposed business activity, obtain any required employer approval in writing and review the employment contract for non-compete and confidentiality provisions before taking steps to establish the new entity.

 

The UAE legal framework therefore allows employees to pursue business ownership while maintaining employment, but that freedom is subject to contractual obligations and safeguards designed to protect legitimate employer interests.