Understanding Non-Compete Clause UAE

The 2025 salary guide released by the Robert Half study revealed that two-thirds or 65 per cent of employees will look for a new job before the end of 2025.

Competitor clauses in employment contracts, or agreements restricting employees from working for a competitor, are increasingly being used in the UAE. However, many employees (and even employers) are confused about how post-employment clauses like non-solicitation, non-compete, and confidentiality clauses actually work and are enforced.

If a non-compete agreement cannot be enforced, the employer may face significant losses, and if an employee doesn’t comply with a non-compete, they may face fines and even a jail sentence. Given the serious consequences, understanding non-compete clauses in the UAE is crucial.

What is a Non-Compete in the UAE?

A non-compete clause is a part of employment agreements in the UAE, under which the employer prevents or restricts an employee from carrying out any activity that directly competes with the employer after the employment has ended, including starting or joining a competing business.

The purpose of a non-compete clause is to protect the business interests of an employer. After the employment has ended, the employee cannot use any of the business or trade secrets they learned while working for the former employer.

Non-Compete Clauses in the UAE: Governing Laws

In the UAE, the following federal laws regulate agreement not to work for a competitor or non-compete:

1. Federal Decree-Law No. (33) of 2021: Article 10  of the federal law provides the conditions under which a non-compete clause can be applicable and enforced.
2. Cabinet Resolution No. (1) of 2022 Concerning the Executive Regulations of Federal Decree-Law No. (33) of 2021: Subject to Article 10 of the Federal Law, Article 12 of the Cabinet Resolution states the rules for implementation and non-applicability of a non-compete clause, including the burden of proof for proving damages.
3. UAE Federal Law No. (5) of 1985 concerning Civil Transactions: Articles 909 and 910 of the Civil Code discuss the conditions of a non-compete agreement, and the validity of a penalty for the breach of a non-compete agreement.

Drafting a Non-Compete: Enforceability in the UAE, Employer’s Obligations and Drafting Standards

Non-compete clauses are enforceable in the UAE. However, they must be:

1. Clearly defined
2. Reasonable
3. Reflect a concern for protecting the legitimate business interest of the employer, and not act as a penalty if an employee leaves the job.

Expert Tip: If a non-compete clause appears to be excessive or punitive in nature, the court may refuse to enforce it.

Key Elements of a Non-Compete Clause in the UAE

A non-compete clause should be framed in accordance with the Federal Decree-Law No. (33) of 2021 and Cabinet Resolution No. (1) of 2022. This includes framing the:

1. Duration: While most non-compete clauses last anywhere between 6 and 12 months, the upper limit as per the UAE law is 2 years from the contract’s expiry date.
2. Geographical Scope: The scope of the location where an employee cannot carry out similar competing activities must be reasonable. A non-compete clause extending all over the UAE may be struck down, unless the former employer can prove that they have legitimate business interests that need to be protected.
3. Scope of Activity: The kind of work an employee cannot carry out during the operation of a non-compete must be clearly defined to avoid any dispute or ambiguity. Again, the clause must be reasonable.

Important: If the employer has terminated the employment agreement without any cause or reason, or the employer has breached any of the legal or contractual obligations, leading to termination, the non-compete cannot be enforced.   

Non-Compete: Violating Non-Compete Agreements in the UAE

An employee may be liable to pay damages or compensate the employer for breaching the non-compete agreement. An employee may also be liable to pay additional fines and penalties under the UAE criminal law if they unlawfully use the trade or business secret of the former employer.

Note: An employer may file an injunction preventing the employee from continuing to work for a competitor, especially if any confidential trade information is at risk of disclosure.

Calculating Damages

The damages for violation of a non-compete agreement may be:

1. Liquidated: If the employment agreement includes payment of any damages, the burden of proof is on the employee to prove that the damages are excessive (in the form of a penalty), or that the employer didn’t actually incur the pre-estimate losses.
2. Post-Termination: When there are no liquidated damages specified in the non-compete, and the parties cannot agree on an amount, the burden of proof is on the employer to prove the value/amount of damages suffered by them due to the breach or violation of the non-compete.

Critical Note: An employer can only file a suit for violation of a non-compete agreement within 01 year of discovering the breach or violation.

Legal Assistance: Kayrouz & Associates’ Employment and Labour Law team assists both employees and employers in Employment and corporate dispute resolution, resolving disputes before they escalate and lead to judicial claims.

Non-Compete Clause in the UAE: Can My Employer Force Me to Sign a Non-Compete Agreement?

No, your employer cannot force you to sign a non-compete agreement in the UAE. However, they may refuse to extend a job offer if you don’t sign a non-compete. If the terms of the non-compete are excessive or not in accordance with the UAE federal law, the employer would not be able to enforce the non-compete agreement.

Expert Guidance: Before signing a non-compete agreement or clause, book a consultation with Kayrouz & Associates’ Employment and Labour Law team to understand the terms, scope and obligation.

Employee Rights: Can I Withdraw From a Non-Compete Clause in the UAE?

Yes, under the UAE laws, an employee can withdraw from a non-compete agreement. This can be done through:

1. Agreement: If the former employer and employee have agreed in writing that the non-compete clause shall not be applicable upon terminating the employment contract.
2. Termination during Probation: If the employment agreement is terminated during the probation period, the non-compete clause cannot be enforced.
3. Payment of Compensation: If the former employer agrees, the employee or their new employer may pay compensation to the former employer to avoid the non-compete agreement.

Important: The compensation amount cannot exceed 03 months of the worker’s wage as per the latest employment contract.

Assistance from Employment Law Experts: How Kayrouz & Associates Can Help

At Kayrouz & Associates, our Employment and Labour Law team combines expert legal expertise with practical insights to help both employees and employers in:

1. Negotiating and drafting employment agreements and contracts, including non-compete clauses
2. Resolving employment disputes
3. Prosecuting and defending employment-related judicial claims and allegations of non-compliance
4. Collective labour complaints and coordination with the Ministry of Human Resources & Emiratization (MOHRE)
5. Developing personalised workplace policies and procedures.

As a full-service law firm with 25-plus seasoned lawyers and consultants, offices across Dubai, Abu Dhabi, and Beirut, and a 96% client satisfaction rate, Kayrouz & Associates offers clear, trusted legal guidance for every legal problem, from corporate deals to family disputes, criminal defence to real estate.

Contact Kayrouz & Associates to discuss your case.