Theoretically, Article 127 of the Labour of UAE Federal Law 8 of 1980 provides that an employer may agree on a post-contractual non-competition clause with an employee who, due to their employment with the employer, has knowledge of the clients of the employer or confidential information or business secrets, as long as the non-compete duration limited to 2 years. In practice, the vast majority of companies added the above-mentioned restrictions based on article 127 to protect the company’s legitimate business interests.
Increasingly, employees are required to sign contracts containing confidentiality and non-competition clauses by employers who seek to prevent disclosure of confidential company information or trade secrets.
This is especially true in technical, oil field or engineering disciplines where new production processes or chemical formulas are being developed. It also applies in sales and marketing environments where employees have access to customer and supplier information.
The nature of confidential information varies from company to company. It can be technical, such as detailed specifications of manufacturing processes, or it can relate to competitively sensitive customer databases. The information can be of enormous value, such as the recipe for a soft drink; it can be as simple as a single word such as the name of a company takeover target; or it can be more complex, such as the details of a planned advertising campaign. The common factor is that all such confidential information can and should be protected.
However, even where non-compete clauses are contractually agreed upon between both parties, it is very difficult for article 127 to be applied. Two tests have been added by Dubai Supreme Court to enforce the non-compete clause, the employer has the obligation to prove the infringement of the clause, as well as the damage, should be as a result of the employee’s disclosure of confidential information. In practice, it is highly difficult for any employer to submit the required evidence.
Recently ministerial Resolution 297 of 2016 seeks to introduce alternative ways to implement the contractual non-compete restriction. Please contact FranGulf Legal Consultants to get further explanations related to this article.