Post-termination restrictions
If a company grants an employee access to confidential information, know-how, or its customer base, it is usually in the employer’s interest to prevent the employee from taking advantage of such knowledge and seeking employment with a competitor. The employer can try to prevent this risk by agreeing on a non-competition clause that covers a period after the termination of the employment relationship (so-called post-contractual non-competition clause). Both the labor law and the civil law of the United Arab Emirates contain respective provisions
We, FranGulf legal consultants is having the corporate lawyers in Sharjah, Dubai and Abu Dhabi to assist the employers as well as the employees in matters in relation to the non- competent clause.
Certain employees will definitely be exposed to the commercially sensitive informations of the company. In that case, restricting the post-termination activities of employees is mandatory. It is also important to see if the employees who are subjected to post-termination restrictions are having any incentives for their protection.
What is a post-termination restriction?
In simple terms, post-termination restrictions are contractual provisions that seek to protect an employer’s business by limiting the activities of employees after termination of employment. One way of placing post-termination restrictions is the non-compete clause. However, this is not the only type of post-termination restriction.
Legal Position
In many jurisdictions, the general position in relation to post-termination restrictions is that they are unlawful since they attempt to restrain trade. In the UAE however , the post termination restrictions (and specifically non-compete clauses) are lawful.
There are no specific provisions in the UAE laws about any minimum or maximum period for setting non-competent clauses in the employment contracts. However, there are judgements where the judge decided the reasonable period for setting post-termination restrictions may be from 3-24 months depending on the nature of the business and the kind of employment.
The Federal Law Number 8 of 1980 regarding UAE labour law contains a provision under Article 127 which allows the employer to require the worker not to compete or to participate in a competing project after the end of the contract.
Article 127 of the UAE Federal Law states where the work assigned to the worker allows him to become acquainted with the employer’s clients or to have access to his business secrets, the employer may require him to undertake not to compete with him or participate in any enterprise competing with his own, after the termination of the contract. For such an undertaking to be valid, the worker must be at least 21 Gregorian years of age at the time the agreement is concluded, and the agreement must be confined, in terms of time, place and the nature of the business, to the extent necessary to safeguard the employer’s legitimate interests.
However, an non-national worker who abandons his work with his employer is banned from working in UAE for one year from the date of expiry of the employment contarct.
Conclusion
In all kinds of contracts, post-termination restrictions act as a valuable deterrent for the employer. We would recommend that careful drafting is used in all circumstances to ensure the value of post-termination restrictions and to give confidence to the employers by placing them in a better position. We have the expertise among the corporate lawyers in Dubai, corporate lawyers in Sharjah, corporate lawyers in Abu Dhabi to assist you with that!
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