Overview

Since Hadef & Partners’ article on the enforceability of non-compete clauses in our November 2009 Hadef Highlights newsletter, there have been several court decisions on the subject, notably among them a judgment of the Dubai Court of Cassation on 22 December 2008 where the court ruled, amongst other things, that the absolute prohibition of an employee from working for a competitor is tantamount to a restriction of the employees liberty.

In brief, the ruling states that:
● Non-compete clauses, which are often included in contracts of employment to protect the interests of employers, may not always be enforceable.

● This may seem contrary to the expressly agreed intentions of the parties, as set out in the contract. However, a non-compete clause may be rendered unenforceable by the actions of the employer, resulting in a waiver of rights.

● Enforceability of non-compete clauses is subject to over-riding considerations of public policy. In particular, the scope of the clause must be strictly limited. Clauses which exceed what is necessary to protect the essential interests of the employer, will not be enforced. The liability of the employee to work scientifically is paramount.

Although the Cassation Courts ruling is welcome, insofar as it lays down the conditions that must be met in order for a non-competition clause to be enforceable, the legal community in Dubai awaits with interest a judgment of the same court, declaring an appropriately limited non-compete clause to be reasonable in its scope and enforceable in accordance with its terms and awarding the plaintiff a substantial amount by way of compensation.