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UAE labour law: Can I start a business while being employed full-time?
An employee may establish an entity or be a partner or shareholder in an existing entity, provided the employer issues a no objection certificate.
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Question: I work in a private firm in the UAE. Will it be a legal problem if the business I start and my current job are of a similar nature? I work in the HR department in my firm and the business I plan to start is an HR consultancy.
Response: Pursuant to your queries, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Employment Law') and those of Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Cabinet Resolution No. 1 of 2022 on Employment Relations') are applicable.
An employee may establish an entity or be a partner or shareholder in an existing entity in the UAE, provided the employer issues a no objection certificate (NOC). Therefore, you should obtain an NOC from your employer before starting your business.
Further, if the activities of your entity are similar to your current role, then your employer may consider it as a competitor of your employer, if your employment contract includes the non-competition clause.
This is in accordance with Article 10(1) of the Employment Law, which states: "Where the employee performs a work which gives him access to employer's customers or business secrets, the Employer may make a provision in the employment contract that the employee shall not compete with or be engaged in any business which competes with him in the same sector after the expiry of the contract. Such clause shall specify the place, time, and type of work to the extent necessary to protect the legitimate business interests, and the non-competition period shall not exceed (2) two years after the expiration of the contract.”
However, the non-competition clause may not be applicable if you and your employer have agreed in writing that it does not apply on termination of your current employment contract. This is in accordance with Article 12 (4) of the Cabinet Resolution No. 1 of 2022.
Further, the provisions of non-competition may be exempted as mentioned in Article 12 (5) of the Cabinet Resolution No. 1 of 2022 on Employment Relations, which states: “An employee shall be exempted from the non-compete clause provided for in Article (10) of the Employment Law under the following conditions:
a. If the employee or the new employer pays compensation not exceeding (3) three months of the employee's wage agreed upon in the last contract to the former employer, and the former employer's written consent thereto is required.
b. If the contract is terminated during the probationary period.
c. Any professional categories according to the needs of the employment market in the UAE, as determined by decision of the Ministry under the employment classification approved by the Cabinet.”
Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.
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