During your term of employment, you get exposed to a lot of information while at your desk, in meetings, overheard conversations in elevators or corridors, you may have had the opportunity to gain access to material, documents, software, brochures, databases, images, media, information relating to company’s customers, suppliers, service providers, ideas, technical information such as know-how, models, drawings, manuals, techniques and so on. Your employer is the owner of all such information and while most of the information might be harmless, there might some private and confidential information that might cause harm to the employer when you part ways with the job.
In the event that the employee leaves the business, how does the management protect their business and reduce the risk that the individual will use the confidential information and contact details of customers, for example, whilst working for a competitor?
Part (v) to Article 905 of the UAE Civil Transactions Law states that every employee must refrain from disclosing the industrial and trade secret of the employer ever after expiry of the contract as required by the agreement. Article 120 of the UAE Labour Law (Part 6) allows employers to terminate services of employees if the employee reveals secrets of the establishment in which he was employed. Articles 53 and 54 of the UAE Labour Law (Federal Law No. 8 of 1980) impose record-keeping obligations on employers with five or more employees.
In order to grow business and gain an edge, many companies may look to recruit employees directly from their competitors. Such employees will be aware of an abundance of commercially sensitive information. In that context, restricting the post-termination activities of employees is a necessary part of the business landscape today.
What is a Post-Termination Restriction?
Post-Termination restrictions (“covenants”) are agreements which seek to protect an employer’s business by limiting the activities of employees after termination of employment. Article 127 of Federal Law No. 8 of 1980 (Labour Law) and Article 909 of the Law of Civil Transactions of the State of the UAE state the requirements for a ‘covenant’ to be enforceable. Article 379 of Federal Law No. 3 of 1987 (Penal Code) provides that the disclosure and/or misuse of confidential information in the UAE is potentially a criminal offence, compared to the contractual or civil remedies that a previous employer can pursue if a post-termination restriction has been breached. For a covenant to be enforceable, the employee must be over 21 and the restriction must be limited concerning time, place and nature of business.
One clause of the covenant is the non-compete clause which prevents an employee from working with a competitor. Other clauses are non-poaching, non-dealing and non-solicitation. The restrictions must be reasonable to protect a legitimate interest. According to Article 909(3) of the Civil Code, the covenants might be deemed unenforceable if the employee resigned or got fired due to invalid reason.
What can you do?
If you are contemplating including post-termination restrictions in contracts it is advisable to seek specific legal advice from Best Employment Lawyers of Dubai at the outset to ensure that they are enforceable. Before speaking with legal advisers, employers should have a proper understanding of the business that they are seeking to protect and also an awareness of the risk imposed by the employee(s) in question if they started working for a competing business. The more tightly drafted a covenant the more likely it is to be enforced as it will demonstrate to the court that there is a particular lawful interest that the employer needs to protect.
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