Starting a business while being employed full-time in the UAE can be a complex issue, especially if your new venture is in a field similar to your current job. Many employees wonder if they can legally launch a company alongside their existing employment without violating any laws or contractual obligations. Here’s a detailed explanation based on the latest UAE labour laws and expert insights.
Establishing a Business While Employed : The Basics
According to UAE law, a full-time employee may establish a new business or become a partner or shareholder in an existing company. However, this is contingent upon obtaining a No Objection Certificate (NOC) from their current employer. The NOC is a formal approval allowing the employee to pursue entrepreneurial activities legally while still employed.For example, if you work in the HR department of a company and want to start an HR consultancy, it’s crucial to first secure this NOC from your employer. Without it, the new business may be considered unauthorized and could lead to legal complications.
Competition and Non-Competition Clauses in Employment Contracts
If your planned business operates in a sector similar to your employer’s, like your case with HR consultancy, and your employment contract includes a non-competition clause, then starting this business could be problematic.Article 10(1) of the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations specifies that if the employee’s job grants access to the employer’s customers or business secrets, the employer may include a clause preventing the employee from competing with them during or after employment.Key points about the non-competition clause:
- It must clearly define the place, time, and type of work to protect the employer’s legitimate business interests.
- The non-competition period cannot exceed two years after the employment contract ends.
When Non-Competition Clauses May Not Apply
There are exceptions where the non-competition clause may not apply, especially once your employment ends:
- If you and your employer have agreed in writing that the clause will not apply after the contract ends, the restriction is lifted. This is outlined in Article 12(4) of Cabinet Resolution No. 1 of 2022 concerning the executive regulations for Federal Decree Law No. 33 of 2021.
- The clause can also be exempted under certain conditions, according to Article 12(5) of the same resolution:
- If you or your new employer pay the former employer compensation not exceeding three months’ wages (as per your last contract) and the former employer consents in writing.
- If the employment contract is terminated during the probationary period.
- If your profession falls under categories determined by the Ministry of Human Resources and Emiratisation as needed in the UAE labor market.
