Ask Gulf News: Can my employer enforce an excessive non-compete penalty?
Question: I have been employed by a private company for two years. Upon renewing my employment contract, my employer has asked me to sign a non-compete clause that includes a penalty provision. If I agree to the clause but the penalty provision is deemed excessive or unreasonable, would it be legally enforceable if my employer brings a claim against me for breaching the non-compete clause in the…
A reader recently asked whether their employer could enforce an excessively high penalty if they signed an employment contract with a non-compete clause. According to Article 10 of Federal Labor Law No. 33 of 2021, UAE employers are permitted to include such non-compete clauses in their contracts, subject to limitations on duration, geography, and the nature of work.
The law allows employers and employees to negotiate the terms of the non-compete clause, including any associated penalty provision. However, the court may scrutinize an overly punitive penalty and amend or annul the clause if it appears designed to coerce the employee into remaining with the employer beyond the agreed-upon period.
Federal Decree-Law No. 25 of 2025, under Article (852), clarifies that an excessively punitive penalty clause could be deemed a means of compelling the employee to continue working for the employer, thereby potentially leading to annulment or modification of the clause.
Written by urgent.news from Gulf News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
