Table of Contents
- Is It Legal to Start a Business While Working Full-Time in UAE?
- Importance of No Objection Certificate (NOC) in UAE
- Non-Compete Clause in UAE Employment Contracts
- Requirements for Valid Non-Compete Clause in UAE
- Exceptions to Non-Compete Clause in UAE
- Mutual Agreement to Waive Non-Compete Clause
- Can You Legally Operate a Business While Employed in UAE?
- Legal Tips Before Starting a Business in UAE While Employed
- How HHS Lawyers in Dubai Can Help
In the UAE many full-time workers consider to commence their businesses while continuing to work in current employment. However, before doing that it is very important to understand specific legal requirements that protect both employment contracts and labor laws when starting their own businesses.
This article examines the legal requirements you need to know.
Is It Legal to Start a Business While Working Full-Time in UAE?
Under the law in the UAE, it is possible for an employee to start a business or be a shareholder or partner in another company. Nevertheless, legally, they must obtain a No Objection Certificate (NOC) from the current employer if they intend to remain in employment.
This applies to all employees as per Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations of the UAE and its Cabinet Resolution No. 1 of 2022 to act as Executive Regulations.
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Importance of No Objection Certificate (NOC) in UAE
An NOC is necessary to:
- Open a new company under a valid employment visa
- Become a partner or shareholder in an existing entity
- Legally engage in business activity along with full-time employment
Failure to obtain an NOC may lead to the rejection of your business license application, or your employer may pursue legal action against you for any breach of contractual obligations.
Non-Compete Clause in UAE Employment Contracts
The situation becomes more complex at this point. A non-compete clause in your employment contract will restrict you from starting a business that competes with your current employer.
The Employment Law stipulates in Article 10(1) that
“If the work assigned to the worker allows him to gain knowledge of the employer’s clients or have access to its work secrets, the employer may require that the worker under the employment contract shall not, after the expiry of the contract, compete with the employer or be engaged in any competing project in the same sector.”
Your employer has the right to include a non-compete clause in your contract if your job provides access to business secrets or confidential data or client relationships.
Requirements for Valid Non-Compete Clause in UAE
For a non-compete clause to become enforceable, it needs to contain specific details about
- The geographical scope of application of the clause
- The term of the clause (not exceeding two years)
- The nature of the work causing harm to employer’s interests
The limitations imposed on an employee must be reasonable to protect the employer’s legitimate business interests.
Exceptions to Non-Compete Clause in UAE
Under Article 12 (5) of Cabinet Resolution No. 1 of 2022, the worker shall be exempted from the non-competition clause under the following conditions:
1. Compensation Payment Option
If the worker or the new employer pays the previous employer compensation not exceeding three months of the worker’s wage.
2. Contract Terminated During Probation
If the contract is terminated during the probationary period.
3. Market-Based Exceptions
Any professional categories that are in demand in the national labor market.
Mutual Agreement to Waive Non-Compete Clause
According to Article 12(4), employees and employers can mutually agree in writing to waive the non-compete clause after termination.
Can You Legally Operate a Business While Employed in UAE?
You can operate a business with your employer’s written NOC approval provided your activities do not violate your employment contract or compete directly with your employer.
The following consequences will occur when you fail to comply:
- Disciplinary action by your employer
- Termination of employment
- Civil claims for damages
- Criminal liability in case of misuse of employer data
For example, when you serve as an HR officer and want to establish an HR consultancy, the risk of conflict of interest exists.
- Review your employment contract
- Seek a No Objection Certificate
- Assess competition risk
- Consult a legal expert
Legal Tips Before Starting a Business in UAE While Employed
- Secure a No Objection Certificate
- Understand non-compete clauses
- Act transparently and professionally
Businesses operating within your employment sector require increased attention alongside legal professional guidance.
Need Labour Law Help?
Dubai's Expert Advice at Your Fingertips.
How HHS Lawyers in Dubai Can Help
At HHS Dubai Lawyers, our employment lawyers in Dubai will examine your employment contract and prepare or secure an authorized NOC.
Our legal team at HHS Lawyers in UAE provides assistance in employment disputes, non-compete clauses, and business structuring.
Also explore: Commercial & Corporate Law Services in UAE
Contact HHS Lawyers for an initial consultation to start your business venture with assurance.
