Can You Start a Business While Employed Full-Time in the UAE?

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 Employed in the 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.

Importance of the No Objection Certificate (NOC)

An NOC is necessary to:

• Open a new company under a valid employment visa, or
• Become a partner or shareholder in an existing entity, or
• 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.

What If the New Business Is Similar to Your Current Job?

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, provided that the requirement is specified, in terms of time, place, and type of work, to the extent necessary to protect the legitimate business interests.”

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.

What Should a Valid Non-Compete Clause Include?

For a non-compete clause to become enforceable, it needs to contain specific details about

• The geographical scope of application of the clause (e.g., Dubai or throughout the UAE).
• The term of the clause, provided that it does not exceed two years from the contract expiry date.
• The nature of the work, such that it causes significant harm to the legitimate interests of the employer.

The limitations imposed on an employee must be reasonable to protect the employer’s legitimate business interests. Vague or expansive non-compete clauses have a low chance of standing up in court.

Exceptions to the Non-Compete Clause

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 as agreed upon in the last contract, subject to the previous employer’s written consent thereto.

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 and determined by resolution of the minister in accordance with the workers’ classification approved by the Cabinet.

Mutual Agreement to Waive the Clause

According to Article 12(4) of the Executive Regulations, employees and their employers can create a written agreement that excludes the non-compete clause from their employment contract after termination. This provision enables employees and employers to end their working relationship peacefully.

Can You Operate a Business While Still Employed?

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 without following the mentioned legal exemptions.

The following consequences will occur when you fail to comply:

• Disciplinary action by your employer,
• Termination of employment,
• Civil claims for damages,
• Criminal liability if fraud or misuse of employer data is involved

For example, when you serve as an HR officer for a private company, you want to establish an HR consultancy while maintaining your current position. The risk of conflict of interest exists because both activities operate within the same business field. Your first step should be:

1. 1. Review your employment contract for any non-competition clause.
   2. Seek a No Objection Certificate from your current employer.
   3. Consider whether your business could be seen as competing with your employer’s operations.
   4. Consult a legal expert to assess potential legal implications.

Final Thoughts

UAE law supports entrepreneurship yet maintains employer rights by establishing formal legal protections. The following steps will protect employees who want to start businesses from legal conflicts:

• Secure a No Objection Certificate.
• Understand and comply with any non-competition clause.
• Act transparently and professionally.

Businesses operating within your employment sector require increased attention alongside legal professional guidance.

How HHS Lawyers in Dubai Can Assist

At HHS Dubai Lawyers, our employment lawyers  in Dubai will examine your current employment contract to evaluate your business plan’s legal status and prepare or secure an authorized NOC.

Our legal team at HHS Lawyers in UAE provides UAE labor law compliance assistance for all matters, including non-compete clause interpretation, employment dispute resolution, and new business structuring during employment.

Contact HHS Lawyers for an initial consultation to start your business venture with assurance.