Can an Employer Take Legal Action Against an Ex-Employee Who Directed Clients to Other Firms?

Introduction:

In the UAE, employment relations are governed by Federal Decree-Law No. 33/2021 and its implementing regulations. The issue of non-compete clauses and employee obligations holds significant implications, particularly concerning the loyalty and confidentiality owed by employees to their employers. This article explores the legal possibilities available to employers seeking recourse against former employees who redirect clients to competing firms, examining relevant provisions and precedents under UAE labour law.

Understanding Non-Compete Clauses:

Under Article 10 of Federal Decree-Law No. 33/2021, employers are authorized to include non-compete clauses in employment contracts. These clauses restrict employees from engaging in activities that compete with their employer’s business interests for a specified period after leaving employment. According to Cabinet Decision No. 1/2022, these non-compete clauses must specify the geographical scope, duration (not exceeding two years from the date of contract expiry), and the nature of the work causing significant harm to the employer’s legitimate interests.

Enforcement and Legal Recourse:

If an employer discovers that a former employee has redirected clients to other firms in violation of a non-compete clause, legal action may be pursued. Article 12 of Cabinet Decision No. 1/2022 outlines the procedures for enforcing non-compete clauses, emphasizing the employer’s burden to prove the damaging impact of the employee’s actions on their legitimate business interests.

Employee Obligations and Breach of Contract:

Beyond non-compete clauses, employees are bound by a general duty of loyalty and confidentiality during and after employment, as outlined in Article 16 of Federal Decree-Law No. 33/2021. This duty prohibits the unauthorized disclosure of confidential information, including client lists and business strategies, which are integral to an employer’s competitive advantage.

Conclusion:

While employers have legal avenues to address breaches by former employees who direct clients to other firms, the effectiveness of legal action depends on the clarity and enforceability of non-compete clauses within employment contracts.