Dubai Court of Cassation, Labour Appeal No. 12 of 2025, judgment of 13 May 2025
Under Article 10 of the Labour Relations Law, an employee who breaches a post-employment undertaking not to compete is liable to compensate the employer for the resulting damage. The liability is contractual: breach of the undertaking is not enough, the employer must prove that it suffered damage as a result, and merely possible damage does not qualify. Whether the employee breached the clause and whether damage occurred are questions of fact for the trial court, which may rely on an expert's findings.
A real estate developer employed a financial analyst from 2014. In April 2022 he signed a contract containing an undertaking not to work in a competing field in Dubai or Abu Dhabi for one year after leaving. He resigned in August 2023, served three months' notice and joined a company that managed owners' associations, which the employer said belonged to a group of real estate companies competing with it. The employer sued for AED 1 million in compensation, alleging that he had drawn its clients to his new employer and exposed its confidential information, and asked for his new work permit to be cancelled. The Court of First Instance dismissed the claim, and the Court of Appeal, after appointing an accounting expert, affirmed.
In cassation the employer argued that the courts had relied entirely on the expert, that a salary increase of more than 50 per cent pointed to a breach, and that they had wrongly refused to ask the Department of Economy and Tourism about the ownership of the new employer in order to prove its link to the competing group.
The Court of Cassation dismissed the appeal. Under Article 10 of the Labour Relations Law, an employee's breach of his undertaking not to compete after his service ends entitles the employer to compensation for the resulting damage. That liability is contractual, so a breach alone is not enough: the employer must prove damage caused by the breach. The Court of Appeal had relied on the expert's findings that the employee had not breached the clause, since the new employer's licensed activity differed from the employer's, and that the employer had suffered no loss, and had held that merely possible damage did not justify compensation. Since no damage had been shown, the refusal to obtain information about the new employer's ownership could not change the result.
Non-compete clauses are common in UAE employment contracts, but the judgment shows how difficult they are to enforce through a damages claim: the employer must prove an actual loss caused by the breach, and a court-appointed expert's comparison of the two businesses' licensed activities can decide whether the new job competes at all.
| Article 10 of Federal Decree-Law No. 33 of 2021 Regulating Labour Relations — text of article 10 |
“مسئوليته في هذا الخصوص هي مسئوليه عقديه ولا يكفى لتوافرها الإخلال بهذا الإلتزام ، بل يتعين ثبوت الضرر نتيجة هذا الخطأ العقدي”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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