If an employee in the UAE resigns after several years with a company and starts his own business in the same field, the clients he dealt with while employed may follow him to the new business, and the company’s revenue from those clients may fall as a result. This insight explains what the company needs to do to protect itself and recover the sums it has lost, and what it must prove in court to succeed.
What the Non-Competition Clause Actually Does
The first document the company reaches for is the non-competition clause. The clause is only valid within three limits:
- the restriction cannot run beyond two years from the end of the contract;
- the geographical area has to be defined; and
- the restricted work must be of a kind that would cause serious harm to the employer’s legitimate interests.
Those limits are set out in Article 10 of the Labour Law, Federal Decree-Law No. (33) of 2021, and Article 12 of Cabinet Resolution No. (1) of 2022.
In practice, these conditions are applied narrowly, so a clause drafted too widely, whether in time, place or type of work, may not be enforced as written. Even a clause that satisfies all three is unlikely to remove the ex-employee from his new position. The UAE onshore courts award compensation for proved loss and do not, as a general rule, order a person to stop working.
How a Company may Strengthen its Case Against Former Employee
A strong claim is built on evidence, not on the fall in revenue alone. A client is free to move its business, so its departure is not in itself a wrong committed by the ex-employee. To put itself in the strongest position, the company should be able to establish three things:
- that the ex-employee did something he was not entitled to do, whether breach of the clause, solicitation of clients, or use of confidential material;
- that the company suffered a financial loss capable of being quantified; and
- that the loss followed from that conduct rather than from the market, the pricing, or the client’s own decision.
Compensation covers the loss suffered and the profit lost, provided it is a natural consequence of what the ex-employee did, under Articles 246 and 255 of the Civil Transactions Law, Federal Decree-Law No. (25) of 2025.
In the absence of an enforceable non-competition clause, the ex-employee is generally able to join another company or start a business of his own. The law nevertheless provides safeguards for employers, so that employees and ex-employees do not misuse their position in bad faith, or use information obtained in the course of their employment for their own benefit. The strongest evidence is usually the record of what the ex-employee accessed or sent before resigning, because that ties the loss to a person rather than to a market. A client list, a pricing file and a contact database belong to the company where it has treated them as confidential and kept access restricted, and taking that material, or persuading someone still employed to hand it over, is unlawful in its own right. Material of that kind is protected as undisclosed information under Federal Law by Decree No. (11) of 2021, at Articles 61 to 64. Mailbox forwarding rules, export logs and system access records are frequently overwritten within weeks, so a company that suspects client data left with the ex-employee should preserve them before sending any demand.
How the Court Assesses the Claim
Claims of this kind are usually decided on an expert report. The court appoints an accounting expert, who may examine the company’s records and will ordinarily attend its offices. He compares revenue from the named clients before and after the resignation, reviews the client contracts, invoices and financial statements for both periods, and considers whether the fall in turnover has another explanation. The expert may also look at what the ex-employee has done since leaving, including the contracts and invoices of the business he now works through, and may ask the named clients themselves whether they had dealt with the company before, through whom, and on what terms.
Frequently Asked Questions
Is it a crime for an employee to take a client list before resigning?
It can be. Where the company kept the material confidential, taking it or using it is unlawful and carries a fine of between AED 100,000 and AED 1,000,000 under Federal Law by Decree No. (11) of 2021.
How long does a company have to bring a claim against an ex-employee?
Two years, running from the end of the employment relationship, under Article 54 of the Labour Law. Evidence, not the limitation period, is the practical constraint, because system records are often lost within a few months.
Does the company have to disclose its financial statements to win a case against its former employee?
In practice, yes. The loss has to be quantified, and the court appointed expert does that from the company’s own records. A company unwilling to open its accounts will struggle to prove its loss.
What if the clients approached the ex-employee rather than the other way around?
That is a genuine answer to the claim and it frequently succeeds. Clients choose who they deal with, and following someone they trust is not a wrong. The position changes where the approach was made using the company’s confidential material.
Can a company claim for future revenue it expected from the lost clients?
Lost profit is recoverable where it is proved rather than projected. A claim built on a contract that was in place and has since been cancelled stands on firmer ground than one built on revenue the company merely expected to earn.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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