Employers should include in contracts restrictive covenants to ensure confidential information and customer connections are protected when employees move on.

People and information comprise the bulk of the assets of most modern businesses. To fully utilise these assets most businesses give their key staff access to confidential and commercially sensitive information and customers. But what happens when an employee chooses to leave the business, depriving it of not only their valuable experience and expertise, but also potentially taking everything they have learned, customers and other employees with them?

In a difficult economic environment “poaching” employees and even whole teams is often the option for a competitor seeking to grow their business. Some protection is afforded to employers within the UAE under post-termination restrictive covenants.

Keeping schtum
Although the misuse of confidential information post termination is often linked with restrictive covenants under article 379 of Federal Law No 3 of 1987 (the “Penal Code”) the disclosure and misuse of confidential information in the UAE is a criminal offence.

An employer will need advice on whether to report matters to the police. This sanction is a powerful deterrent to employees who should be made aware of the seriousness of a breach of confidentiality.

The starting point when considering other restrictive covenants is article 127 of Federal Law No 8 of 1980 (the “Labour Law”). This provides that: “Where the work assigned to a worker allows him to become acquainted with the employer’s client or to become familiar with the secret of his business, the employer may require him to refrain, after the termination of his contract, from competing with him or participating in any enterprise competing with his own. Such agreement shall be valid only on condition that the worker is at least 21 years of age at the time of its conclusion and that the agreement is limited, as regards the time, the place and the nature of the business, to the extent necessary to safeguard the employer’s lawful interests.”

These basic requirements for a post-termination restrictive covenant are repeated in article 909 of the Law of Civil Transactions of the State of the UAE (the “Civil Code”).

Covenants should therefore be limited as to time, place and nature of the business, making sure all of these are specifically linked to the interests of the employer and the employee to which the covenants apply.

In the UAE, the courts have been known to take a paternalistic view to drafting and will make amendments to the covenants to make them more palatable (for example, shortening the period). The discretion as to whether to amend or not will lie with the courts. It is obviously preferable that the covenant is properly drafted to begin with. A period of no more than 12 months is recommended.

As a final point of drafting, article 910 of the Civil Code provides that: “If both parties agree that the employee should be liable in the event that he is in breach of his agreement not to compete, and such liability is fixed at an exorbitant amount in such a way as to compel him to remain with the employer, such a provision shall be invalid.”

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