The New Article 127 of the UAE Labour Law
Major businesses working with private formulas tend to use clauses on their contracts to keep this information from becoming public. These specific circumstances are contemplated in Article 127 of the UAE Labour Law. This law states that there will be certain consequences for laborers or ex-employees if they expose this information. For this, it will be necessary for companies to have a post-termination clause.
In this article, we are going to explain to you the main aspects of the new post-termination restrictions in accordance with the law. In addition, we will review certain clauses in the employment contract, as well as its terms and conditions. If you are looking to remain updated on the new UAE Labour Law, the following information will be useful for you:
- What does Article 127 of the UAE Labour Law state?
- What does a post-termination constraint refer to?
- Including a post-termination clause on a work contract
- How long do post-termination restrictions last?
- Who does a post-termination clause concern to?
- How can employers prevent ex-workers from breaching this contract?
- What are the employer’s alternatives?
- What is a garden leave cause?
- How can we help you learn more about Article 127 of the UAE Labour Law?
1. What does Article 127 in the UAE Labour Law state?
Because of their service inside a business, the employee may have knowledge of company’s clients or company secrets. Companies often make use of post-termination agreements to protect themselves. This includes the business’ private information as well as information from previous workers.
In this way, a business may opt to apply a non-competition post-contractual clause for those laborers who hold important information about them. This clause applies, according to Article 127 of the UAE Labour Law, if the laborer is over 21 years old.
Another relevant aspect is that this agreement must be time-limited, as well as geographically limited; therefore, contemplating a specific region. Further, as Article 127 of the UAE Labour Law states, the non-compete provision must be strictly followed in order to look after the legitimate interests of the worker.
2. What does a post-termination constraint refer to?
This term refers to contractual measures intending to protect a business by restricting laborers’ activities after termination of their contract. Post-termination limits are what Article 127 of the UAE Labour Law consists of.
The most widely considered type of post-termination agreement is the non-compete provision. These clauses aim to prevent a worker from forming a business that represents a competition with their employer’s company; as Article 127 of the UAE Labour Law states.
However, there is more than one type of post-termination restriction. Among the less commonly used, we can find non-solicitation, non-poaching, and non-dealing agreements. Despite the fact of being slightly less relevant, they can be highly advantageous for company owners. Following is a brief description of their effect:
- Non-poaching provisions: These agreements prevent laborers of a company from encouraging other workers to quit along with them.
- Non-dealing provisions: These prohibit previous employees from being in contact with the company’s clients or suppliers. This applies despite which party reached out to the other.
- Non-solicitation agreements: These restrict the former employee from poaching the company’s clients or suppliers.
3. Including a post-termination clause on a work contract
In many countries, post-termination limitations are considered illegal. This unconstitutionality is justified by the fact that they are meant to limit commerce. However, Article 127 of the UAE Labour Law states that these agreements, particularly non-compete clauses, are legal.
Article 127 of the UAE Labour Law determines that when a worker carries out activities that let them access confidential information; the employer can impose an additional agreement in the work contract. For example, one that restricts them from working at a competing business post termination.
On the other hand, the Civil Code offers guidance on situations in which a limitation may apply. This legal regulator ensures that non-compete clauses are fair. In other words, they should only constrain actions that may risk the employer’s most legitimate interests.
These are the aspects to contemplate when establishing a post-termination clause:
- Time and duration.
- Nature or business attempt to restrain.
4. How long do post-termination restrictions last?
Non-compete agreements are usually limited to 6 months after termination. As Article 127 of the UAE Labour Law states, this term must include the Emirate in which the individual works. In addition, it must explicitly identify the business objectives that could concern the employer.
Nevertheless, in the case that these limitations are ruled unenforceable, they will not be immediately repealed. Instead, a court will often modify these clauses. In this way, the court will remove the language that renders a clause unenforceable, leaving the rest of the provision legal as required by the new UAE Labour Law.
If you would rather prevent these events, we recommend that you seek the help of law experts. These specialists will assist you in writing a contract that complies with all the law’s specifications.
Even after meeting the aforementioned requirements, employers must be capable of proving that any limitations they impose are critical. They must guarantee that their intentions are based on a legitimate interest and not to prevent competitors. After considering this, business owners should proceed cautiously regarding post-termination limitations.
5. Who does a post-termination clause concern to?
Since Article 127 of the UAE Labour Law says that these agreements should only protect legitimate interests; there will only be specific cases in which the actions of ex-workers could represent a risk for the business.
For instance, a junior employee whose job is unrelated to the company’s clients and who does not handle any confidential information is unlikely to be perceived as a threat to the business. On the other hand, senior workers who face clients and access sensitive information as a part of their job could be.
In the first case, the junior worker may declare that the contract’s limitations are not valid. This is due to the fact that there are no justifiable purposes that involve the company’s legitimate interest. For this reason, Article 127 of the UAE Labour Law is not applicable here.
The UAE Labour Law is constantly presenting more and more changes. When creating employment contracts, you should consider all the possible aspects that may concern you regarding your workers’ termination. For this reason, we invite you to contact legal experts who understand how to write these contracts legitimately and compliantly with Article 127 of the UAE Labour Law.
6. How can employers prevent ex-workers from breaching this contract?
When ex-employees attempt to break or break the post-termination agreement, the most common sanction is an injunction. However, in the new UAE Labour Law, we need to find an alternative solution as injunctive remedies are no longer an option. Therefore, if a laborer is subject to post-termination prohibitions that their former employer considers were violated, remedies are restricted.
Company owners can never truly prohibit their business’ former employees from violating this agreement. Hence, any legal action they take against the ex-worker will be compensatory. We can compare this to claims for damages.
There are many diverse legal services for organizations and enterprises. With the intention to safeguard your investment, it is essential that you rely on the best assistance. As a result, you should look for employment lawyers that understand how to write work contracts that suit your business activities.
7. When is it appropriate to file a claim for damages?
If you intend to file a complaint on labor issues, there are a few things to consider. Relying on adequate legal representation will indeed translate into advantages for your case. This is true particularly when we are referring to a highly complex case. For example, matters related to Article 127 of the UAE Labour Law.
Firstly, a court is going to contemplate whether or not the established limits are fair according to the new UAE Labour Law. Note that this is before evaluating the possibility of filing a claim for damages. However, this is not optimal. For many businesses, it can be extremely difficult to measure or quantify the loss it caused. Therefore, the employer must aim to prevent the breach from ever taking place.
As we mentioned, company owners have to prove that their business saw a significative financial loss. Further, this damage must be directly linked to the former employee’s actions, violating the post-termination agreement.
Moreover, even if the company wins the dispute, there will be no cost award. Instead, both parties must cover their expenses despite the final outcome. This is disadvantageous for the two of them.
8. What are the employer’s alternatives?
We know that options for employers in these cases are limited, and looking to take punitive action is an often expensive and difficult task. Nevertheless, liquidated damages provisions can be advantageous to a certain degree. For instance, in the UAE Labor Law, the relevant clause will specify an estimate of the loss for the company; of course; in the case of a breach of the contract.
According to the Article 127 of the UAE Labour Law, the business must prove in court that the financial damage is directly correlated with the post-termination agreement violation. In other words, they must present evidence of the company’s financial losses as a consequence of the worker’s actions.
When invoking a liquidated losses provision, the laborer will be in the obligation to prove that the amount being requested -in accordance with the clause- was not lost by the employer.
For this reason, we recommend business owners to perform a careful writing of the contracts; considering all the relevant aspects of the Article 127 of the UAE Labour Law. This, in order to maintain post-termination restrictions within safe limits; therefore, placing their businesses in the best position to defend themselves.
In the United Arab Emirates, these limitations can be complicated to determine. Hence, an employer must be aware of all the different legal measures available. For example, damages provision, garden leave clause, and in the worst-case scenario, presenting charges.
9. What is a garden leave clause?
This clause is usually applied along with restrictive agreements to guarantee effectiveness. Employers may consider garden leave as an additional safety measure that will serve to back up the case in court.
The main key benefit of this clause is that it restricts the laborer from working for a rival company. For example, if the employer proves that a foreign former laborer is working at one of these companies during the specific time frame; not only will this will qualify as a breach of the employment; it violates the immigration law, with very strong repercussions.
A clause of this kind, as the Article 127 of the UAE Labour Law states, lets the employer obligate an ex-employee to remain at home during the specified period. Of course, as they continue to receive their monthly wage and all employee benefits.
10. How can we help you learn more about the Article 127 of the UAE Labour Law?
As post-termination agreements are a reality in certain countries, such as the United Arab Emirates, employers can protect themselves. For this reason, we recommend that you, as a company owner, have a clear understanding of the Article 127 of the UAE Labour Law.
Nevertheless, it is true that you have a large number of tasks to look after. This is why we offer you the best legal services to protect your enterprise. In addition, not only do we help you take care of the business-related aspects of your life; we have everything you need!
From family law to criminal law, we have the greatest and most professional lawyers in the country. Do not hesitate to contact us and ask us all the ways in which we can assist you. We will do the work for you.
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