Employment contract

An employment contract is a written legal document that lays out binding terms and conditions of employment between an employer and an employee. In the UAE, employment contracts are defined by the UAE Labour Law and must cover the following:

1. Date of the employment contract
2. Nature of the contract (limited or unlimited contract)
3. Nature of the work
4. Date on which work begins
5. Date of conclusion or duration of the contract (for fixed term contracts)
6. The location of employment
7. Amount of the remuneration (salary)

Non-compete conditions can be found in many employment contracts, they are designed to protect a business owner’s interest by restricting potential competition. When hiring new employees, employers invest heavily in employee trainings and employees have access to employers’ clients and trade secrets. The recruitment process and associated administrative costs to bring in the foreign workers can also be quite time consuming and costly.

The Ministry of Labour will only approve non-competition conditions provided that the following are included in the contract:

1. Place: Does not exceed the borders of the United Arab Emirates and may include one or two emirates, or the entire state.
2. Time: The validity of the non-competition condition may not exceed two years from the date of the contract termination.
3. Type of Work: Determine the type of work that may not be practiced as a condition for non-competition.

The employee has to be 21 years old at the time of signing the contract for this agreement to be legal.

A non-compete agreement may also not be considered valid if an employer attempts to add a clause that would potentially prohibit employees from working in the country after termination of their contract, example by adding the phrase: “employees may not work in the country at expiry of the contract” would be in violation of the law.

There are two types of employment contracts accepted in the Emirates:

1. Limited Employment Contracts or Fixed Term Contracts
2. Unlimited Employment Contracts

Limited Employment Contracts are for a specified duration with characteristics such as specific commencement and completion date, not more than four years. However, it can be renewed with mutual consent. The employment automatically terminates at the end of contract period.

However, in the case of unlimited contracts, there will be a true commencement date, but no completion date. The unlimited employment contract only ends when it is terminated by either party after giving notice (usually 30 days). The employee will, however, be entitled for compensation, if the termination of the contract by the employer is for an unjustified cause.

If a limited or fixed term contract expires and the working relationship continues without renewing the contract, the contract becomes an unlimited contract under the law. An oral employment contract also qualifies as valid in the UAE, and falls under the unlimited contract category.

If an employment contract was never formally issued and services were agreed upon verbally, an employee may use evidence such as, an appointment letter, payroll or book of attendance, as legal confirmation of an oral contract between both parties.

Although not mandatory, employers have the option to submit copies of employment contracts to The Ministry of Labour for safekeeping. In cases of employment disputes, the Ministry of Labour can at any time refer to the archived contracts for clarification.

It is important to note that in the UAE, all contracts must be written in Arabic and may be translated to English. The Arabic language version is always the legal default if any discrepancies arise in an employment dispute.