Starting a Business While Employed in the UAE
In the UAE, many employees think about launching their own businesses while keeping their current jobs. However, before taking this step, it is essential to understand the legal framework that governs employment contracts and labor laws to avoid potential conflicts.
Is It Legal to Open a Business While Employed?
Yes, UAE law allows employees to establish a business or become a partner/shareholder in another company. However, they must obtain a No Objection Certificate (NOC) from their existing employer if they plan to continue working under the current employment contract.
This requirement is based on Federal Decree Law No. 33 of 2021 and Cabinet Resolution No. 1 of 2022.
Why is the NOC Important?
- To register a new company while under an employment visa
- To join as a shareholder or partner in an existing entity
- To legally carry out business activities alongside employment
Without an NOC, your business license application may be rejected, or your employer may pursue legal action for breaching contractual terms.
What If the New Business Competes With Your Job?
If your new venture is in the same industry as your current employer, a non-compete clause may prevent you from starting it. According to Article 10(1) of the Employment Law, employers can restrict employees from competing if their role gives access to confidential information, clients, or trade secrets.
Conditions of a Valid Non-Compete Clause
- Clearly defined geographical scope (e.g., Dubai or all UAE)
- Limited duration (maximum two years after contract expiry)
- Specific type of work that could harm the employer’s interests
Overly broad or vague restrictions are less likely to be enforceable in court.
Exceptions to Non-Compete Clauses
- Compensation agreement: If the employee or new employer compensates the previous employer with up to three months’ salary, with written consent.
- Termination during probation: The clause does not apply if the contract ends during probation.
- Market needs: Workers in high-demand professions may be exempt, based on ministerial resolutions.
- Mutual waiver: Employers and employees can sign a written agreement waiving the clause after termination.
Operating a Business While Still Employed
You may run a business if you have a valid NOC and your venture does not directly compete with your employer. Otherwise, the consequences may include:
- Disciplinary action or dismissal
- Civil claims for damages
- Possible criminal charges if fraud or misuse of company data occurs
Example: If you work as an HR officer and want to launch an HR consultancy, this may be seen as a conflict of interest. Therefore, you should:
- Check your contract for a non-compete clause
- Request an NOC from your employer
- Evaluate whether your business overlaps with your employer’s work
- Seek legal advice to avoid risks
Conclusion
The UAE encourages entrepreneurship while safeguarding employer rights through strict regulations. To minimize risks, employees should:
- Obtain an NOC
- Respect non-compete clauses
- Maintain transparency with employers
Legal guidance is strongly recommended when starting a business in the same sector as your employment.
How OBH Lawyers Can Help
At OBH Lawyers Dubai, our employment law experts can review your contract, assess your business plan’s compliance, and assist in securing an official NOC. We also provide legal support for:
- Understanding non-compete clauses
- Employment dispute resolution
- Structuring new businesses within UAE law
Contact OBH Lawyers for professional advice and ensure your business journey begins on solid legal ground.
