Effect of the non-competition clause in labour contracts

Dear Questioner,

Your offer letter constitutes a non-competition clause. Please note that even though the law permits inclusion of such clauses in labour contract it is hard to implement.

Kindly note the applicable legal provisions in this context:-

Article (127) of the Labour Law states that:

"Where the work assigned to a worker allows him to become acquainted with the employer's clients or to have access to his business secrets, the employer may require him to undertake not to compete with him or participate in any enterprise competing with his own, after the termination of his contract."

Article (909) of the Civil Code states:

"If a worker, in the course of his work, has access to the secrets of the work or gets acquainted with the customers of the firm, the two parties may agree that the worker may not compete with the employer or take part in work competitive to his work after termination of the contract.

Nevertheless, such an agreement shall not be valid unless it is restricted to time, place, and type of work, to the extent which is necessary for the protection of the legitimate interests of the employer.

It shall not be permissible for the employer to rely on that agreement if he terminates the contract without any action on the part of the worker justifying that course, and likewise, it shall not be permissible for him to rely on the agreement if he commits any act which justifies the worker in terminating the contract."

In order to implement the non-competition clause, one of the following shall be present:-

1. The non-compete clause must be necessary to protect the legitimate interests of the employer.

2. It must be limited in its geographical scope, duration and also to the nature of business activity.

Hope the above gives you a satisfactory explanation.

Thank you.