Dubai: If you are a full-time employee in the UAE and have career aspirations, you may be wondering about the legality of starting your own business and whether it is considered a breach of employment contract.
Gulf News spoke to legal experts in the United Arab Emirates to find out what an employee should keep in mind when starting their own business. Here’s everything you need to know.
Can I start a business while working full time?
First, yes, you can start a business in the UAE even if you are a full-time employee in a company. However, you must ensure that the commercial activity of your company is not the same as that of your employer. Business activity refers to the area in which a business operates.
“You can open a business in the UAE while fully employed provided your business activity is not the same as the current employer and you may be required to obtain a No Objection Certificate (NOC) from Furthermore, it is up to the employer to accept or reject NOC’s request,” said Reda Hegazy, Senior Partner and Arbitrator of Alsuwaidi and Company LLC.
You can open a business in the UAE while employed full-time, provided your business activity is not the same as the current employer and you may be required to obtain a no-objection certificate (NOC) of the employer. In addition, it is up to the employer to accept or reject the CA request.
– Reda Hegazy, Senior Partner and Arbitrator of Alsuwaidi and Company LLC
But do you still need a NOC before starting your own business?
According to Hegazy, you may or may not need it, as each licensing agency (mainland, different free zones) has its own requirements.
“In addition, in the event that the employee carries out a professional activity similar to that of the employer, the latter may include a non-competition clause in the employment contract. With a non-competition clause in the contract, the employee cannot open a business activity that is the same as the employer, unless the employer issues the NOC,” Hegazy said.
Further clarifying the non-competition clause, Hegazy said: “It is mentioned in Article 10, paragraph (1) of Federal Decree-Law No. 33 of 2021 on the regulation of labor relations. [the new UAE Labour Law] that when the employee’s work allows him to have access to the clients or business secrets of the employer, the latter may include a non-competition clause and stipulate in the contract that the employee refrains from engage or enter into any competing business in its line of business after the expiration of the contract.
“The clause must be specific in terms of time, place and type of work to the extent necessary to protect the legitimate interests of the employer. The duration of this clause may not exceed two years from the date of expiry of the contract.
What if I work part-time?
According to Sridevi Sidharthan, Senior Partner at Mahmood Hussain Advocates and Legal Consultancy, the legal requirement to run your own business while employed varies depending on the type of employment, which can be full-time, part-time or temporary.
“A full-time employee must operate their personal business within the limits set by the employer – if any – when issuing the NOC, in order to manage the business while performing their job duties.
“In the case of a part-time or temporary employee, the employee must obtain a work permit from the Ministry of Human Resources and Emiratization (MOHRE) and does not need any other approvals from his employer” , said Sidharthan.
“It is important for an employee who operates his own business while being employed full time not to violate the terms of the employment contract and also to respect the obligations of the worker as provided for in article 16 of the law on the work. These include having good behavior and good character while working and not working for others, in violation of the provisions of the Labor Law and other applicable laws in this regard,” said Sidharthan.
So while it’s legally possible to start your own business while employed, you need to make sure it doesn’t affect your job performance. Sidharthan also shared some basic tips for aspiring entrepreneurs to keep in mind, to ensure their full-time job doesn’t suffer:
1. Involving your colleagues in your business activity may constitute a breach of contract.
“Soliciting the services of colleagues to work part-time will be a breach of the non-solicitation clause, if it is stipulated in your employment contract,” Sidharthan said.
In addition, each part-time employee in your company will need to obtain a work permit from MOHRE.
Soliciting the services of colleagues to work part-time will be a violation of the non-solicitation clause, if it is stipulated in your employment contract.
– Sridevi Sidharthan, Senior Partner at Mahmood Hussain Advocates and Legal Consultancy
2. Take business calls at work? This could result in warnings from your employer.
“Taking work calls during your working hours may expose you to warnings or subsequent sanctions imposed by the employer, because the employment contract dictates the obligation of the employee to wear their own and provide their services only to the employer during contractual working hours,” Sidharthan said.
3. Poor job performance may result in summary dismissal.
“Any subsequent breach could be grounds for dismissal of the employee without notice under Article 44 of the Labor Law, which states that [a worker may be dismissed without notice] “if the worker fails to fulfill his basic obligations under the employment contract and continues to violate them despite a written investigation with him for this reason and warning him twice of dismissal in the event of repetition,” Sidhharthan said.
If my job starts to be affected due to the extra commitment, can my employer legally ask me to close the business?
Although an employer does not have the legal right to order you out of business because of its effect on your work, your full-time employment may be jeopardized if the quality of work is poor.
“The Labor Law, in accordance with Article 39, grants employers the right to issue warnings, impose penalties or terminate contracts of employment due to any violation of your obligation under the section 16(8) of the Labor Act which is to continuously and diligently develop your functional work and professional skills, and raise the standard of performance you offer to the employer.This may also lead to dismissal without notice under Article 44 of the Labor Law for failing to perform basic duties according to the employment contract after repeated warnings,” Elhassan said.
4. Do not use your salary account for business transactions.
According to Waddah Elhassan, Junior Partner at Mahmoud Hussain Advocates and Legal Consultancy, you must have a bank account under your registered business name to obtain your license and rent office space.
“Above all, business transactions should ideally be separated from your payroll account to prevent risks resulting from the association of the two accounts, such as fraud, embezzlement and to provide transparency in the audit of your business. Moreover, the use of the salary account for the business transaction also raises a risk of seizure and freezing of the salary account by the court in the event of a dispute over the business transaction,” Elhassan said.
Above all, business transactions should ideally be separated from your payroll account to prevent risks resulting from the association of the two accounts, such as fraud, embezzlement, and to provide transparency in the audit of your business.
– Waddah Elhassan, Junior Partner at Mahmoud Hussain Advocates and Legal Consultancy
So, if you want to become an entrepreneur and have questions about how to go about it, read our in-depth guide to starting a business in the UAE.