Can employees start their own business while being employed? Law explained

starting a business while employed

Starting a business while being employed is a common scenario, especially for individuals with entrepreneurial aspirations. However, it's crucial to navigate the legal landscape carefully to ensure compliance with labor laws and contractual obligations. In the UAE, where the regulatory framework is robust, employees must adhere to specific procedures and obtain necessary approvals before venturing into entrepreneurship while still working for an employer.

 Understanding the Legal Framework

In the UAE, employment relations are governed by Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations and Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021. These laws outline the rights and responsibilities of both employers and employees and provide guidelines for situations such as starting a business while being employed.

  Requirement for NOC 

One of the fundamental requirements for an employee intending to start a business while employed is obtaining a No Objection Certificate (NOC) from their current employer. The NOC serves as acknowledgment from the employer that they have no objection to the employee establishing a separate entity that may potentially compete with the employer's business interests.

 Conditions for Obtaining NOC

While obtaining an NOC is essential, employers have the discretion to refuse to provide it under certain circumstances. For instance, if the employer perceives the proposed business as a competitor or if the employee's role grants access to sensitive business information or clientele, they may decline to issue the NOC. Additionally, non-competition clauses in employment contracts may restrict employees from engaging in similar business activities for a specified period after leaving their current employment.

 Navigating Non-competition Clauses 

Non-competition clauses, often included in employment contracts, prohibit employees from engaging in activities that may compete with their employer's business interests for a specific duration after termination of employment. However, employees can negotiate the terms of these clauses or seek exemptions under certain conditions, such as mutual agreement between the parties or termination during the probationary period.

 Practical Steps for Employees

For employees contemplating starting a business while employed, several practical steps can facilitate the process:

1.   Requesting NOC : Initiate a dialogue with the employer to request an NOC, outlining the nature of the proposed business and its compatibility with the current employment.

2.  Compliance with Contractual Obligations : Review the employment contract thoroughly to understand any contractual obligations, including notice periods and non-competition clauses.

3.  Resignation Consideration : If obtaining an NOC proves challenging or if the proposed business conflicts with contractual obligations, consider resigning from the current employment before initiating the business setup process.

4.  Legal Consultation  Seek legal advice to ensure compliance with labor laws and contractual obligations, particularly concerning non-competition clauses and intellectual property rights.

 Conclusion 

Embarking on entrepreneurship while being employed requires careful consideration of legal obligations and procedural requirements. By understanding the regulatory framework, communicating effectively with the employer, and seeking appropriate legal guidance, employees can navigate the process smoothly while adhering to labor laws and contractual obligations. Ultimately, transparency, communication, and compliance are key to ensuring a seamless transition into entrepreneurship while maintaining professional integrity and legal compliance.