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Abstract:
A note on the issues arising in relation to confidentiality both during employment and after termination in the United Arab Emirates.
Body:
Information is a key asset of most businesses. Many employees may have access to or create information and acquire valuable knowledge while working for their employer. Employers will want to ensure that they protect this information to the fullest extent possible to avoid any misuse by an employee that could dilute the value of this important asset.
While many jurisdictions have laws in place that may protect an employer’s confidential information during and after employment, employers may be able to take steps, such as entering into a confidentiality restriction in their employment contracts with employees, to prevent employees making use of the information either for themselves or for a third party especially if they are a competitor.
This Practice Note explains:
- What duties in relation to confidential information can be implied by law.
- What information is considered confidential.
- How the employer can protect confidential information using a clause in the employee’s employment contract.
- What remedies are available to an employer where the employee had made unauthorised use or disclosure of the employer’s confidential information.
Confidentiality Protection in Employment: UAE
Implied Duty of Confidentiality
Federal Decree-Law No. 33/2021 On the Regulation of Labour Relations (Labour Law) governs employment relations in the UAE’s private sector. Article 16(4) of the Labour Law imposes an obligation on the employee:
- To maintain the confidentiality of the information and data that they have access to by virtue of their work.
- Not to disclose work secrets.
- To return any confidential information to the employer upon the termination of their employment.
It is also advised to include the duty of confidentiality in the employment contract. [BR(P1] [IS2]
Employment relationships are also governed by Federal Law No. 5/1985 On the Civil Transactions Law of the United Arab Emirates State (Civil Transaction Law). Under Article 905(5) of the Civil Transaction Law, an employee must safeguard the industrial and commercial secrets they have access to in the course of their employment, even after the end of their employment contract, as required by agreement or by customary practice. [BR(P3]
Customary practice will vary, depending on the employee’s job description and the industry they work in. Although customary practice is not defined in UAE law, it is understood to be a practice which is ordinarily acceptable and expected or usual within a certain trade, profession, or industry.
There is no definition of “industrial and commercial secrets” in any UAE legislation. However, it is arguable that “industrial and commercial secrets” in Article 905(5) of the Civil Transaction Law can be interpreted as any work secrets that employees have access to during their employment (see Other Related Duties on the concept of work secrets).
Federal Decree-Law No. 31/2021 On the Issuance of the Crimes and Penalties Law (Penal Code) provides that anyone who is entrusted with a secret by virtue of their profession, occupation, status, or specialisation, and discloses it either for their benefit or for the benefit of someone else, commits a criminal offence punishable by imprisonment of at least one year and/or by a fine of at least AED20,000 (Article 379).
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Other Related Duties
In addition to the duty of confidentiality, Article 16(5) of the Labour Law also imposes a duty on employees, during their employment, not to keep, in a personal capacity, any original papers, or hard or soft copies of documents related to work secrets, without the employer’s permission. While there is no definition of “work secrets” in any UAE legislation, reference is made to the WIPO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), to which the UAE is a signatory. Article 39.2 of the TRIPS Agreement protects undisclosed information, in other words, information that is a secret and has commercial value, where reasonable steps have been taken to keep that information secret.
Under the TRIPS Agreement, a person lawfully in control of such information must prevent it from being disclosed to, acquired, or used by others in a manner contrary to honest commercial practices. “Manner contrary to honest commercial practices” includes, among other things, breach of contract and breach of confidence.
UAE law protects undisclosed information in general, and also in the specific context of employment obligations. Federal Law No. 11/2021 On the Regulation and Protection of Industrial Property Rights offers protection to undisclosed information subject to satisfaction of certain conditions. See also Implied Duty of Confidentiality for the Penal Code’s provision making disclosure of secrets in certain circumstances a criminal offence.
[BR(P4] [RR5] Employers can also enter into a non-compete agreement with employees, which prevents them from competing with the employer or gaining employment with a competitor if the employee has knowledge of the employer’s work secrets or details of the employer’s customers (Article 909, Civil Transaction Law). The maximum duration for a non-compete restriction on an employee is up to two years from the end of the employment contract (Article 10, Labour Law).
Confidentiality Clauses
As companies and businesses are always seeking to protect their work secrets and confidential information, it is a common industry practice to include a confidentiality clause such as Standard clause, Confidentiality clause (employment): International in employment contracts, or to ask their employees to sign a separate confidentiality agreement.
Written Confidentiality Clause
Under the Civil Transaction Law, the expression of the intention of the parties to enter into a contract can either be verbal or in writing (Article 132). Therefore, it is not necessary for a confidentiality clause to be in writing for it to be valid and enforceable.
However, a verbal contract will be more difficult to enforce, and therefore the written form is recommended for evidentiary purposes.
In practice, since most employment contracts are in writing, confidentiality clauses are put in writing either as part of the employment contract or as a separate contractual agreement.
Language
There are no requirements for a confidentiality clause to be drafted in a particular language. Article 129 of the Civil Transactions Law requires that the contracting parties agree on the core elements of the contract. As long as both parties understand the terms of the contract and agree upon them, the language in which the contract was entered into is immaterial.
Execution Formalities
To execute a confidentiality clause, it is essential that the parties agree to it and that the agreement abides by the local employment and civil transaction laws.
If both parties have expressed their intention to be bound by the agreement, either in writing or verbally, the agreement is valid and enforceable.
[BR(P6] Definitions
Confidential Information
There is no definition of the term “confidential information” under UAE law. However, any information or data and any industrial or commercial secrets that an employee has access to by virtue of their work, are deemed to be confidential information (see Implied Duty of Confidentiality).
Employers can seek to protect any information that is material to the business they conduct. This includes, among other things, work secrets, and information regarding any third party that an employer conducts business with, including clients, vendors, and suppliers.
While the law does not exclude any specific information from the scope of confidential information that an employer can seek to protect, any information that the employee becomes aware of or gains access to outside their working hours, and that has no relation to their work, cannot be protected under a confidentiality clause.
As mentioned above, any information related to the employee’s work during their employment, and any information the employee has access to in their workplace is deemed confidential. If there is a dispute as to whether particular information is subject to confidentiality obligations, the burden of proof will be on the employer to prove ownership of such information.
Protected Corporate Entities
There is no legal definition of “group company” under UAE legislation. However, the term “group” is recognised in the UAE by Federal Decree-Law No. 32/2021 on Commercial Companies (Commercial Companies Law). It is generally understood to refer to a holding company and its subsidiary companies. For example, if ABC Ltd is a holding company, and XYZ Ltd is a subsidiary company to ABC Ltd, ABC Ltd and XYZ Ltd will together be considered a “group company” under the Commercial Companies Law.
Article 268 of the Commercial Companies Law defines a Holding Company as “a Joint Stock Company or a Limited Liability Company that establishes subsidiaries inside the State or abroad, or controls existing companies, by holding shares or membership interests enabling such Company to control the management of the subsidiary and have influence on the decisions thereof.”
Article 271 of the Commercial Companies Law provides that a company is a subsidiary of a Holding Company if the Holding Company holds controlling shares in the capital of the Company and controls the formation of its board of directors, or if the Company is affiliated to a subsidiary.
The confidential information of all these entities can be protected by a confidentiality clause in an employee’s contract of employment.
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Information Existing in the Public Domain
It is common practice to exclude any information that is already available in the public domain from the definition of confidential information, as is the case in Standard clause, Confidentiality clause (employment): International: clause 1.2.
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Best Endeavours to Protect Confidential Information
The concept of best endeavours is recognised in the UAE.
It is very common to find a confidentiality clause in a contract of employment, requesting that the recipient of confidential information, including employees, undertake to use their best endeavours to maintain the confidentiality of such information, especially with respect to third parties.
The term “reasonable endeavours” is also used in some instances, though its meaning is the same as that of the term “best endeavours”.
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Return of Confidential Information
The Labour Law provides that employees should not keep in their possession any original papers, hard copies or soft copies of documents belonging to the employer during the course of their employment (Article 16 (5)) (see Other Related Duties).
Employees are under a further obligation to return any work-related information and data to their employer upon the end of their service (Article 16 (4).
It is however advisable that, as an extra protective measure, employers include a provision such as Standard clause, Confidentiality clause (employment): International: clause 1.4(b) to ensure that employees return confidential information once their employment comes to an end.
The UAE laws do not require employees to provide a signed statement that they have fulfilled their obligation to return company property. However, it is advisable, for evidentiary purposes, to include a provision that does require such a statement, as provided by Standard clause, Confidentiality clause (employment): International: clause 1.4(c).
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Remedies
In the UAE, employers can terminate an employee’s contract without notice if the employee discloses industrial or IP secrets, and the disclosure causes damages or a loss of profit to the employer, or if it brought a personal benefit to the employee (Article 44(5), Labour Law).
In general, employers can bring a civil suit against an employee for breach of confidentiality obligations arising out of their contract of employment, either during the course of the employee’s employment, or within one year of the termination of the contract. However, Article 922(2) of the Civil Transaction Law provides that there is no limitation period in the event of a disclosure of a trade secret.
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Practical Steps
Although it is open to employers to bring an action against an employee if they are in breach of a confidentiality agreement or have disclosed work secrets, employers can also take practical steps to mitigate the risk of such breaches taking place.
During employment, employers can mark specific documents as confidential to bring the employee’s attention to their confidentiality obligations. Employees may also be required to follow a “clean desk” policy to ensure that no files or hard drives are left unattended at their desk, and that they are stored away and locked when the employees leave their workplace. After the termination of employment, employees can also be required to destroy any confidential information in their possession by permanently deleting files and emails from their storage devices, and by shredding hard copies of documents.
[BR(P7] As an additional precaution, employers may require their employees to sign a non-disclosure agreement (NDA) to further protect their confidential information, work secrets and know-how. The NDA can be customised to include the projects that the employee is involved in, and any sensitive information they are exposed to in their professional capacity. The nature of the information that they would be contractually bound to keep confidential can also be clearly defined under an NDA, making it a particularly beneficial instrument for the employer.
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Whistleblowing
The Penal Code provides immunity for individuals who report wrongdoings to the judicial or administrative authorities.
However, there are no laws protecting whistleblowing in the UAE at the federal level.
The Emirate of Dubai has enacted Dubai Law No. 4/2016 On Dubai Economic Security Centre (Financial Crime Law). This is the first statute to provide some limited protection to whistleblowers. The Financial Crime Law defines a “whistleblower” as a person who cooperates with the Dubai Economic Security Centre (Centre) or notifies the Centre of any matter which may prejudice the economic security of Dubai. The Financial Crime Law, among other things, protects whistleblowers in the workplace and ensures that they are not subject to discrimination or maltreatment. It provides that any report made by a whistleblower will not be considered a breach of any law or agreement not to disclose workplace confidential information. For the whistleblower to be protected, the disclosure must be made to the Centre and the information disclosed must be true and related to any activity that can affect the economic security of Dubai.
The Dubai International Financial Centre (DIFC), a financial free zone in the UAE, encourages whistleblowing and has a whistleblowing provision in the DIFC Law No. 1/2004 Operating Law (DIFC Operating Law). The Dubai Financial Services Authority (DFSA), the financial regulatory body of the DIFC, published the DFSA Whistleblowing Regime in March 2022. The DFSA Whistleblowing Regime has improved the protection given to whistleblowers in relation to disclosures made regarding DIFC registered entities.
Under the DFSA Whistleblowing Regime and under the DIFC Operating Law, whistleblowers are protected, among other things, against dismissal from their current employment, or from being otherwise subject to any action by their employer or its related companies that is reasonably likely to be detrimental to them.
DIFC Law No. 7/2018 Operating Law (DIFC 2018 Operating Law) provides protection to any person who makes a disclosure of information to the DIFC Registrar, the DIFC registered auditor or a member of the audit team, a director or other DIFC officer (Article 64). It does not provide a definition of the term “whistleblower”. The disclosure of information must be made in good faith and it must relate to a reasonable suspicion that the registered entity has or may have contravened the laws or regulations of the DIFC.
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Confidentiality Clause: Validity in Relation to Whistleblowing
As there is no whistleblowing legislation in the UAE, a confidentiality clause would not be void if it prevented an employee from whistleblowing.
There is no mandatory wording regarding whistleblowing which must be included in a confidentiality clause. However, given that whistleblowing is becoming more acceptable to UAE authorities, employers, as a best practice, may choose to include a clause similar to Standard clause, Confidentiality clause (employment): International: clause 1.5 clause in their employment agreements.
This clause states:
“Nothing in this Clause 1 shall prevent you from [whistleblowing OR equivalent wording] within the meaning of the applicable legislation.”
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