Non Compete Agreement (Non Compete Clause)

What a non compete agreement is

A non compete agreement (اتفاقية عدم المنافسة), also called a non compete clause, is a condition that prevents a worker from competing with the employer after the contractual relationship between them has ended. Under the Saudi Labor Law (نظام العمل) a non compete agreement is permitted on conditions, not without limit, and it is not made valid merely by being written into the contract.

The restriction that a non compete agreement imposes concerns the period after the employment relationship. Article 83 of the Labor Law frames it in the same terms: it is a condition that the employer may require of the worker, under which the worker will not compete with the employer once the contract has ended.

When a non compete agreement may be required at all

Article 83 of the Labor Law permits a non compete agreement in one situation: where the work itself allows the worker to know the employer’s clients. The text speaks of the work assigned to the worker (العمل المنوط بالعامل), so the question it asks is whether that work gives the worker knowledge of who the employer’s clients are.

A non compete agreement is therefore tied to the nature of the job, not to the wishes of the employer. An employee whose work does not bring them into contact with the employer’s clients gives no ground on which a non compete condition can be required of them.

Article 83 of the Labor Law also states the purpose for which the condition is permitted. Where the work lets the worker know the employer’s clients, the employer may, to protect its legitimate interests (مصالحه المشروعة), require the worker not to compete with it after the contract ends. The purpose and the situation are stated together in the same sentence of the Article, and the permission is given in those terms.

Royal Decree M/44 of 1446H, in force since 19 February 2025, amended provisions of the Labor Law. That decree did not amend Article 83 of the Labor Law, which was last amended by Royal Decree M/46 of 5/6/1436H.

The conditions of validity of a non compete agreement

A non compete agreement is valid only where it meets three restrictions, and Article 83 of the Labor Law requires all three of them together:

1. It is in writing. The condition is set out in writing (محرر), in the employment contract or in a separate agreement between the two parties.
2. It is defined as to time, place and type of work. It states the period for which the restriction runs, the place in which it applies, and the type of work that it covers. A condition that prevents the worker from working anywhere in the field, anywhere in the Kingdom and with no end date is not a defined condition.
3. It does not exceed two years. Its duration may not exceed two years from the date on which the relationship between the two parties ends.

The absence of any one of these restrictions deprives a non compete agreement of one of the conditions of validity stated in Article 83 of the Labor Law. The three are cumulative, so a clause that meets two of them still lacks the third.

The second restriction has three elements, and the condition described in the second item above fails each of them. Working anywhere in the field leaves the type of work undefined, anywhere in the Kingdom leaves the place undefined, and the absence of an end date leaves the time undefined. A non compete agreement that is defined as to time, place and type of work states each of these elements.

How a non compete agreement differs from a non disclosure agreement

Article 83 of the Labor Law governs both the non compete agreement and the non disclosure agreement, and it distinguishes between them by the reason on which each condition rests:

• Non compete. It rests on the worker’s knowledge of the employer’s clients, and it prevents the worker from competing with the employer.
• Non disclosure. It rests on the worker’s access to the secrets of the work, and it prevents the worker from disclosing them.

Under the confidentiality paragraph of Article 83 of the Labor Law, where the work gives the worker access to the secrets of the work, the employer may, to protect the same legitimate interests, require the worker not to disclose those secrets after the contract ends. Each of the two paragraphs states a different trigger, but both state the same purpose and both apply after the contract ends.

The two clauses share the two conditions of validity that Article 83 of the Labor Law sets for both of them: the condition must be in writing, and it must be defined as to time, place and type of work. The non compete clause carries one further limit in Article 83 of the Labor Law that the confidentiality clause does not: it may not exceed two years from the end of the relationship. A confidentiality clause is bound by the two shared conditions of validity, but not by that two year ceiling.

The difference lies in what each agreement restricts. A non compete agreement restricts where the person works, and a non disclosure agreement restricts what the person says.

The period for a claim under a non compete or non disclosure agreement

Article 83 of the Labor Law gives the employer the right to bring a claim within one year from the date on which it discovers the breach. The period starts from the discovery, not from the date on which the breach itself took place.

The paragraph of Article 83 of the Labor Law that sets this period states it as an exception to the provisions of the Labor Law. It applies to the worker’s breach of any of the obligations in that Article, so it covers a breach of the non disclosure obligation as well as a breach of the non compete obligation. That paragraph states the period and the point from which it runs.

The provision relied on is Article 83 of the Labor Law as published by the Ministry of Human Resources and Social Development, covering the non compete clause, the confidentiality clause after employment and the one year period for a claim.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.