Supreme Court rules on landmark non-compete clause case

In what is being seen as a victory for employers, the Supreme Court has upheld a non-compete restriction in the contract of an employee who left her job and went to work almost immediately for a rival company.

Tillman v Egon Zehnder Limited is the first employment competition case to reach the Supreme Court in more than a century and reverses a previous Court of Appeal decision going back 99 years.

The case

Former investment banker Mary-Caroline Tillman had worked at the management consultancy Egon Zehnder since 2004 when she resigned in 2017 to join a competitor soon afterwards.

Her employment contract contained a non-compete clause which prevented her from being 'concerned or interested in' any competing business for six months after leaving.

After her departure, Egon Zehnder sought an injunction to stop her whilst Ms Tillman argued that the non-compete clause was unreasonably wide and therefore unenforceable.

Five Supreme Court judges agreed with Egon Zehnder, concluding that the injunction, though broad, should be restored and that any parts deemed unreasonable could have been deleted leaving a valid non-compete clause still in place.

Implications

As a result of this important ruling, courts will be able to edit restrictive covenants by removing words which they find objectionable (as long as the rest of the covenant can be read without any further additions or modifications).

Also, editing words out should not "majorly change the overall effect" of all of the post-employment restraints in the contract.

The Court set out how high ranking employees can do particular damage to the legitimate interests of their employers following the termination of their employment.

In recognition of this, the Court has readily allowed employers to enforce post-termination restrictions as long as they go no further than is reasonably necessary to protect their legitimate interests.

Previously, there has been some doubt as to whether the Court could edit a restraint which it finds to be excessive by deleting certain words (the so called "blue pencil" test).

The case of Tillman v Egon Zehnder Limited sets out how the Court will delete (with an imaginary blue- pencil) any terms which might make a covenant unenforceable so that what is left in the contract can be enforced by an employer.

Many restrictive covenants already contain an express clause providing for blue-pencil editing of a restriction.

How Wards Solicitors can help

We advise a large number of employers who are affected by these clauses and an equally large number of employees who want advice when entering into employment contracts or when contemplating a career move.

This latest decision is an important one in what is a complex area of law. For advice and assistance with post-termination restrictions, please contact Wards Solicitors' highly experienced specialist Employment or Business Employment teams.