Yes.

The much-anticipated judgment in Tillman v Egon Zehnder Ltd, the first employment competition case to have reached the Supreme Court in over 100 years, was handed down yesterday morning.   Overturning the Court of Appeal’s decision, the Supreme Court has held that certain words contained within a non-compete provision were capable of being severed in order to make the covenant enforceable.

While the 6 month non-compete period has long since passed, this case will be of interest to employers and employment lawyers alike, and serves as a useful reminder of the importance of careful drafting when including restrictions in employment contracts.

Facts

Ms Tillman was employed by Egon Zehnder Ltd, an executive search and recruitment company.  Ms Tillman’s employment contract contained a non-competition clause which provided that Ms Tillman would not “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company or any Group Company”.

Following her termination, Ms Tillman notified Egon Zehnder that she intended to start work as an employee at a competing firm.  Ms Tillman conceded that the non-competition clause would prevent her proposed employment, but alleged that it was an unreasonable restraint of trade and, therefore, void.

Egon Zhender applied for an injunction to stop Ms Tillman starting work at the competing firm and, at first instance, the judge granted the injunction. The Court of Appeal (CoA) subsequently allowed Ms Tillman’s appeal and set aside the injunction.  The CoA held that the covenant, and particularly the phrase “interested in”, sought to prevent Ms Tillman from having a minor shareholding in a competing business and, therefore, was too wide to be enforceable (even though she had no intention of becoming a shareholder in a publicly quoted competitor).

On appeal, Egon Zehnder accepted that there was no legitimate basis to prevent Ms Tillman from having a shareholding but submitted that the phrase “interested in” could be severed to preserve the non-competition covenant.

Decision of the Supreme Court

Overruling the Court of Appeal’s decision, the Supreme Court has held that the words “interested in” could be severed from the clause in order to make it enforceable against Ms Tillman.  The Supreme Court provided the following guidance for the basis of severance in future cases:

1. the unenforceable provision must be capable of being removed without the necessity of adding to or modifying the wording of what remains; and
2. the removal of the provision would not generate any major change in the overall effect of all the post-employment restraints in the contract (which is for the employer to demonstrate).

Comment

Although in this case, the offending words were capable of being removed and the covenant was preserved, the courts will not readily leap to the aid of employers to tidy up poorly-drafted restrictions.  It seems likely that this case may lead to future tussles over whether the removal of particular wording or a phrase constitutes a “major change in the overall effect” of a restriction.

By way of reminder, it remains vitally important for employers to give careful consideration to the restrictions they include in any employee’s contract, and ensure they are appropriately tailored, bearing in mind the individual’s role and the confidential and client information they will have access to as part of their role, while ensuring that the protection sought is no wider than is reasonable.

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