Employment Cases Update

Tillman v Egon Zehnder Ltd [2019] UKSC 32

Date published: 03/07/2019

Appeal against the Court of Appeal’s refusal to sever certain words from a non-competition covenant in the Respondent’s contract of employment, such that the covenant was void as an unreasonable restraint of trade. Appeal unanimously allowed.

The Respondent left her employment with the Appellant, and agreed to comply with all covenants in her contract apart from a non-competition covenant which stated that she should not "directly or indirectly engage or be concerned or interested" in any competing business; she alleged that this covenant was in unreasonable restraint of trade and thus void. The High Court granted an interim injunction restraining the Respondent from working for a competing business, but the Court of Appeal considered that the words "or interested" would prohibit even a minor shareholding and refused to sever those words; accordingly, the covenant was held to be void as an unreasonable restraint of trade. The Appellant appealed, and raised the issues whether (1) the covenant fell entirely outside the restraint of trade doctrine, (2) the words "interested in" prohibited any shareholding, and (3) the correct approach to severance was applied.

The Supreme Court held that (1) the restraint of trade doctrine did apply on the facts, and (2) the natural meaning of "interested" included shareholding so that, subject to severance, the covenant would be void as an unreasonable restraint of trade; however, (3) on the facts, and preferring the approach in Beckett Investment Management Group Ltd v Hall [2007] ICR 1539 (CA) to Attwood v Lamont [1920] 3 KB 571 (CA), the words "or interested" were capable of being removed from the covenant without the need to add to or modify the wording of the rest of the covenant, and removal of the prohibition against the Respondent being "interested" would not generate any major change in the overall effect of the restraints. Consequently, the High Court injunction would be formally restored, subject only to the removal of the words "or interested", even though the contractual period of restraint had since expired.

Employment Claims without a Lawyer 2nd edition published March 2018

Read the full text of the judgment on BAILII or download the file by clicking the link below.