The Supreme Court has upheld a non-compete restriction today in the first employment competition case to have reached the court and its predecessor in over a century.
Tillman v Egon Zehnder Ltd involved a former investment banker Ms Tillman, who joined management consultancy Egon Zehnder in 2004.
Tillman’s contract of employment included a non-compete clause which prevented her from being ‘concerned or interested in’ any competing business for six months after leaving. When Tillman resigned to join a competitor in 2017, Egon Zehnder sought an injunction to stop her, relying on the non-compete clause. However, Tillman argued that the non-compete clause was unenforceable as it was unreasonably wide.
In a judgment handed down this morning, five Supreme Court justices concluded that the injunction should be restored, setting aside an order by the Court of Appeal.
A particular point of contention was the phrase ‘interested in’, which appeared in the non-compete clause. The Court of Appeal ruled that ‘interested in’ meant Tillman was not allowed to hold shares in a competing company. It said this was unreasonable.
The Supreme Court agreed, stating ‘the natural construction of the word “interested”, consistent with long-standing authority, is that it covers a shareholding’. However it went on to say that the offending word could be removed from the clause without damaging the rest of the covenant. Consequently, the injunction could be restored.
David Lorimer, employment lawyer at international firm Fieldfisher, said: ‘This should be treated as a major victory for employers. The Supreme Court has confirmed that courts will sometimes be prepared to come to the rescue of employers where they have drafted very broad restrictive covenants.’
He added: ‘As always, it is only half the story. The fundamental principle remains that restricting employees from competing when they leave is incredibly difficult to do legally and in practice.’
Michael Anderson, partner at commercial firm Lewis Silkin, said: ‘This is a key decision. But there may be a sting in the tail for employers. Although the Supreme Court has confirmed that the employer in this case could enforce the other parts of its non-compete clause, it indicated that the employer may ultimately be left to pick up a major part of the legal bill.’
James Laddie QC and Adam Solomon QC, instructed by Reynolds Porter Chamberlain LLP, appeared for the appellant; Daniel Oudkerk QC and Amy Rogers, instructed by Simmons & Simmons LLP, for the claimant.