Tillman v Egon Zehnder Ltd [2019] UKSC 32

Facts

Ms Tillman was employed by Egon Zehnder Ltd (EZ) under a contract of employment that included various restrictive covenants. The six month non-competition clause stated that she would not "directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of [EZ] or any Group Company which were carried on at the Termination Date or during the period of 12 months prior to that date and with which you were materially concerned during such period". Ms Tillman gave notice and informed EZ that she was going to join a competitor, alleging that the non-competition clause was unreasonable because it prevented her from holding even a minor shareholding in a competing business, and it was therefore void. EZ sought an injunction preventing Ms Tillman from joining a competitor.

Decision

The Supreme Court held that the wording prevented Ms Tillman from holding even a small number of shares in a competitor. It was therefore void as an unreasonable restraint of trade. In an application of the "blue pencil test", the Court went on to look at whether the offending wording could be severed from the rest of the clause. It set out the relevant test:

1.    Can the unenforceable provision be removed without the necessity of adding to or modifying the wording of what remains?
2.    Do the remaining terms continue to be supported by adequate consideration?
3.    Does removal of the provision generate any major change in the overall effect of all the post-employment restraints in the contract?

The Court concluded that the words "or interested" could be removed from the non-competition clause without the need to add to or modify the wording of the rest of the clause, the second part of the test could be ignored in this case, and the removal of the wording would not generate any major change in the overall effect of the restraints. The injunction (which had originally been granted by the High Court) was restored, even though it had expired nearly two years earlier, with the deletion of "or interested" from the covenant.

Comment

This was apparently the first restrictive covenant case to come before the Supreme Court in more than a century. It is a helpful decision for employers, as it confirms that the "blue pencil" test can be used to delete some of the words in a restrictive covenant in some cases, as well as an entire clause. However, it is better for employers to have properly drafted and enforceable covenants in their contracts of employment in the first place, rather than relying on this case to sever some of the wording later.