The 2019 Supreme Court ruling on the case of Tillman v Egon Zender Ltd provides further useful clarification on the complex issue of restrictive covenants. In employment law, restrictive covenants are used to prevent staff from disadvantaging their current employer when they seek employment elsewhere.
In this particular case, the covenant indicated that the defendant must not “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of [Egon Zehnder]” within a twelve-month period prior to the termination date “and with which [she was] materially concerned during such period.” The case rested on whether the clause was enforceable or not, given its wording. In particular, the use of the words “or interested” was the subject of considerable legal debate.
Greater clarity of wording
The Supreme Court’s judgment that “or interested” could be removed from the clause without materially affecting its meaning is important. Previous interpretations suggested that the term might be interpreted as meaning that an employee bound by the clause could not hold even a small number of shares in a competing business (as part of a portfolio of investments, for example), as that could be constituted as being “interested” in the company.
Removal of the phrase provides helpful clarification on what individuals who have a restrictive covenant in their contract can and cannot do whilst adhering to its terms.
How our Employment Solicitors can help
Whether you’re an employee who has an issue with the restrictive covenants in your contract, or you are an employer who wishes to draft a contract with restrictive covenants, we can help. Our team of specialist Employment Law professionals are also able to advise on a wide range of employment issues.
Get in touch to speak with a member of our Business Department on 01872 241414 to learn more about restrictive covenants.