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Non-Compete Clauses In Employment Contracts Tillman v Egon Zehnder Ltd

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Claric’s ability to identify and deal with potential problems before they arise is a key feature.

Open Exhibitions Ltd David Edwards Managing Director

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Gives a more commercially minded view as to the operation of law in order to smooth the flow of business

Advanced Construction Technologies UK Ltd A C Benfield Chairman

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We simply cannot imagine life without Claric. Macismo International Ltd Doug Shipsey

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Tillman v Egon Zehnder Ltd

Introduction and Summary

The Court of Appeal recently held a non-compete clause in a senior executive’s contract of employment unenforceable because it prevented her from having “any interest” in any competing business.

The restriction prevented the executive from holding minority shareholdings so the court reasoned that this made it wider than necessary to protect the business’ legitimate interests. The fact that the executive did not want to acquire a minority shareholding but simply wanted to work for a rival was irrelevant. Public policy took precedence over the merits of individual cases. The non-compete provision was therefore unenforceable and meant that the executive was free to start working for a direct competitor.

Comment

This decision makes it important to limit non-compete clauses by, for example, allowing the employee to hold shares in a company listed on a stock exchange up to a maximum percentage of the total shares (often 5%). Clauses without this caveat are now likely to be unenforceable.

This should not be relied upon for legal advice. If you would like any further information or advice please email richard@clariclegal.co.uk.

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