Tillman v Egon Zehnder Ltd [2019] UKSC 32: The UK Supreme Court On The Severance Of Non-Competition Covenants

When a portion of a post-employment clause is found to be in unreasonable restraint of trade, in what circumstances should the court sever the offending portion, leaving the employee bound by the remainder of the clause? The UK Supreme Court considered this issue in Tillman v Egon Zehnder Ltd [2019] UKSC 32 and held that the offending portion of a non-compete clause was to be severed.

Facts

In 2003, Egon Zehnder Ltd ("EZ"), a UK subsidiary of a worldwide group in the business of specialist executive search and recruitment, hired Ms. Tillman to work in its financial services department.

Ms. Tillman's employment contract contained five restraints upon her activities in the six months following the end of her employment. One of the restraints was that Ms Tillman would not "directly or indirectly engage or be concerned or interested in any business" in competition with any of the businesses of EZ or any company in the group ("the Non-competition Covenant").

In 2017, Ms. Tillman's employment was terminated and she subsequently informed EZ that she intended to start work at a competitor. Ms. Tillman alleged that the Non-competition Covenant was in unreasonable restraint of trade and thus void. She argued that the effect of the portion of the Non-competition Covenant to not be "interested" in competing businesses was to unreasonably prohibit her from holding even a minority shareholding in such businesses.

EZ applied for an interim injunction to restrain Ms Tillman's entry into the proposed employment.

Issues

The issues before the Supreme Court were:

Assuming that the word "interested" purported to restrain Ms. Tillman from holding shares in competing businesses, did such a restriction fall within the doctrine against the restraint of trade? On a proper construction of the word "interested", was Ms. Tillman prohibited from holding shares in any competing business? If the word "interested" prohibited Ms. Tillman from holding shares in any competing business, can the offending portion be severed from the Non-competition Covenant? Supreme Court's judgment

The Supreme Court unanimously allowed the appeal by EZ and restored the injunction, which was previously set aside by the Court of Appeal.

Issue (A): Doctrine against the restraint of trade

Assuming that the word "interested" prohibited Ms. Tillman from holding shares in the competing businesses, the Supreme Court found that such a restraint on shareholding was part of the restraint on Ms. Tillman's...