Restrictive covenants

31 July 2019

In Tillman v Egon Zehnder the Supreme Court disagreed with the Court of Appeal, who had found that a covenant in an ex-employee’s contract which prevented her from being directly or ‘indirectly’ engaged or concerned or ‘interested in’ any business which competed with her former employer was too wide and, therefore, unenforceable. The Court of Appeal’s view was that it would have prevented the employee from holding a minor shareholding in a competing company, whereas her contract of employment had allowed her to hold up to 5% shareholding in a publicly quoted company. The Supreme Court allowed the employer’s appeal and held that the restriction was enforceable because the offending part could be severed and that did not involve a major change in the overall effect of the restrictions.

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brandon