Shiva Shadi – Head of Employment – discusses Non-Compete Clauses

Shiva Shadi, Partner and Head of Employment at Davis Blank Furniss

Restrictive covenants have long been used by employers as a mechanism to, for example, restrict their former employees from working for their competitors. The Supreme Court this week has heard the case of Tillman v Egon Zehnder Ltd which considered the specific wording of such restrictive covenants.

The case itself centres around whether an ex-employee’s restrictive covenants were drafted too widely as to prevent them from holding shares in a rival private company.

The specific wording of the clause in dispute states that the former employee should not ‘directly or indirectly engage or be concerned or interested in’ any business in competition with any of the businesses of the company. This is standard wording that appears in many employment contracts across the land.

At first instance, the High Court held that the restrictive covenant did not prevent the employee from becoming a shareholder in a competitor. However, that decision was appealed and subsequently overturned by the Court of Appeal which considered that the wording of the clause was too wide to be enforceable.

Five justices in the Supreme Court have presided over the two day trial this week and we await the outcome.

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