• 28th June 2017

The recent case of Egon Zehnder Ltd v Mary Caroline Tillman [2017] EWHC 1278 (Ch) had found that, although the reasonableness of a non-compete clause should be assessed at the time the contract is entered into, the parties’ expectations of future promotions should also be taken into account.

In Egon Zehnder Ltd v Mary Caroline Tillman the High Court upheld a six-month non-compete restrictive covenant, finding that it went no further than reasonably necessary to protect the legitimate business interests of the employer. Although the employee was very senior at the time of the termination of her employment, she had not signed new restrictive covenants since she was first hired in a more junior role. Nevertheless, she had been recruited with high hopes for her future potential and it was in the parties’ contemplation that she would be swiftly promoted. The correct approach was to determine the reasonableness of the non-compete clause at the date of the contract by reference to the employee’s status at that time and what was contemplated by the parties as a result of that. In addition, the court also needed to have regard to the view taken at that time of the employee’s prospects and whether that in fact gave her a level of engagement with protectable interests which was greater than might otherwise have been expected. As it was in the parties’ contemplation at the date of the contract that Mrs Tillman would have a significant level of client engagement and involvement with strategic matters, the non-compete restriction was justified.

Two points of construction also arose. Although there was no express territorial restriction, there was an in-built limitation in that the non-compete restriction was limited to businesses in competition with any businesses of the employer’s group with which Mrs Tillman had been materially concerned. Also, on a proper construction of the clause, it did not prohibit her from holding a minor shareholding in competitors for investment purposes. Therefore the clause was not void for being wider than reasonably necessary. (Egon Zehnder Ltd v Mary Caroline Tillman [2017] EWHC 1278 (Ch).)