Today the Supreme Court handed down the long awaited judgement in the Tillman vs Egon Zehnder Ltd case that means restrictive covenants in employment contracts for thousands of senior executives in the City are likely to remain enforceable, says GQ|Littler, the London office of the largest global employment law firm for employers.
The landmark ruling is the first Supreme Court judgment in this area for over a century.
The covenant is commonplace in the contracts of senior executives across financial services and professional services.
Raoul Parekh, Partner at GQ|Littler, the London office of the largest global employment law firm for employers, comments: “The ruling from the Supreme Court in favour of upholding restrictive covenants is good news for employers.”
“Whilst employers have dodged a bullet this time, Egon Zehnder was still forced to go all the way to the Supreme Court to fight its case. No one will want to repeat that.”
“This case should act as a wake-up call for employers: now is the time to go through restrictive covenants to make sure that your covenants are enforceable. Fixing issues before an employee leaves might cost a few hundred pounds; fixing them afterwards might cost tens of thousands or be entirely impossible.”
The case relates to whether a post-termination non-competition covenant in a contract that prevents an ex-employee from being “interested in” (i.e. owning any shares in) a competitor for six months is too wide and therefore unenforceable.
There were fears that if deemed too wide, many similarly drafted non-competition covenants in employment contracts would be unenforceable. The Supreme Court has said the offending restriction could be deleted from the covenant, leaving an enforceable, valid non-competition clause.