In 2017, Mary Tillman resigned from headhunting firm Egon Zehnder to join a competitor. Her contract said that for six months after leaving, she couldn’t “be concerned or interested in” a competing business.
Her argument came down to one word. “Interested”, she said, was wide enough to stop her owning even a handful of shares in a competitor, so the whole restriction went too far and should fail. The Court of Appeal agreed, and she started her new job.
Egon Zehnder took it to the Supreme Court, which in 2019 deleted the word and kept the rest of the restriction. So the firm won. But by then the six months had long passed. Two years of litigation over one word, and the restriction never protected them when it counted.
How a restriction is worded matters just as much as having one. And with the government planning to change the rules, now is a good time to look at your own contracts.
What’s happened
On the 9th October, Andy Burnham said the government will legislate so non-compete clauses stop being a barrier to hiring for start-ups and growing businesses. The detail isn’t known yet, but options have ranged from an outright ban to a cap on length or a minimum salary threshold. The Budget later this month should open a consultation. For now, the law is the same.
Would your clause actually work?
A restriction is only enforceable if it protects something real, such as your client relationships, confidential information or your team, and goes no further than it needs to. If it goes too far, a court won’t rewrite it. Sometimes it can strike out words, as in Tillman, but often the whole restriction fails. Reasonableness is also judged when the contract was signed, so someone who joined in a junior role and now looks after your best clients may not be covered.
Non-competes are only one tool. Clauses stopping someone approaching your clients or poaching your staff, along with good confidentiality wording, often do more of the heavy lifting.
We became a certified B Corp this year, which has made us think harder about how our advice affects everyone involved, including employees. Restrictive covenants are a good example. The restrictions that treat people fairly are usually the ones a court will uphold, so getting the balance right protects you too.
If you’re a Legal Plus client, your Client Partner will be happy to review your current restrictions with you. Just drop them a line. If you’re not, we offer a fixed-price review and advice package from £595 + VAT. Contact the team at Hybrid Legal today for details.
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Ryan has helped a vast number of businesses protect and control their intellectual property as well as drafting and advising on consumer and commercial contracts.
