07 June 2017

In the case of Egon Zehnder Ltd v Tillman the company sought a court order to enforce a term in the employment contract, a restrictive covenant, to stop the former employee from working for a competitor for six months following the ending of his employment.

While this case is an English case, the law is not significantly different form that applicable in Scotland. In short, there needs to be a legitimate business need which is capable of being protected by such a restriction (such as confidential information, staff, goodwill or client connections etc). Secondly the restriction must be shown to go no further than is absolutely necessary to achieve the protection in question. Thus if the confidentiality restrictions in the contract would achieve the same outcome, the more onerous restrictions may not be enforced. Or if it could be shown that the scope or duration of the restriction is too wide, it may not be enforced.

In this case the English Court upheld the restriction and granted an order prohibiting the employee from acting in breach of the restriction. The restriction had been drafted very carefully and the judgment looks in detail at the words and scope.

For example, the Court took the view that limiting the restriction to areas 'with which [she was] materially concerned during such period' was helpful in limiting the scope from a potential global restriction (which would have been unreasonable) to a more localised restriction. That allowed the Court to conclude the scope was reasonable. The Court emphasised that the question of reasonableness had to be judged as at the time the contract had been agreed and not some later point of time but that was not to say that only the actual position as at the date the employment started was considered. What had been in the parties contemplation had to be considered.

In Scotland it is possible to seek an interim order (an interim interdict) whereby the Court would restrict the individual from breaching the relevant restriction. The issuing of such an order is a powerful way to protect the business. It will only be issued in certain circumstances which underlines the need for legal advice and careful advanced planning.

This judgment is a reminder that employers should ensure that appropriate steps are taken to ensure that the business is adequately protected in the event senior staff leave. Ensuring proper contractual provisions are in place is a good start. The case is also a reminder that appropriately worded restrictions can on occasion be enforced by the Courts.

The judgment is available at: http://www.bailii.org/ew/cases/EWHC/Ch/2017/1278.html

To discuss further please contact one of our BTO employment lawyers on 0141 221 8012.