non compete

Non-compete clauses: Ruling boost

A UK Supreme Court decision will give comfort to employers looking to enforce contractual clauses that restrict employees from leaving to work for their competitors, says our dispute resolution specialist John Lennon.

So-called ‘non-compete clauses’ can be vital in preventing key staff from damaging a business immediately after they leave, for example by bringing a company’s key clients over to a competitor. 

Employers have come to regard non-compete clauses as a waste of time. However, the Supreme Court’s ruling Tillman v Egon Zehnder Limited [2019] UKSC 32, confirms that where there is genuine business interest to protect, and the clauses are drafted reasonably, non-compete restrictions can be upheld. 

In the Tillman case, the employee’s contract stated that for 12 months after leaving she must not “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company”.

The Supreme Court found the words “interested in” rendered the clause too broad. But instead of striking down the entire clause, the court held that the words “interested in” could be omitted and the remainder of the clause would stand.

It would appear employers can now be more confident about the robustness of non-compete clauses so long as they are well drafted and signed by the employee.

Non-compete clauses should also be regularly reviewed and updated to reflect particular risks posed by the departure of that employee as the business develops and their role in it changes.

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