Restrictive covenants under spotlight at Supreme Court

The Supreme Court will today hear a dispute surrounding restrictive covenants in employment contracts, a case that could have huge implications.

The court will consider whether a former employer unreasonably restrained trade through a covenant that prevented former employee Mary Tillman from taking a job with a competitor for six months. The Claimant’s contract contained a non-competition clause preventing her from engaging or being 'concerned or interested in’ any business carried on in competition with her former employer for six months. The question to be determined was whether to covenant was unreasonable since it prevented her from becoming a shareholder in a competitor.

The High Court held that it did not prevent her from becoming a shareholder but the Court of Appeal held that it did, because being a shareholder was being concerned in that business, at least indirectly.

As such a clause is commonly used in professional and partnership agreements, the awaited decision may mean that such agreements need to be rewritten.

Tillman v Egon Zehnder Ltd