The Supreme Court has held in Tillman v Egon Zehnder Ltd that if a restraint of trade clause in an employment contract is too broad, the offending words can be severed from the clause with the result that the rest of it can still be enforced. However, courts need to ensure that, by virtue of severing the words, the overall effect of the clause does not change.

Basic facts

Clause 13.2.3 of Ms Tillman’s contract stated that she could not 'directly or indirectly engage or be concerned or interested in any business' which competed with any of the businesses of Egon Zehnder for six months after leaving her job with them.

When she left to work for a competitor she refused to comply with the clause on the basis that it was in 'unreasonable restraint of trade' and therefore void as it would prevent her from even taking up a minor shareholding in a competing business.

The company applied for an interim injunction to stop her from taking up the new job.

Decision of lower courts

The High Court granted the injunction on the basis that the words “interested in” did not preclude her from taking a minor shareholding in a competitor. The Court of Appeal, however, disagreed holding that they did prohibit even a minor shareholding. In addition, it said that the words could not be severed and removed from the rest of the clause with the result that Clause 13.2.3 was void as an unreasonable restraint of trade.

Decision of the Supreme Court

The Supreme Court explained that although restraints of trade are generally void, as a doctrine, there is an exception to the rule where the restriction is reasonable. For instance, in order to protect against dissemination of trade secrets or solicitation of an employer’s customers.

In this case, clause 13.2.3 related to an employment contract and clearly provided for a restraint of trade, including a restraint on shareholding, with the result that the doctrine clearly applied on the facts. 

It then turned to consider the meaning of the words “interested in any business” which, it pointed out, have long been included in standard precedents for drafting non-competition clauses throughout the last century. It had therefore been considered frequently in case law and held to mean that employees are prevented from having any interest in a competing company, which includes owning even one share.

This left one last question to consider which was whether the words could be severed from the rest of the clause without changing the overall effect of the clause. Holding that the words could be removed, the Court applied three criteria:

  1. Whether the unenforceable provision could be removed without needing to add to or modify the wording of what remains – the so-called “blue pencil” test
  2. Whether the remaining terms could still be supported by “adequate consideration” such as goods, money, services or promises
  3. Whether removing the unenforceable provision would change the overall character of the contract so that it was no longer recognisable as the sort of contract that the parties entered into at all.

With these three criteria in mind, the Supreme Court held that the words “or interested” could be removed from clause 13.2.3 without needing to add to or modify the wording of the rest of the clause. In addition, removing the prohibition against being “interested” would not generate any major change in the overall effect of the restraints.


This decision is not as esoteric as it might seem; senior jobs often come with a requirement to hold shares in the company and so this restriction was a real problem. We have gone from position of this being a zero-sum game (i.e. the whole clause would be struck out if it was unreasonable) to it being far more fact-specific with a likelihood that much of the clause would survive a bit of editing. This decision means that (even more than before) this is a fight only for those with deep pockets.

Employers used to draft these clauses with restraint in order to keep them reasonable and so enforceable, but now might they be encouraged to throw the kitchen sink at them and see how much the courts retain? Economic reality still has a part to play: in this case the six months expired two days after the Court of Appeal decision, and this Supreme Court decision comes nearly two years after that, and the cost of going to the Supreme Court must surely have outweighed the financial benefit which the clause ever had for Egon Zehnder Ltd, which makes one curious about the rationale for going to the Supreme Court.