Any employment lawyer will tell you that you that it may be difficult to stop ex employees joining a competitor. Whilst such "non compete" clauses are often found lurking in employment contracts (usually towards the end of the document) they are not automatically enforced by the Courts. The employer must demonstrate a legitimate interest and, crucially, the effect of the restraint must go no further than is reasonably necessary to protect that interest. The wording of the clause and its effect is therefore critical to enforceability.

However, where the wording goes too far, there has always been a "get out of jail" card for the employer to play - the so called "blue pencil test". If the offending wording could be deleted (by the blue pencil!) such that it made the overall effect of the clause reasonable then the Courts could potentially do this. However the this power was limited to situations where the surgery was to be carried out to only one of several distinct restrictions and the deletion did not fundamentally alter the meaning of the clause. This principle generally reflects the view that Courts should not "re-write" the contract that parties entered into to change it into something more palatable and therefore enforceable.

The recent case of Tillman v Egon Zehnder Limited caused much excitement in the employment law world. Not only was it the first employment restrictive covenant case to get to the lofty heights of the Supreme Court in 100 years, but the Court was set to re-examine the blue pencil test - should it really be so restrictive?

Tillman was bound by a clause which said the she should not be directly or indirectly engaged, concerned or interested in a competing business for 6 months post exit. The Court of Appeal found that "or interested in" had the usual meaning that it prevented even a small shareholding in a competitor business and this meant that it was unreasonably wide and there was not the usual saving provision in the drafting that permitted a minority holding. The Court declined to sever the words "or interested in" on the basis of the restricted approach of blue pencil ie that it would be interfering with a single covenant and the Court felt it would be going too far. The Supreme Court overruled this approach and found that the offending words could be severed.


A sensible result. The idea that the clause should be unenforceable because it prevented even a minority holding was entirely theoretical. The real issue here was employment. Severing wording that in effect was entirely theoretical led to the right result.  The Supreme Court has loosened the shackles of the blue pencil test.

What now?

The result of this case is that Courts should be more prepared to come to the rescue of clauses that for some reason (poor drafting or otherwise) go too far. However, that is not to be taken as encouragement to take liberties with drafting. There will still be limits to what may be blue pencilled. And certainly wording cannot be added by the Courts (in this case the usual saving provision permitting a minority holding was noticeable by its absence and of course could not be added).

A final sting in the tail was a note on costs. A party seeking to absolve itself during the course of litigation from poorly drafted wording (so called "legal litter") even if successful by a squeak, should not always expect to recover its costs against the unsuccessful party.

As ever, ensure your contracts are well drafted and properly up to date. You never know when you may need to rely on them and no-one likes to be trawling through "legal litter".