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Uk Law Non Compete Agreements

Ft said the Ministry of Business Strategy, Energy and Industry (BEIS) would launch a consultation on the application of non-compete clauses in the coming days. According to the FT source, an absolute ban should not be expected, but ministers want to check whether non-competition bans are appropriate in light of UK privacy and intellectual property legislation. In its recent decision in Tillman/Egon Zehnder Ltd [2019] UKSC 32, the UK Supreme Court gave a favourable response to a long-standing question for employers about when courts should save non-competition clauses by removing unenforceable clauses known as the „blue pencil“ in the United Kingdom. By refusing a tight secular test of severance pay and specifying the modern approach, Tillman increases the likelihood that THE UK courts will apply invalid conditions to end otherwise valid non-competition bans. However, as explained below, Tillman does not give employers the freedom to develop excessively restrictive non-competition agreements. Non-compete prohibitions often involve leaving employees who work for competitors, create a competing business or work with former customers, often for many months after leaving an employer. Competition bans and restrictive agreements are very applicable in the Uk to protect the company leaving the employee. They must be defined strictly and should only be applied for the time it takes to protect the company. The court then assessed the three criteria that have been confirmed in recent cases.

With respect to the first – the blue pencil test – the court found that, although the application of the test may be caprio, „this is an appropriate brake on the ability of employers to be free of… inappropriate reluctance that employers usually write themselves. Id. to [85]. In other words, the test discourages employers who would look to court to save them if a large or poorly drafted contract is called into question. The court justified this decision by the fact that the courts „are never deemed appropriate“ to rewrite the restrictions in order to make them legal, „it should certainly be achieved by legislation,“ as it was adopted in New Zealand. Id. With respect to the second criterion – if proper consideration is favourable to the other conditions – the court found that unusual circumstances required the requirement and that „in the usual situation, the second requirement can be ignored.“ Id. to [86]. Finally, the third requirement – the effect of severance pay on the character of the contract – is the „decisive criterion“. Id.

to [87]. However, the Tribunal considers that this test would be better expressed if the repeal of the provision would not result in a substantial change in the overall effect of all post-employment restrictions in the treaty. Id. Applying the first and third criteria to the facts before it, the Tribunal decided that the terms „or interested“ should be separated, as this would not require completing or amending the remaining text or making a substantial change to the overall effect of the non-competition obligation.

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