Tillman v Egon Zehnder Ltd is the first employee competition case to be heard by the Supreme Court in over 100 years, establishing clear guidelines for the application of the severance principle in employment contracts and bringing the issue of restrictive covenants in modern business to the forefront.

The case’s background

Ms Tillman’s contract of employment with executive recruitment firm Egon Zehnder (EZ UK) included a non-compete clause which stipulated that she would not “engage or be concerned or interested in” any business competing with EZ UK.

EZ UK was granted an injunction to enforce the non-compete clause after Ms Tillman made clear her intentions to start working for a competitor.  However, the Court of Appeal later considered that the words “interested in” would prohibit a minor shareholding, which they found unreasonable, so held the covenant to be void. 

The Supreme Court’s Involvement

EZ UK appealed to the Supreme Court raising three issues, namely:

1. whether a prohibition on holding shares falls outside of the restraint of trade doctrine;
2. whether the words ‘interested in’ prohibited minority shareholding if properly construed; and
3. whether the doctrine of severance was applied correctly.

The court concluded that:

1. falls within the doctrine (but only on the facts of this case due to Ms Tillman’s employment as a top executive);
2. Upon the application of the validity principle, the court determined that the Appellant was unable to provide a realistic alternative construction and on that basis considered the word “interested” to be an unreasonable restraint of trade; and
3. Despite agreeing with the Court of Appeal’s decision to set aside the injunction, the Supreme Court considered the principle of severance in relation to the words “interested in” and held it would be possible to apply it appropriately in this situation. 

Judgment

The case generated a review of what is known as the ‘Blue Pencil Rule’.  The Court clarified that the removal of wording or a provision within a clause must not generate any major change in the overall impact.  It further ruled that it was the employer’s responsibility to establish this. The Court subsequently determined that the words “or interested in” could be removed from the clause without disrupting its general restraints.

Impact

The case is significant in revising the severance principle and establishing the criteria for its future application. This will likely prove valuable in enforcing future post-termination restrictions.  It also gives clear guidance to employers as to how they should draft non-compete clauses in contracts. The Court further considered the historical significance of the restraint of trade doctrine as one of the earliest products of common law, but it also affirmed the wider principle of allowing severance when it does not generate major change in the overall effect of the restraints.  However, the Supreme Court declined to decide on “the outer boundaries of the doctrine” suggesting this may be an area for further development in future cases.

For now, employers are likely to feel reassured by the principles set out in Tillman v Egon Zehnder – although as always, great care should be taken when drafting such clauses.

For advice on how best to protect your business interests, please contact our Head of Employment, Ilinca Mardarescu on 01753 486 777.

In July 2017, the Supreme Court ruled to abolish Employment Tribunal fees on the basis of them being unlawful and unconstitutional. Since then, there has been a significant increase in the volume of Employment Tribunal claims being made.

Whilst Tribunal fees were still a requirement, the number of cases between April 2016 to March 2017 were as low as 88,461. However, in the following twelve month period in which tribunal fees were abolished (being the period of 1st April 2017 – 31st March 2018) the number of applications rocketed up to 109,685.  This means that the removal of tribunal fees meant that there was around a 130% increase on outstanding Tribunal claims. This is the highest they have been since 2012, a year where there were no Tribunal fees, and the number of claims reached 191,541.

In the few months between April and June, claims went up by 165% compared to the same time frame the previous year. 

Here at Aston Bond, we are experiencing the repercussions of these increases.  Claims that are issued now can often experience a wait of over 6 months simply to get to the preliminary hearing stage (where directions are given for the next steps to be taken). A full hearing of just one day can often be listed more than a year after that – with longer hearings taking even longer.  These substantial delays affect both claimants and respondents negatively. Claimants find it difficult to move one and find the experience extremely stressful. Respondents face uncertainty and on-going legal fees to deal with these matters.

New Employment Tribunal judges are being recruited but that takes time.  Meanwhile, Employment Tribunals are struggling with demand.

Businesses need to ensure that disciplinary and grievance procedures are not only in place but are followed properly, thoughtfully and carefully.  We would urge all employers to take advice at an early to stage to ensure formal litigation is avoided later on down the line.   

If you would like any more advice on this or to discuss generally, please contact our Head of Employment, ilinca Mardarescu on 01753 486 777

April traditionally sees the increase of various employment-related pay rates. This year is no different.  Here’s what you need to know; whether you are an employer or employee.

National Minimum Wage

As from 1 April 2019, the following minimum rates of pay will apply:

• National Living Wage (per hour) Age 25+: £8.21
• Standard adult rate (per hour) Age 21-24: £7.70
• Development rate (per hour) Age 18-20: £6.15
• Young workers rate (per hour) Age 16-17: £4.35
• Apprentice rate (per hour): £3.90

Weekly pay – and unfair dismissal and redundancy calculations

In a number of employment claims, the value of any award or how much employees are entitled to is calculated by reference to a prescribed “weekly pay”.  This weekly pay is capped at a set amount which as of 6 April 2019, has increased to £525.

Consequently, statutory redundancy pay will increase, with the maximum payment increasing to £15,750.

Similarly, the maximum compensatory award for unfair dismissal increases to £86,444 (this only applies to dismissals which take place on or after 6^th April 2019) or 52 weeks’ gross actual pay, if that is lower.

Sick Pay

From 6 April 2019, the rate at which statutory sick pay is paid will increase to £94.25 per week.

Family friendly rates

The prescribed rate for statutory maternity pay, adoption pay, paternity pay and shared parental pay will increase as of 7 April 2019 to £148.68 per week.

Pensions

From 6^th April 2019, the minimum level of employer contributions into the auto-enrolment pension scheme increases to 3% with the employee required to contribute 5%.  This means that the total contribution into the pension scheme will now be total 8%.

For any further information on this or any other employment matter, please contact Ilinca Mardarescu

A global software company salesman lost his final appeal for discrimination in November 2018 after complaining about being called various names, including “fat ginger pikey”, “wonky eye” and “salad dodger” in the workplace.

The salesman, David Evans, had been dismissed in December 2016 due to poor sales performance.  However, his dismissal took place after only 11 months employment – falling below the qualifying period in which employees can claim for unfair dismissal.  Mr Evans however made a claim for race and disability discrimination instead. The case reached the Employment Appeal Tribunal who considered whether such comments could be considered discrimination, and, while they usually could be, when taking into account the facts of this case, it was established that they were not.

Mr Evans claimed that he was victimised by his former bosses and colleagues due to his race (as he had strong links to the traveller community) as well as his disability (as he was a diabetic and had an underactive thyroid gland, which he said caused him to gain weight).   Therefore, he felt that some comments, such as “fat ginger pikey” addressed his race, while others, such as “salad dodger” were in reference to his weight, and thus, he felt that these constituted harassment, as well as discrimination due to his disability.

However, during the case it was established that the office culture at Xactly was one of ‘banter’ where good-humoured teasing and joking was participated in by all; indeed MR Evans himself had previously joined in and was further said to have used the ‘c word’ around the office.  It was established that the intention between colleagues was not for offence to be taken. Furthermore, many of those who made the comments towards him either were not aware of his links to the traveller community or his illnesses, they did not think he was fat, or both. Mr Evans had also failed to prove that his weight gain was linked to his disability. Lastly, Mr Evans also waited months to complain about the insults, leading the Employment Tribunal to believe that he potentially only made the discrimination claims to help him negotiate an exit package or avoid any disciplinary action.

The Employment Appeal Tribunal concluded that Mr Evans had not been subjected to discrimination based on his race and/or disability at his former workplace. The case of Evans v. Xactly Corporation Ltd therefore brings to our attention the importance of the factual background of harassment claims.  In order to avoid such claims however, employers should always have clear policies in place and regular training on such issues. And crucially, any complaint that is made should be dealt with quickly to avoid matters escalating.

European parcel delivery giant Hermes has introduced a new label for the nature of their workers’ contracts, namely “self-employed-plus” in a bid to reach a compromise with the courier’s union workers. An Employment Tribunal based in Leeds in June of last year held that Hermes couriers are ‘workers’ rather than being ‘self-employed’ as suggested by their job description.  

This optional middle-ground which lies between being a ‘worker’ or an ‘employee’ allows Hermes drivers an entitlement to basic workers’ rights which include earning nine per cent above the national minimum wage and the ability to take annual leave on a pro-rata basis, both of which had previously not been automatic entitlements.  Choosing a self-employed-plus contract also allows Hermes’ employees to join the GMB and benefit from union representation.

This development has come in the wake of many similar organisations, including Uber, Deliveroo and Pimlico Plumbers, whose ‘self-employed’ workers’ contract terms have been subject to scrutiny in the courts with regards to the distinction between workers and employees. This seems to conform to the recent tendency of employment tribunals to find some sort of employment status where there is any uncertainty.

A new issue arises from this third category with regards to taxation. Some commentators argue that since those on self-employed-plus contracts are still paying tax as if they were self-employed, and Hermes is therefore making no national insurance contributions on their behalf, there may be complications with how HMRC will view this sort of arrangement.

The majority, however, view this development with optimism and excitement at the possibilities of finding new modes of working within the gig economy. The general consensus among employment lawyers is that the boundaries between employed and self-employed status have become increasingly blurred in recent years, and this new ‘self-employed-plus’ contract provided by Hermes is a direct manifestation of the desire for clarity.