When an employer is trying to rely on the terms of a restrictive covenant (usually for the purposes of obtaining an interdict or injunction against the employee) one of the grounds upon which an employee can challenge its validity is that it is too broadly drafted and, as such, is a restraint of trade. Non compete clauses are often drafted to include, amongst other things, geographical limitations and an exclusion allowing an employee to hold a minor shareholding in another company for investment purposes.
In the case of Tillman v Egon Zehnder Ltd, Ms Tillman was subject to non compete, non solicitation, non dealing and confidentiality clauses for a 6 month period following termination of her employment. The non compete clause stated that Ms Tillman could not "directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company…….".
During her employment she had been promoted quickly and by the time of her resignation she was co-Global Head of the Financial Services Practice Group which generated 22.5% of Egon Zehnder's global billings. Her post termination restrictions had not been altered on any of the occasions she had been promoted. Within a week of her employment terminating Ms Tillman indicated she intended to start work for a competitor, Russell Reynolds Associates. Egon Zehnder raised proceedings on the basis that this would breach the non compete clause.
Ms Tillman argued that the non compete covenant was void because it lacked any territorial limitation and that the restriction on being "interested in any business" prevented her from holding a minor shareholding in a competitive business. The High Court did not accept Ms Tillman's arguments, and granted an injunction. However, on appeal, the Court of Appeal found it impossible to say that a shareholder in a company was not "interested in" that company. They upheld Ms Tillman's appeal, finding the clause too wide and therefore void. This was despite the fact that Ms Tillman's arguments were theoretical only - she had no intention of taking a minor shareholding in a competitor - her intention was to go and work for a competitor and she simply used this argument as a means to an end.