Examining the Validity and Reasonableness of Non-compete Clauses in Recent UK Supreme Court Cases

Recently, the Supreme Court in Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32, held that consumer action law firm Your Lawyers could enforce a non-compete clause against rival firm Harcus Sinclair relating to the latter’s potential collaboration in a group emissions claim against Volkswagen (Anderson 2021 ). There was a clause in the non-disclosure agreement (NDA) between the firms which specified that they could discuss working together on a claim in collective action. The Supreme Court held that Harcus Sinclair LLP should have sought Your Lawyers Ltd’s permission before ‘retaining clients’ and signing on another City firm to launch its own group collective action. Prior to the case coming to the Supreme Court, the High Court decided that Harcus Sinclair should stop representing claimants in the Volkswagen due to the non-compete clause (Anderson 2021 ). The Court of Appeal had reversed this decision on the ground that it was unenforceable due to being unreasonable restraint of trade (Anderson 2021 ). It is worthwhile to also consider the prior judgments on both non-compete clauses and restraint of trade. Also, seeking expert advice from UK dissertation help services can provide the most valuable insights into the legal complexities involved in such cases.

In another recent case by the Supreme Court, the court considered the validity of a non-compete clause in the context of the period of time that the clause restrains trade for (Tillman v Egon Zehnder Ltd [2019] UKSC 32). The Supreme Court held that a non-compete clause for more than 12 months effectiveness is generally unreasonable except under some circumstances (Tillman v Egon Zehnder Ltd [2019] UKSC 32). In this case, the Supreme Court clarified the test for considering the validity of the non-compete clause. The clause should not be unreasonably long in terms of its enforceability because that would be an unreasonable of trade. This is aligned with the general rule that restrictive covenants are an unreasonable restraint of trade unless they are made only for the protection of employers’ legitimate proprietary interests and are reasonably necessary to do so (Tillman v Egon Zehnder Ltd [2019] UKSC 32).

The judgment of Harcus Sinclair LLP v Your Lawyers Ltd can be seen in this context. In this case, there was a non-compete clause in which both law firms agreed that that one of them will not take part in the emissions litigation without the other’s permission. In line with the prior case law the court considered whether the non-compete clause could be said to be reasonable, for which the court was required to consider whether the non-compete clause was reasonable between the parties and not contrary to the public interest (Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32). The court allowed the clause even though it was effective for 6 years because in the opinion of the court the period was reasonable considering that the period equates to the limitation period for claims in the emissions litigation. Therefore, the legitimate interests of Your Lawyers Ltd could only be protected if the clause was for a period of 6 years. The principle that can be gleaned is that the non-compete clause’s validity is to be considered on the basis of its reasonableness.

Continue your journey with our comprehensive guide to Examining the Legality of Prenuptial Agreements.

References:

Anderson, Madeline. 2021 . "UK Supreme Court upholds law firm's non-compete clause with rival after four-year legal battle." www.globallegalpost.com. Jul 23. Accessed August 6, 2021. https://www.globallegalpost.com/news/uk-supreme-court-upholds-law-firms-non-compete-clause-with-rival-after-four-year-legal-battle-1931302983.

Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32

Tillman v Egon Zehnder Ltd [2019] UKSC 32