International Labor and Employment Law

Further Guidance Published on UK’s Coronavirus Job Retention Scheme

Further to our prior blog post available here, the UK Government has published more detailed guidance on the Coronavirus Job Retention Scheme (“CJRS”). That guidance is available here and here. Here are some of the key questions the updated guidance now answers.

What is the CJRS?

The CJRS is a government scheme set up to support UK employers who have been affected by the coronavirus. Under the CJRS, UK employers are able to obtain a grant equal to the lower of 80% of the wages or £2,500 per month per furloughed employee plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions (if payable) on the subsidised wage.

The CJRS will last for at least a three month period commencing on 1 March 2020 and is expected to be up and running by the end of April. Claims can be backdated to 1 March if applicable.

Which employers are covered?

The CJRS is open to all UK employers who have a PAYE payroll scheme (provided it was created before 28 February 2020) and have a UK bank account.

Which employees are covered?

Eligible employees can be employed on any type of contract, including full time and part time contracts, agency worker contracts and flexible or zero-hour contracts. Affected employees must have been on the payroll on 28 February 2020 so any employees hired after this date will not be covered. Employees that were made redundant after 28 February 2020 and have since been rehired by their employer.

To be eligible, when on furlough, an employee can not undertake any work for their employer, so employees who simply reduce their hours will not be covered.

What happens to employees on sick leave, who are self-isolating for other reasons or are shielding in line with public health guidance?

If an employee is:

  • on sick leave or self-isolating: the employee should get statutory sick pay whilst on sick leave or is self-isolating and can be furloughed after this;
  • shielding in line with public health guidance: the employee can be placed on furlough but they should speak to their employer about this.

What happens to employees who have already been made redundant?

If an employee was made redundant after 28 February 2020, then an employer can rehire them and then designate them as a “furlough worker” instead.

How is an employee’s salary calculated?

For employees whose pay does not vary, the employee’s actual gross salary as of 28 February should be used to calculate 80%.

For employees employed for a full year but whose pay varies, then the amount will be the higher of: (i) the salary the employee earned in the equivalent month last year; or (ii) an average of the employee’s monthly earnings from the last year.

If employed for less than a year, employees will be entitled to an average of their monthly earnings since they started work.

Bonuses, commissions and fees are not included as part of an employee’s monthly earnings.

Employers can top up salaries if they wish.

Does being placed on furlough, impact an employee’s right?

Employers can still make employees redundant while on furlough or afterwards but an employee’s rights, including their right not to be unfairly dismissed (if applicable) and their redundancy rights (including to redundancy pay), are unaffected.

It also means that the normal rules on statutory maternity pay, paternity pay and shared parental pay apply. This does mean though that if an employee is due to start maternity leave (or another similar leave) and are placed on furlough, it could have an impact on the statutory pay they are entitled to.

How should I place an employee on furlough?

Normal employment rules and protections apply in terms of placing an employee on furlough. For instance, employers will need to discuss the changes with employees and seek their agreement to change the employment contract. In addition, if the employer is selecting employees to be furloughed, then normal rules in relation to equality and discrimination apply and employers will need to consider any selection criteria accordingly. Employers should also consider if collective consultation obligations are triggered.

Employers should ensure that they have a confirmation in writing that the employee is furloughed.

Note that, employees must be placed on furlough for a minimum of 3 weeks, but need not be furloughed for the entire period.

How does the employer access the money for furloughed employees?

Employers calculate their claim and should submit it through an online portal that will be established by the UK’s HM Revenue and Customs (“HMRC”). HMRC expects that it will be available by the end of April 2020.

If the employer is eligible for a grant, the grant will be paid to the employer’s UK bank account.

What happens when the CJRS ends?

CJRS is currently open for at least 3 months through to at least 31 May 2020. The Government will keep the scheme under review and may extend it.

At the end of CJRS, the employer will need to make a decision on whether the employee returns to work or is dismissed/made redundant.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

UK Government announce Coronavirus Job Retention Scheme

Over the past few days, the UK Government has announced various measures to assist employers/businesses protect jobs in these exceptional times.

We have received a number of queries about the Coronavirus Job Retention Scheme in particular. The Government has currently provided the following information about the scheme:

  • Any UK employer can take part in the scheme, no matter their size or sector.
  • Employers would designate employees as “furloughed workers” instead of laying them off or making them redundant.
  • Employees must not undertake any work for the employer whilst a “furloughed worker”.
  • Employers have to notify employees of this change, though the Government notes “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation”.
  • HMRC will reimburse the lower of: 80% of salary costs or £2,500 per month for each employee.
  • Employers can top up salaries if they wish.
  • Wages will be backdated to 1 March 2020. The scheme will initially be open through to 31 May 2020, but it may extended if necessary.
  • HMRC will set up an online portal through which such payments will be reimbursed.
  • Employers will need to submit certain information to that online portal about the employees who are furloughed, including details as to their earnings.

Unfortunately, there are many open questions with regards to the Coronavirus Job Retention Scheme, including:

  • Are the amounts stated gross or net?
  • What is the impact on NICs and pension payments?
  • How would this interact with company sick pay or statutory sick pay?
  • How would this impact businesses who have already made employees redundant? Can they turn back the clock?
  • Does the employer need to have commenced negotiations to lay employees off or commenced redundancy consultation procedures?

For employers and employees alike the Coronavirus Job Retention Scheme will provide some relief in these uncertain times. However, there is much still to be understood about how this scheme will work. We will be monitoring government guidance over the coming days and provide any updates on the scheme in due course.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

REAL ID and Enhanced Driver Licenses: Are TSA Agents As Confused As We Are?

I proudly presented my new ENHANCED driver’s license to the TSA agent at Newark International Airport with the comment that I am now ready for October 2020 when the new rules go into effect requiring the presentation of a REAL ID license to board an airplane for domestic flight.  A regular license would no longer be acceptable, and without the REAL ID license, you would have to present a passport.

Imagine my surprise when the agent looked carefully at my license and advised “this is no good, you will have to get it changed, because it does not have the star in the upper right hand corner.”  [It had a flag in the lower right hand corner].

I responded very respectfully that “I think you are wrong”, they probably just have not instituted the necessary training yet to confirm that “Enhanced Driver licenses” are in fact better than REAL ID licenses, as they are also acceptable identification and documentation for land and sea travel between the United States, Canada and Mexico.  The agent grinned and shrugged his head.

The almost identical exchange took place when I was returning from Florida to the New Jersey area with a TSA agent at Fort Lauderdale International Airport.

Getting my Enhanced Driver License (EDL)

My odyssey began after being alerted through public announcements as to the need for REAL ID, prompting me to go to the website of the Department of Motor Vehicles for New York, where very clear instructions provided me with the option of “Get an Enhanced Driver License (EDL) or REAL ID”.  The FAQ on the website read as follows:

What is an Enhanced Driver License (EDL)?

An Enhanced license (permit, or non-driver ID) is a New York State DMV issued document that you can use instead of a passport to return to the US by land or sea from Canada, Mexico and some countries in the Caribbean. New York’s EDL is compliant with the Western Hemisphere Travel Initiative (WHTI). 1 It is not acceptable for air travel between these countries.  We recommend you contact your travel agent, your cruise line or the specific countries of destination to verify your travel document requirements.

An Enhanced license, permit or non-driver ID is Federal REAL ID compliant and is accepted to board a domestic flight (within the US), enter military bases, and certain federal facilities.

Only US citizens who are residents of New York can apply for a New York State EDL.


The additional fee for an enhanced driver licensed (EDL) or enhanced non-driver ID card (ENDID) is $30.00.  The fee is added to the other fees for the driver license or non-driver ID transaction.

I thought this would certainly be a good deal for an additional $30.00.

I made an appointment, as instructed, ready with my U.S. passport; current driver’s license, birth certificate, recent bank statements and utility bills confirming my local address and, what I thought was my original Social Security card.

I was initially rejected, because the document that I though was a social security card, which did have my name and social security number on it was actually the stub attached to the original Social Security card.

I made an appointment with the Social Security Administration office to request a new card, providing the same documents that I presented for my enhanced driver’s license!

Two weeks later, I had my social security card, made my appointment at the DMV, successfully completed the application process, and my enhanced driver’s license was issued.

TSA Website

After my exchanges at the airports in Newark and Fort Lauderdale, I went back to the TSA website under the heading REAL ID and discovered that, no surprise, my understanding of the requirements and that of the New York DMV was correct, as under the heading of “About Enhanced Driver’s Licenses”, the TSA site indicated as follows:

“Michigan, Vermont, Minnesota, and New York State issue REAL ID and state-issued enhanced driver’s licenses, both of which are acceptable.  Washington State issues enhanced driver’s licenses only.

States that issued enhanced driver’s licenses are marked with a flag.  These documents will be accepted at the airport security checkpoint when REAL ID enforcement goes into effect.”

Reaching Out To TSA

I was not going to leave this alone, so I took advantage of the TSA’s CONTACT facility to send a message and request under the category of “Request for Information”.  This is the message I forwarded to them:

We have been doing some traveling, passing through TSA Security at Newark International Airport EWR and Fort Lauderdale, and none of the TSA agents seem to be aware that there is such a thing as an “Enhanced” driver license, which is just as good, if not better than a REAL ID license.

They seem to be of the opinion that only if the license is REAL ID and has a star in the upper right hand corner, does it fulfill the new requirement that goes into effect in October.

This is not my understanding and certainly it is clear under the DMV site for New York that the enhanced license is better, and I understand that the sign for it is the flag in the lower right hand corner.

Is this something that is going to be resolved by additional education as we get closer to October?

This could be a serious concern for those of us who have made an effort to obtain an “Enhanced” license.

I look forward to hearing from you.

Within days, I received a response, but it did not seem to address my concern and seemed to be a canned response.  This is what I received:

Thank you for contacting the Transportation Security Administration (TSA) Contact Center.

All States and U.S. territories are compliant or have an extension for REAL ID enforcement.  The extension dates vary by State.  Unexpired IDs (including those marked “Not for Federal Use”) from all States and U.S. territories that are compliant or have extensions are acceptable at TSA security checkpoints.  It is not necessary to renew these IDs early.  To learn more about enforcement dates and extensions, please visit

Beginning October 1, 2020, every passenger must present a REAL ID-compliant ID, or another acceptable form of ID, to fly within the United States.  REAL ID-compliant licenses are generally marked by a star on the top of the card.  If you are not sure if your ID is compliant, please check with your State driver’s license agency.

For more information and a list of frequently asked questions on REAL ID, please visit

TSA Contact Center

A friend of mine just asked me whether she should apply for a REAL ID license in New York or the Enhanced Driver License.  I did not know what to tell her.

Switzerland – New Gender Pay Gap Requirements

Switzerland has joined the growing list of jurisdictions to introduce legislation to address the gender pay gap.

Effective July 1, 2020, employers with 100 or more employees (including part-time and hourly employees) will be required to conduct an internal gender pay gap analysis every four years until June 30, 2032. Affected employers will be required to complete their first internal analysis by June 30, 2021.

If the requirement to carry out the analysis is the stick, the carrot is that where an employer’s analysis demonstrates that pay equity has been achieved, they are no longer required to conduct further analyses. The Swiss government provides employers with a free tool for conducting the analyses, which can be found here.

Employers will also be required to submit their analyses for independent verification by June 30, 2022. Independent verification may be conducted by: (i) a firm authorized under the Audit Supervision Act; (ii) an organization that meets the requirements of Article 7 of the Gender Equality Act; or (iii) employee representation pursuant to the Swiss Workers’ Participation Act.

Notably, the new legislation does not provide for sanctions or penalties in the event that an employer does not conduct an analysis or there or where pay equity is not achieved. However, it does require employers to provide employees with written notice regarding the results of each analysis within one year of their verification. Additionally, publicly listed companies in Switzerland must publish the results of their analyses in their annual financial reports. Importantly, employees who file suit against their employers alleging a breach of equal pay legislation will be permitted to use the results of their employer’s analysis as evidence to support their claim.

This legislation continues a global trend that has seen numerous countries introduce measures to address the gender pay gap.  Employers should closely review their policies to ensure compliance with these new requirements.

[Podcast]: U.K. Law for U.S. Employers

New York partner Howard Robbins and London partner Dan Ornstein discuss how U.K. laws affect U.S. employers in the latest episode of The Proskauer Brief podcast. International businesses face several challenges of local requirements as well as dealing with U.S. employment law.  Tune in as we discuss many U.K. laws on discrimination, harassment, and retaliation, and their similarities to U.S. counterparts. Additionally, we will highlight what impact Brexit may have on U.K. employment law, including changes in relation to the protections of part-time or agency workers, and workers in the gig economy.

View the original post on Proskauer’s Law and the Workplace blog.

The Surprisingly Broad Scope Definition of Workplace Accidents in France

The legal definition of “workplace accidents” under French law does not normally make global headlines.  However, as many of you will have read, a recent decision of the Paris Court of Appeal (CA Paris, May 27, 2019, n°16/08787) did just that.

The facts in this case were more salacious than most.  The employee died of a heart attack after having sex with a woman during a business trip.  The headlines were caused by incredulity that the Court determined that the death was an “accident du travail” – a workplace accident.

In this blog, we seek to separate the sensational from the legal principles.  The real lesson from this case is a reminder of the extent to which an employer is liable for what happens to its employees under French law when an employee is on a business trip.

As to legal background, the starting point is the broad legal definition of an accident du travail as “any physical injury or psychological damage resulting from an event occurring on a certain date and by or in connection with work” (C. Sec. Soc. Art. L. 411-1).  Moreover, there is a legal presumption that any accident during working time and at the workplace is an accident du travail.  Applying this to a business trip, the caselaw has held that an accident occurring during a trip, whether in connection with “professional acts” (e.g. at a client meeting) and “everyday acts” (e.g. having a meal during a trip even if alone), is presumed to be an accident du travail. This presumption is only rebuttable if an employer can prove that in the course of the business trip, the employee had interrupted that trip for a personal reason (Cass. Civ. October 12, 2017 n° 16-22.481). In the absence of such proof, the employee is considered to be under the employer’s authority and any accident is deemed to be an accident de travail.

In this case, notwithstanding the sensational facts, the key issue was whether the employer could prove that the employee’s activities constituted an interruption of the trip for personal reasons.

In this regard, the Courts have adopted an extremely broad definition “everyday acts”, limiting the scope for an employer to show acts that take place during a business trip are for personal reasons. This is illustrated by a 2017 decision, holding that an employee injured at 3am, while dancing in a nightclub, during a business trip in China, was the victim of an accident du travail: the dancing was part of an “everyday act” and therefore not an interruption  of the trip for personal reasons (Cass. Civ. 2, October 12, 2017, n°16-22.481).

As such, although somewhat counter-intuitive, the decision in this case is not out of keeping with existing decisions that adopt a very broad definition of “everyday acts”. In large part, this may be due to an overriding policy for give employees as much protection as possible while they are on business trips motivated by the fact that where death is an accident du travail, a victim’s dependents are entitled to benefits, often paid for by the employer, of up to 80 per cent of salary until normal retirement age as well as a share of pension. The adverse consequences to an employee’s family caused by a finding that there has not be an accident du travail could well be extremely severe.

Nonetheless, this is a case that stretches the definition of “everyday act” and there are indications that the case will be appealed.  We will keep you posted on any appeal.

As to practical steps to mitigate the risks caused by the broad definition of an accident de travail, we would recommend that when an employee goes on business trips, the time they required to work and the time they have to engage in personal activities are clearly defined.  While such a definition will not be determinative, where an accident take place at a time where the employee is defined as being engaged in personal activities, it may be a factor in favour of a finding that the accident was not an accident de travail.

Ireland Supreme Court Analyzes Disability Accommodation Requirements

On July 31, 2019, in the case of Nano Nagle School v Daly, the Supreme Court of Ireland delivered its decision in a long-running disability discrimination lawsuit between a paraplegic special needs assistant (“SNA”) and the school that ended her employment based on her disability.  The Court’s decision provides a thoughtful analysis of an employer’s obligations to accommodate a disability and an interesting comparison to the approach under American law.


In 1998, Marie Daly began working as an SNA for the Nano Nagle School in Killarney, a school for children with special needs.  SNAs are tasked with assisting teachers with various non-teaching functions, such as tidying the classroom, supervising students, escorting students to and from the classroom, and assisting students with using the bathroom, eating, and undressing.

In 2010, a car accident left Ms. Daly paraplegic and confined to a wheelchair.  After the accident, she met with the school’s occupational therapist, who performed an assessment of the tasks that Ms. Daly could perform on the job.  The therapist determined that she would only be able to perform nine out of the sixteen duties identified for the SNA position, and noted her concern that Ms. Daly’s restriction to a wheelchair made her vulnerable when a student was “acting-out.”

After considering the report, but without consulting Ms. Daly, the school’s principal determined that Ms. Daly would be unable to return to her position.  Although the report noted that Ms. Daly could be suitable as a “floating SNA” (in which she would work in multiple classrooms and only on certain tasks), the principal found that no such position existed, and, based on a phone call to the school’s funding body, determined that such a position would not be funded.

Procedural History                              

In 2013, Ms. Daly’s claims were first heard by an Equality Officer, who determined that she would be unable to perform the duties of an SNA.  Ms. Daly appealed to the Labour Court, which held that the school had failed to accommodate her and awarded compensation.  The High Court affirmed this determination, but it was reversed by the Court of Appeal.  In 2018, Ms. Daly appealed to the Supreme Court.


Section 16 of the Employment Equality Act (the “Act”) states in relevant part that “a person who has a disability is fully competent to undertake . . . any duties, if the person would be so fully competent and capable on reasonable accommodation.”  Significantly, the Act does not require reasonable accommodations which “would impose a disproportionate burden on the employer.”  In determining what measures have a disproportionate burden, the court may consider factors such as the costs involved, the employer’s resources, and the availability of public funding.

The Supreme Court disagreed with the analysis of the courts below.  Specifically, the Court of Appeal had held that an employer was not required to consider the possibility of removing or redistributing an employee’s duties or essential functions connected with the employee’s role.  The Supreme Court disputed this threshold.  It held that in principle, employers were obliged to consider all appropriate measures which could be undertaken to provide reasonable accommodation, even where these included removing or redistributing employee’s duties or essential functions, and in cases where no such measure were taken, the employer had to demonstrate that this was only because those measures would be disproportionate or unduly burdensome.  In setting out this test, the Supreme Court further held that “the test is one of reasonableness and proportionality: an employer cannot be under a duty entirely to re-designate or create a different job to facilitate an employee” and that in most instances “removing all the duties which a disabled person is unable to perform” would inevitably become a disproportionate burden.

The Supreme Court also took issue with the school’s failure to consult with Ms. Daly about her situation.  While it did not hold that such consultation is mandatory, it did opine that “a wise employer will provide meaningful participation in vindication of his or her duty under the Act.”

Finally, the Supreme Court was uncertain whether the school fully considered whether a floating SNA would be funded.  It expressed concern that the school’s phone call “did not appear to have been preceded by, or followed up with, any letter making a formal case to retain [Ms. Daly] as a floating SNA,” meaning that the school may not have “taken real steps to identify ‘the financial and other costs’ entailed by taking the ‘measure’ of employing [Ms. Daly] as a floating SNA.

Based on this, the Supreme Court determined that the Labour Court had not adequately considered all of the evidence and had not properly explored whether the school fulfilled its obligations under the Act.  It determined the only appropriate step forward was to remand the case back to the Labour Court.

Comparison to American Law

The requirements detailed in the Daly case are similar to those under American law.  Under the Americans with Disabilities Act (“ADA”), an employer is to engage in an “interactive process” with an employee regarding his or her disability and possible accommodations. An accommodation that eliminates essential job functions would go above and beyond what is considered reasonable for an employer to make, and therefore not required.  Accordingly, the Irish legislation appears to be broader, as the Supreme Court seemed willing to consider the possibility that, at least in some circumstances, it is reasonable to make accommodations even if they were to remove essential functions.


The case will now return to the Labour Court for further analysis in line with the Supreme Court’s instructions.  The Supreme Court’s detailed analysis provides useful criteria for employers to consider when accommodating employees and provides an insight into the various approaches in different jurisdictions taken in relation to the fast-developing issue of accommodating disabilities in the workplace.

Romania Amends Labour Code to Provide In-Vitro Fertilization Leave

Romania’s fertility rate is statistically low, with only 1.54 children born per woman in 2018. The country’s birth rate has continued to decline since the early 90s, and more families are choosing to have one or no children. In-vitro fertilization, while increasingly common in the European Union, is rare in Romania. Approximately 5,000 Romanian couples undergo the procedure each year, in comparison with 40,000 couples in France.

Romania recently made changes to its Labour Code to promote in-vitro fertilization. As of April 23, 2019, female employees who decide to undergo the in-vitro procedure are now afforded three days of paid leave. This new leave law allows women to take one day of paid leave on the day of the ovarian puncture procedure, and the remaining two days may then be used in concurrence with the embryonic transfer procedure. Employees must file a formal request for this non-medical leave with an attached letter from their doctor confirming that they will undergo in-vitro fertilization.

While there are no sanctions outlined for employers who refuse to grant in-vitro leave, Romania has demonstrated its interest in supporting population growth and may strictly enforce this new leave law. Employers should consider how requests for in-vitro fertilization leave should be scheduled in conjunction with female employees’ annual leave, and they should update leave policy language to reflect these Labour Code changes.

Dubai International Financial Center Enacts Sweeping Changes to Employment Law


On June 12, 2019, the Dubai International Financial Center (“DIFC”) in Dubai, UAE announced its new employment law regime, which will come into force on August 28, 2019.  This new employment code replaces the DIFC’s previous employment code from 2005 and aims to rectify various issues that arose under the old system.  While many changes to the law can be viewed as employee-friendly, others push back on employee rights.  As Dubai is increasingly becoming the financial hub for the Middle East, Africa, and South Asia, these changes will affect many workers.  The major changes are summarized below.


Under the new law, pregnancy, maternity, and age are now protected categories of employment (in addition to the previously recognized categories of race, nationality, religion, sex, marital status, and disability).  Additionally, employees will now be protected after engaging in protected activity, including filing a complaint of discrimination or providing evidence against an employer in a discrimination proceeding.  The law now specifies available remedies for discrimination claims, which are capped at one year’s wages.  Additionally, there is now a six-month statute of limitations for all employment claims.

Parental Rights

The new law introduces the concept of parental leave, providing fathers five days of leave after the birth of a child or adoption of a child less than five.  Maternity leave is also expanded, and nursing mothers will have the right to a one-hour nursing break if their shift is more than six hours in a day.

Sick Leave

Pay for sick leave is reduced from the old employment law system.  While employees were previously entitled to sixty days of leave at their full salary, sick leave is now provided on the following scale: (i) employees will receive full wages for their first 10 days of sick leave; (ii) 50% wages for the next 20 days; and (iii) no pay thereafter.

Late Payments

Under the previous employment law, employers were liable to pay a statutory penalty of one full day’s wages for each day past 14 days that they were late in paying post-termination payments.  This system occasionally produced absurd results, such as having statutory damages eclipse actual damages if, for instance, there was a dispute over a small bonus or gratuity.  It also meant that damages would grow from an employee’s own delay in filing suit or from court delays.  Now, statutory damages will only apply if the amount the employer owes exceeds the employee’s weekly wage.  Additionally, statutory damages will not apply for any period in which a court proceeding is pending or for which the employee’s own unreasonable conduct is shown to be a material cause of the employer’s failure to pay.

Probation, Secondment, and Part-time Employees

The new law formally recognizes the concepts of probation, secondment, and part-time employment.  Probation is capped at six months.  Secondees in the DIFC will be entitled to certain rights under the new employment law and employees seconded out of the DIFC can choose foreign law to govern their employment contracts.  Finally, the law explains that the concept of part-time employment shall apply to any employees working less than eight hours per day or less than five days per week.  Any required periods of leave shall be calculated on a pro-rata basis for part-time employees.  All other provisions of the employment law are equally applicable.


Finally, the new provides specifications on terminations.  The previous minimum notice periods are maintained, which the employer and employee can agree to lengthen but not shorten.  Employers can place employees on garden leave and payment in lieu of notice is permissible if agreed to by both parties.  The law is now more accepting of mutual settlements ending employment, but courts maintain the ability to void settlements found to be unreasonable.

UK Supreme Court Examines Restrictive Covenants First Time in 100 Years: A New Test for Severance

In the case of Tillman v Egon Zehnder [2019] UKSC 32, the UK Supreme Court, for the first time in over 100 years, has examined the law of post-termination restrictive covenants. As well as providing clarity of the law, the decision serves as a reminder of the importance of the doctrine of restraint of trade, which, in the words of Lord Wilson, who delivered the judgement:

is one of the earliest products of the common law. It epitomises the nation which developed it: a nation which has ascribed central importance to the freedom of all of us to work – in the interests both of the self-sufficiency of ourselves and our families and of our common prosperity

In the employment context, the doctrine of restraint of trade means that post-termination restrictive covenants will be enforceable only if they go no further than is reasonably necessary to protect the legitimate interests of a business. However, this is subject to one safety-valve for employers: where a covenant goes to go too far, a court will sometimes save it by severing offending words from it.

The most important issue examined in this case is the circumstances where severance is available to save an otherwise unenforceable restrictive covenant.

The facts

Egon Zehnder are headhunters. In January 2004, the employed Ms Tillman, who rose through the ranks from consultant to joint global head of its financial services practice group. Ms Tillman resigned and her employment came to an end in January 2017. In April 2017, she informed Egon Zehnder that she would be starting work for a competitor from 1 May 2017.  Egon Zehnder considered that working for a competitor at this time would be a breach of the post-termination restrictive covenant contained in Ms Tillman’s contract of employment which prohibiting her, for six month from:

directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company or any Group Company which were carried on at the Termination Date or during the period of 12 months prior to that date and with which you were materially concerned during such period.”

Ms Tillman argued that this covenant was unenforceable because the use of the term “or interested” prevented her from owning even a tiny minority shareholding in a competitor, which in turn rendered the non-compete too wide to be enforceable. Egon Zehnder raised various arguments to counter this, the most significant one being as follows: even if the words “or interested” prevented Ms Tillman having a minority shareholding, and such a prohibition constituted unreasonable restraint of trade, it was nonetheless permissible to sever the offending words “or interested” from the covenant to render the remainder of it enforceable and therefore rely on it to prevent Ms Tillman from working for a competitor.

The decision on severance

Lord Wilson provided a succinct tour de force of cases on severance going back to the 1726 case of Chesman v. Nainby which led to the following conclusion as to the conditions necessary to enable offending words to be severed from a restrictive covenant to render it enforceable. He held that three conditions are as follows:

  • The offending words are capable of being removed without the necessity of adding to or modifying the wording of what remains” (i.e. the “blue-pencil” test);
  • The remaining terms of the restrictive covenant continue to be supported by adequate consideration; and
  • The removal of the offending words must not generate any major change in the overall effect of the restrictive covenant in the contract, focusing on the legal (rather than the practical) effect of the covenant with the wording severed from it.

Based on the facts, the Supreme Court concluded all three conditions were satisfied and accordingly, the words “interested in” should be severed from the restrictive covenant to leave an enforceable restraint that Egon Zehnder could rely upon.


There is much that can be learned from this decision.

The obvious lesson is to ensure that restrictive covenants are drafted so that they are no wider than is reasonably necessary to protect a legitimate interest. This avoids the uncertainty of having to rely on a court to determine whether offending words can be severed. Applied to this particular case, the covenant would have been enforceable if there had been a provision (of the type often seen) making explicit that Ms Tillman was permitted to have a small shareholding in a competing business (for example of up to 5%). Indeed, there was a suggestion that the need for Egon Zehnder to rely on severance (rather than the covenants as actually drafted) may have adverse cost implications for Egon Zehnder such that the general rule, that a successful party can recover a significant proportion of legal costs from an unsuccessful party, may not apply here because the litigation arose, in part, as a result of defective drafting.

The case also implicitly confirms that under English law, forfeiture provisions that are conditional upon some form of not competing (e.g. a clause under which an individual forfeits commission or a bonus if they compete after their employment ends), are considered to be restraints of trade and therefore subject to the same reasonableness requirements as pure restrictive covenants (i.e. a clause prohibiting competitive activity). This implicit confirmation derived from the reference in the decision to various cases on forfeiture for competing, where the assumption was that such provisions invoke the restraint of trade doctrine. However, not all jurisdictions take this approach. Conceptually, there is a distinction between on the one hand an absolute prohibition against competition and on the other, a choice between competing and losing a payment. This distinction was not addressed in the decision and it remains possible that future decisions may scrutinise this distinction more closely.