Clawing back training costs

Geeks Limited v Joseph Henry Watts [2026] EWCA Civ 889

In this case, the Court of Appeal (“CoA”) confirmed that a contractual training cost clawback clause was an unreasonable restraint of trade and therefore unenforceable, as it went further than reasonably necessary to protect the employer’s legitimate interests.

The Respondent hired the Claimant as a trainee quality assurance engineer in March 2019. On the same day as entering into his employment contract, the Claimant signed a separate Contract of Training Investment (“Training Contract”), under which he agreed to repay a “Training Cost Debt” of £8,108, said to represent the estimated cost of his first six months’ training period, if his employment terminated within the first 12 months of service. Under the terms of the Training Contract, the Respondent was not obliged to increase the Claimant's pay during that period and redundancy during the initial 12 month period was the only exception to the repayment obligation. After working for the Respondent for eight months, the Claimant requested a pay rise, which was refused, and he subsequently resigned to take up a new role at a higher salary. The Respondent brought proceedings to recover the full Training Cost Debt.

In the County Court, the Deputy District Judge decided that although the clawback clause amounted to a restraint of trade, it was necessary to protect a legitimate interest for the Respondent (namely, retaining employees that it had invested time and money in training) and reasonable in the circumstances. Further, the Judge concluded that there was no significant inequality of bargaining power and the repayment obligation was affordable in light of the Claimant's increased earning capacity after training. Judgment was entered for the Respondent, with the Claimant ordered to repay £8,108 plus interest.

The Claimant's subsequent appeal was dismissed. It was open to the County Court Judge to conclude that the aim of the Training Contract was to incentivise trainees to stay and enable the Respondent to maintain a stable and skilled workforce. They had also been entitled to consider subsequent events, specifically the Claimant's higher salary at his new employer, to be admissible evidence supporting the clause’s reasonableness at the date of signing the Training Contract.

The Claimant appealed to the CoA. The CoA rejected the Respondent's argument that the clawback clause was simply a debt repayment provision falling outside the restraint of trade doctrine. The CoA confirmed that the doctrine is a question of substance, not form, and that financial disincentives to leave are not automatically exempt from scrutiny. The key question is whether the clawback clause, viewed at the time it is made, hampers, or might hamper, the employee’s freedom to trade.

The CoA proceeded on the basis that the Respondent had a legitimate interest in maintaining a stable trained workforce, but held that the clause failed on reasonableness for two reasons. First, the repayment obligation was indiscriminate: it applied whatever the reason for departure (save redundancy), including (for example) dismissal, resignation to pursue an unrelated career, or departure to become a carer. Second, the economic effect on the Claimant (who had been paid close to the national minimum wage) was to reduce him retrospectively to what the CoA described as “the equivalent of an unpaid intern.” The clawback provisions were therefore unenforceable. The appeal was allowed and the county court decisions set aside.

This is the first CoA authority that directly considers whether training cost clawback provisions in employment contracts engage the restraint of trade doctrine. Whilst the decision does not mean that all such clauses will be unenforceable, it does confirm that the doctrine will be engaged and that such provisions will be scrutinised carefully.

Employers who use a clawback arrangement will need to show that it protects a legitimate business interest and goes no further than is reasonably necessary to protect that interest. Clawback provisions that apply regardless of the reason for an employee’s departure are likely to be more vulnerable to challenge. Employers should ensure that repayment obligations are reasonable and proportionate in scope and economic effect, that they are not triggered indiscriminately, and that the employee is adequately remunerated during the period to which the training investment relates.