Most readers of this blog will be familiar with the concept of “restraint of trade” and the public policy reasons why the law regulates it so closely, namely that individuals should be free to use their skills and earn a living without unnecessary restrictions.
The doctrine applies around the world to a greater or a lesser degree – with different rules applying depending on both the jurisdiction and the legal situation. In the UK employment context, the general starting point is that any contractual term which restricts an employee’s freedom to carry out their trade will be void, unless (a) it protects the employer’s legitimate business interests; and (b) it goes no further than reasonably necessary to do so. The reasonableness of any such clause has to be viewed at the date of signing and without the glorious benefit of hindsight. It is for this reason that so much ink is spilled on the proper drafting of post-termination restrictive covenants (e.g. non-competition, non-solicitation of clients and customers, etc.) which are bespoke both to the particular role an individual carries out and the consequent risk to the business should that individual leave. This reflects the basic principle that a court will not enforce these, unless the employer can show (as a minimum) that that they satisfy both (a) and (b) above.
The Court of Appeal’s decision in Geeks Ltd v Watts [2026] EWCA Civ 889 came as a surprise to many because it considered training repayment provisions through this lens of restraint of trade, an area not usually associated with such clauses. Many employers use training repayment, or “clawback”, provisions to protect the money they invest in employee development. However, the decision is an important reminder that these provisions are not always enforceable and may be challenged using the usual restraint of trade principles if they go beyond what is reasonably necessary to protect the employer’s legitimate interests.
Mr Watts joined Geeks Ltd as a trainee quality assurance engineer in 2019. As a condition of joining, he entered into a separate “Contract of Training Investment” which included a commitment that he would repay a training cost debt of £8,108 if he left before completing 18 months of employment. The amount was intended to reflect Geeks’ investment in training and support provided during the early stages of employment.
After approximately eight months, having requested (and been denied) a pay rise, Mr Watts resigned to take a higher-paid role elsewhere. Geeks sought to recover the full amount under the training agreement and succeeded at first instance and on appeal. The Court of Appeal, however, overturned those decisions and held that the repayment provisions were unenforceable as a restraint of trade.
Geeks had argued that the arrangement simply created a contractual debt and did not prevent Mr Watts from resigning or taking another job. The Court of Appeal rejected that analysis and focused on the practical effect of the provision. It concluded that a significant financial liability triggered by departure could discourage an employee from leaving employment and therefore engaged the restraint of trade doctrine.
Importantly, the Court did not suggest that employers can never seek to recover training costs. On the contrary, it accepted that employers may have legitimate interests in protecting investments they make in training employees. The issue was whether the particular mechanism adopted by Geeks went further than was reasonably necessary to protect those interests (i.e. applying the same analysis which we would be familiar with in restrictive covenant issues) – the Court concluded that it did.
At the time of writing this blog, Geeks had applied for permission to appeal to the Supreme Court (on 25 August 2026), but permission has not yet been determined. As such, this may not be the last word on this particular scenario, but nonetheless there remain some practical takeaways for employers when considering clawback mechanisms in the meantime.
6 key takeaways for employers:
1. Substance is more important than form
Employers should not assume that labelling an obligation as a repayment of costs or a contractual debt will place it outside the scope of restraint of trade principles. As ever, the Court was prepared to look beyond the drafting and examine the clause’s effect on the employee.
2. Ensure there is a clear link to genuine training costs (with meaningful tapering provisions)
Employers will be in a stronger position to enforce clawback provisions where the amount repayable can be tied to identifiable expenditure on training, qualifications, courses or other development costs. The method of calculation of the amount to be repaid by Watts was deemed to be highly questionable, suggesting that it did not genuinely reflect training costs but rather was designed to be a deterrent to departure (for example, the sum included a cost of the time attributable to Mr Watts’ mentors within Geeks at a rate of £60/hour, which on Mr Watts’ evidence was five or six times what the mentor was in fact actually paid). Ideally, set out the detailed calculation of the sum to be repaid. Be clear as to when the training starts and when it ends, which are the costly sections and that if the employee leaves part way through, he only pays for the parts of the training he received.
The Court noted that the provision for repayment in monthly instalments was more reasonable than if it had required a lump sum payment. Employers would be well-advised to consider the repayment mechanism carefully, factoring in any tapering which may be necessary to adjust the level of repayment to take into account the benefit that the employer receives over any time the employee remains in the business from the skills they gain as a result of the training.
3. Avoid provisions that appear punitive
The Court’s reasoning was heavily influenced by the practical impact of the obligation on the employee. Given Mr Watts’ low salary (already not very much above the level of national minimum wage at the time), the effect of the clawback provisions would be to reduce this in retrospect to the level of an unpaid intern, albeit with the loan repayable over a period. A repayment obligation that is very large relative to an employee’s earnings may be more vulnerable to challenge if it effectively operates as a financial barrier to leaving employment. A smaller sum, being more enforceable, might actually represent a more effective deterrent, since the employee is more likely to be advised that he cannot escape the payment if he leaves. Any recoupment which reduced the employee’s effective pay over his employment to less than the national minimum wage is going to be a tough sell to a Court.
Inequality of bargaining power was also relevant here, as is often the case involving contracts of employment at relatively low wages – contrast these to highly paid City brokers or film stars, where the inequality is non-existent or at least much diminished.
The Court also flagged that Mr Watts did not receive independent legal advice when signing the contracts. While this in and of itself is not conclusive, it is “a relevant pointer away from reasonableness”. Although there was a recital in the contract which stated that he had opportunity to obtain legal advice this was “neither here nor there”, given that Mr Watts had provided evidence that he could not have afforded to do so. Whether this will remain a valid consideration in the light of the explosion of AI advisers remains to be seen, especially given their notorious inability to assess intangibles like reasonableness.
4. Consider whether all termination scenarios should trigger repayment
A notable feature of the Court’s reasoning was the breadth of the repayment trigger. In Watts’ case, the repayment obligation applied very broadly, across most termination scenarios– including if he had been dismissed (save for redundancy), and irrespective of whether he left for a job in technology or something else entirely (the Judge notes that the obligation to repay would have kicked in even if he had e.g. left the role to care full-time for a grandparent with dementia).
Employers should therefore carefully consider whether repayment ought to arise in every termination scenario, including where employment ends for reasons outside the employee’s control. The broader the trigger, the more difficult it may be to establish that the provision goes no further than necessary to protect a legitimate interest. That means looking at the purpose of the repayment obligation. Is it to deter employees form joining competitors in a manner akin to a restrictive covenant or is it just to reduce the risk of the employer bleeding cash into training someone who for whatever reason will not stick around long enough to repay that investment? What incentive is that to employers to train and mentor especially younger staff – which we must accept is societally beneficial – if they can then change their minds? Care must be taken to keep this question relatively objective, since otherwise employers will find themselves going down the rabbit-hole of a discretionary assessment of the worthiness or necessity of the employee’s reason for quitting, and then reasonableness, let alone issues of retaliation or discrimination, all join the mix.
5. Be prepared to explain your working
The Court emphasised that it is not for the employee to show that any particular restraint of trade is unreasonable, rather that the burden is on the employer to show that the clause goes no further than is reasonable to protect its legitimate business interests. As such, employers should be able to explain (for example):
- the investment/legitimate business interest being protected;
- how the repayment figure was calculated;
- why the duration of any recovery period was chosen; and
- why the scope of the repayment obligation (i.e. the triggers) is proportionate.
6. Are you adding value?
Consider also what the employee is getting for the money – if the Court were to consider the training to be generic or of limited developmental value such that it could be gained elsewhere, that would mitigate against onerous repayment obligations. If the employee could show that he already had some of the skills being taught, he should not have to repay that proportion of the training, so think about some preliminary assessment of training needs before requiring agreement to a standard course. However, the more specialised the training, the more useful it would be to the employee in his future career and the more it would make him attractive to a competitor, the more some form of enforcement of a repayment obligation would seem justified.