Training Cost Clawbacks Under Scrutiny: Court of Appeal Clarifies When Repayment Clauses Restrain Trade

Employers often seek protection for the cost of training new recruits by including clauses requiring employees to repay training expenses if they leave within a specified period. However, the recent Court of Appeal decision in Geeks Ltd v Watts [2026] EWCA Civ 889 demonstrates that such clauses will not always be enforceable.

The key issue was whether a training-cost repayment provision amounted to an unreasonable restraint of trade.

Geeks employed Mr Watts as a trainee quality assurance engineer. Alongside his employment contract, he signed a "Contract of Training Investment" under which Geeks claimed to have invested £8,108 in training him. The agreement provided that:

• the “training debt” would gradually reduce over time while he remained employed;
• any outstanding balance would become repayable if he left before the debt was fully written off; and
• the repayment obligation would cease once the debt had been extinguished.

After around eight months, Mr Watts resigned to take a higher-paid role elsewhere (a salary of £30,000 compared with £18,000 at Geeks). Geeks subsequently sought to recover the full £8,108.

The Court of Appeal allowed Mr Watts' appeal and held that the repayment provision was unenforceable.

Importantly, the Court confirmed that training-cost clawback clauses can engage the restraint of trade doctrine. Although Geeks characterised the provision as a debt repayment mechanism, the Court focused on its practical effect. The clause operated as a financial disincentive to leaving employment and therefore restricted Mr Watts' ability to move to another employer.

The Court accepted that employers may have a legitimate interest in protecting genuine training expenditure and encouraging staff retention. However, the clause in question went further than was reasonably necessary to protect those interests.

Several factors were significant:

• the £8,108 figure was not a precise assessment of actual training costs and was described in the agreement as a rough or “basic calculation”;
• the repayment obligation was not closely linked to any identifiable loss suffered by the employer; and
• the overall structure of the arrangement suggested that its primary purpose was to deter employees from leaving rather than simply to recover genuine training costs.

The decision is significant because it confirms that employers cannot avoid restraint of trade scrutiny simply by labelling an obligation as a “debt”. Where a repayment clause effectively restricts employee mobility, the courts will examine whether it is reasonable and proportionate.

The judgment also distinguishes Steel v Spencer Road LLP [2023] EWHC 2492 (Ch), where a contractual requirement to repay a discretionary bonus following notice of termination was held not to be a restraint of trade. In Geeks, the Court of Appeal clarified that financial disincentives can amount to restraints of trade and that the doctrine is not confined to post-termination restrictions.

The decision does not mean that all training repayment clauses are unenforceable. However, it is a clear warning against overly onerous clawback arrangements. Employers should ensure that any repayment obligation is closely tied to genuine training costs, is proportionate to the employee's remuneration, and is no wider in duration or scope than necessary. Clauses that effectively lock employees into employment or require repayment figures that bear little relation to actual expenditure are at significant risk of being struck down as an unreasonable restraint of trade.