Court Of Appeal Case Highlights The Importance Of Properly Drafted Repayment Provisions

Employers often use repayment clauses - also known as ‘clawback’ clauses - to try and recover certain costs from a departing employee, such as those related to training, visa applications, bonuses, relocation allowances or enhanced payments for family leave. These clauses usually require the employee to repay some or all of the applicable cost to their employer if they leave within a specified period after the employer has incurred the expenditure. 

Whilst a useful tool, the recent Court of Appeal decision in Geeks Limited v Watts [2026] EWCA Civ 889 is a timely reminder that clawback clauses are not risk-free. If the repayment obligation is too broad, too onerous, or appears to operate as a penalty for leaving rather than a genuine recovery of costs, the clause may be found to be an unreasonable restraint of trade and therefore unenforceable. The clause must go no further than is reasonably necessary to protect the employer’s legitimate interest in retaining a trained workforce. In other words, whilst employers may understandably want to invest in and retain trained staff, they cannot use repayment provisions to penalise employees unfairly if they decide to leave.

What happened in Geeks Limited v Watts?

Mr Watts joined Geeks Limited as a trainee quality assurance engineer in March 2019. His starting salary was £18,000 and increased to £22,000 by his third (and final) year of employment. Mr Watts signed a training agreement at the commencement of his employment, which required him to repay £8,108 in respect of estimated in-house training costs (characterised as a “career development loan”) if his employment ended for any reason other than redundancy. The agreement specified that the amount due would reduce gradually over time, either by Mr Watts paying the £8,108 in a lump sum (or any remaining balance at the time of exit) or by working off the debt over 18 months. The agreement stated that it did not intend to restrict Mr Watts from pursuing other employment, but that if he did so, the debt (or any remaining balance) would still have to be repaid. 

Mr Watts resigned eight months into his employment and Geeks subsequently commenced county court proceedings to recover the training costs.

What did the Court of Appeal decide?

The Court of Appeal held that the repayment provision was a restraint of trade and that it was unreasonable and unenforceable. In broad terms, there were two central problems.

1. The clause applied too widely. It could bite whether Mr Watts resigned or was dismissed, and regardless of what he did next. It was not limited to situations where he joined a competitor or gained a clear benefit from the training. The only exception was redundancy. The Court considered this scope too broad and therefore unreasonable.
2. The financial impact was too harsh. Mr Watts was paid only slightly above the national minimum wage. Against that background, the repayment obligation effectively meant that, in the early months of his employment, much of the value of his work was offset by a debt to his employer. The Court was not satisfied that this went no further than reasonably necessary to protect Geeks’ legitimate interest in retaining a trained workforce. It also noted that Mr Watts had not received independent legal advice and that there was a clear imbalance in bargaining power between the parties.

Practical Implications for Employers

So, what should employers do now?

1. Focus on the real cost. Labelling a repayment clause a “training cost debt” or “investment recovery” will not suffice if, in practice, it operates to deter employees from leaving. Employers should make sure any repayment obligation is based on genuine, identifiable costs.
2. Be clear about when repayment applies. A clause that triggers whenever an employee leaves, whatever the reason, is more likely to be challenged. Employers should consider limiting repayment to specific situations, such as voluntary resignation, and excluding scenarios like redundancy or capability dismissal.
3. Use realistic figures. The Court was concerned by a mentor charge that appeared much higher than the mentor’s actual salary cost. Employers should keep evidence of how costs have been calculated and avoid figures which are inflated or hard to justify.
4. Ensure repayment amount is proportionate to salary. If the repayment amount is a large proportion of the employee’s annual pay, particularly for junior or lower-paid employees, it may be considered unreasonable.
5. Let the repayment reduce over time. A sliding scale can help, but it needs to be meaningful. The repayment should reduce as the employer gets the benefit of the training and as the value of that training to the business decreases. It is common for such clauses to be tapered over time, e.g. reducing the amount repayable by 25% every few months or so.
6. Make sure employees understand what they are signing. A clause is more likely to be enforceable if it is clearly explained before signature. In higher-risk cases, employers should consider recommending that the employee seeks independent legal advice. This should level-out any arguments relating to inequality of bargaining power. 

The key takeaway for employers is clear: if you want to rely on a clawback clause, it needs to be carefully drafted and proportionate. A clause whose true purpose is simply to discourage employees from leaving may not withstand judicial scrutiny. If the aim is to recover costs in practice, the wording should be clear, fair and closely tied to the actual expense the business has incurred. 

If you are unsure about any of your clauses, please don't hesitate to get in touch.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.