Employers will welcome the High Court's decision in Steel v Spencer Road LLP (trading as The Omerta Group)  upholding as enforceable a contractual requirement for an employee to repay a discretionary bonus if they gave or were given notice of termination within three months of payment. 

The Court declined to depart from established caselaw and rejected an argument that the clawback provisions operated as an unenforceable restraint of trade and penalty clause. The clause did operate as a disincentive to resigning, but it did not impose any restrictions on where the employee could work after resigning and was not disproportionate. The analysis of the clawback provision was not affected by the impact of other contractual provisions such as the length of notice required or post-termination restrictive covenants.

In contrast, clawback provisions which operate if an employee starts work at a competitor within a specified period could potentially be an unenforceable restraint of trade.

Originally published 11 November 2023

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