Training Fee Clawback Clauses Ruled Unlawful: What Geeks Ltd v Watts Means for Employers

What has the Court of Appeal decided about training fee clawback clauses?

On 10 July 2026, the Court of Appeal handed down judgment in Geeks Limited v Watts [2026] EWCA Civ 889. The case concerned a "training fee clawback" scheme used by an IT services employer, Geeks Ltd. New trainees signed both an employment contract and a separate "Contract of Training Investment," under which they agreed to repay a calculated training cost debt if they left within 18 months of starting. The debt reduced by 1/18th for each completed month of employment, but resigning early meant repaying whatever remained.

The employee in question, Mr Watts, resigned after eight months to take a better paid role elsewhere and was pursued for £8,108. He argued the clawback clause was an unlawful restraint of trade. The Court of Appeal agreed with him, overturning the earlier county court decisions and ruling that the clawback provisions were unenforceable.

Why does restraint of trade law apply to training repayment clauses?

Restraint of trade is a long standing legal principle that strikes down contractual terms that unreasonably restrict someone's ability to work or trade freely, unless the party relying on the clause can show it protects a genuine business interest and goes no further than necessary. Employers had argued that a repayment obligation isn't a "restraint" at all, since it doesn't technically stop an employee leaving and finding a new job. The Court rejected that argument in this case. It held that a clause requiring repayment of what is, in substance, a large slice of an employee's earlier salary has the same practical effect as a restraint, because it creates a real financial disincentive to leave. Structuring a clause as a debt rather than a direct restriction doesn't take it outside the principle.

Are training fee clawback clauses always unenforceable?

No. The Court didn't say employers have no legitimate interest in retaining staff they've invested in training, or that clawback clauses are automatically unlawful. The problem was proportionality. Two features made this scheme unreasonable: it applied regardless of why the employee left other than redundancy (dismissal, resignation for any reason, even caring responsibilities), and its practical effect was to claw back sums roughly equivalent to salary during the early months of employment, when the employee was already contributing value to the business.

How should employers update their training agreements now?

• Review any clawback or repayment clauses tied to training, onboarding, or "investment" costs.

• Make sure repayment obligations scale down gradually rather than applying as an all-or-nothing debt.

• Consider excluding, or reducing liability for, departures caused by redundancy, ill health, or other circumstances outside the employee's control.

• Ensure any costs charged genuinely reflect identifiable training expenditure, rather than a broad-brush estimate that effectively recoups general employment costs.

• Take independent legal advice before relying on existing clawback clauses to recover money from departing staff, particularly for lower-paid or junior roles.

Key takeaway for employers with training fee agreements

Training fee agreements aren't dead, but blanket, non-negotiable clawback clauses now carry real risk. Employers should treat Geeks v Watts as a prompt to audit existing agreements and build in proportionality before the next dispute arises.

As ever, if you need advice then get in touch with Oliver Tasker today:

📞 Call: 01522 776270
✉️ Email: oliver@impactemploymentlaw.co.uk

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