Court of Appeal Clarifies Limits of Claw Back Training Costs

Many organisations seek to recover training fees and related costs if an employee leaves soon after receiving training. This is particularly common where the employee can use that training to their advantage with another employer.

The key point for employers is that clawing back training costs can be enforceable. However, they must be proportionate, tailored to the employee and their role, and linked to a legitimate business interest.

Geeks Ltd v Watts

In Geeks Ltd v Watts [2026] EWCA Civ 889, the employer took the training concept one stage further. Mr Watts was entering the job market in his first role, in a position paying only £18,000 per annum.

His contract stated that the first six months of employment would be treated as a training period. During that period, the employer attributed more than £8,000 in costs to mentoring, study and practice time. It also included what it described as the immeasurable cost to the business of coaching him.

How the Training Cost Repayment Agreement Worked

Under the agreement Mr Watts signed, he would repay the training costs unless he worked for the company for long enough. The repayment obligation remained in full for the first 12 months. It then reduced by 1/18th for each further month worked until it was cleared. He left after eight months, so Geeks relied on the contract and claimed the full training amount from him.

Why Mr Watts Challenged the Clawback

Mr Watts defended the claim on the basis that:

• the clawback was a restraint of trade;
• the clawback did not protect any legitimate interest of the company; and
• it went further than was reasonably necessary to protect any such interest.

After losing in the lower courts, Mr Watts took his case to the Court of Appeal. The Court decided the matter by considering three key issues.

1. Restraint of Trade

An employee is likely to acquire skills and knowledge through work or training paid for by the employer.

Employees Can Usually Take Their Skills Elsewhere

They are generally free to take those skills and knowledge elsewhere. This includes moving to another employer or entering self-employment. Any restriction on that freedom must be reasonable. It must also protect the employer’s trade secrets or customer connections.

A Repayment Clause Can Still Restrict an Employee

It was not enough for the contract to say that the clawback clauses did not prevent an employee from leaving. No court would order an employee to work for an employer against their wishes. The question was whether the clawback might hamper the employee’s ability to trade freely.

Repaying Salary May Amount to a Restraint of Trade

In this case, the Court of Appeal found that a clause requiring repayment of all or part of an employee’s salary to the employer could amount to a restraint of trade. The question then became whether that restraint was legitimate and reasonable.

2. Legitimate Interest

Employers Can Protect a Stable and Trained Workforce

It is legitimate for a company to have an interest in maintaining a stable and trained workforce in a highly competitive market. The Court of Appeal accepted that Geeks had such a legitimate interest.

3. Reasonableness

The clawback was unreasonable for two main reasons.

The Clause Applied Regardless of Why the Employee Left

First, the clause applied in every situation except redundancy.

It did not distinguish between:

• an employee dismissed on one week’s notice because the company considered them unsuitable;
• an employee resigning without another role lined up; or
• an employee leaving the IT sector altogether.

The Court of Appeal gave the example of an employee leaving work to care for an ill relative. Under the clause, they would be treated in the same way as someone leaving for a highly paid IT job.

The Court Considered the Broader Financial Effect

The second issue was what the Court called the “broader picture”. Mr Watts had been earning little more than the minimum wage at Geeks. Once he resigned, the effect of the clawback was to reduce him to the equivalent of an unpaid intern for the early months of his employment.

Why the Clawback Was Unenforceable

For both these reasons, the clawback went beyond what was reasonably necessary to maintain a stable and trained workforce at Geeks. It was therefore unenforceable.

What the Judgment Means for Employers

Restrictions on employees, including non-compete obligations and training cost repayment clauses, need careful thought.

Ideally, employers should:

• identify the business interest they are protecting;
• decide how far the restriction genuinely needs to go; and
• tailor the clause to the employee’s role, pay, training and likely circumstances.

Most Training Cost Clawbacks Are More Specific

This case is an outlier because most clawback clauses relate to specific training courses with a set cost. Even so, the underlying principles are the same. A reasonable repayment period should reflect the employee’s level and the cost of the training.

When a Longer Repayment Period May Be Reasonable

For a highly skilled and highly paid employee attending an expensive course, requiring repayment of 100% of the cost if they leave in the first year may be reasonable. This could then be followed by a tapered reduction over the next 18 months.

When a Clawback Is Unlikely to Be Reasonable

By contrast, this case shows that requiring an entry-level employee on close to the National Minimum Wage to repay the equivalent of around six months’ pay for on-the-job training is unlikely to be reasonable. It is unlikely to be a proportionate way to achieve a stable and skilled workforce.

Employers Should Consider Why the Employee Is Leaving

Employers have long needed to give employees a realistic opportunity to avoid a clawback by remaining employed for the required period. This case adds a further consideration: whether the employee is leaving the industry altogether.

That point may not be decisive in every case because an employee could still use the training later. However, it is now part of the reasonableness analysis.

Conclusion

Training cost clawback clauses are not automatically unenforceable. However, employers must ensure that repayment obligations are proportionate, linked to a legitimate business interest and appropriate to the employee’s role, pay and circumstances.

Clauses that impose a substantial financial burden regardless of why an employee leaves may be vulnerable to challenge.

Disclaimer

Chartergate Legal Services Ltd has drafted this email update to provide you with a general overview of the relevant law and developments at the date of sending only. It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.