Geeks Ltd v Watts: Court of Appeal strikes down training fee clawback as unreasonable restraint of trade

A training cost clawback that turned the first six months of a junior employee's salary into a repayable debt engages the restraint of trade doctrine, and this one went further than reasonably necessary to protect the employer.

In Geeks Ltd v Watts [2026] EWCA Civ 889, handed down on 10 July 2026, Lord Justice Bean, Vice-President of the Civil Division, with whom Males and Jeremy Baker LJJ agreed, allowed the employee's appeal and set aside orders of the county court requiring repayment of £8,108.

Eighteen thousand pounds, and a debt

The appellant, a music graduate carrying considerable debt who had applied for more than fifty IT positions, joined the Sutton IT company as a trainee quality assurance engineer in March 2019 on £18,000. He signed two documents: an employment contract, and a contract of training investment fixing a "training cost debt" of £8,108.

That figure comprised mentoring costed at £60 an hour, some five to six times what the mentor was actually paid, and employment costs during study activities. It was written off at one eighteenth per month once twelve months' service had been completed, and otherwise repayable in eighteen instalments. The training contract stated that nothing in it restricted the employee from pursuing other opportunities, and that he would not be in breach if he chose to leave.

He asked for a pay rise, was refused, and resigned after eight months for a job paying £30,000.

Substance, not form

The company's primary case on appeal, raised by respondent's notice and not run below, was that the doctrine was not engaged at all. Applying Singh v Dass, the court permitted the argument as a pure point of law, though Bean LJ noted that had it made a difference to the outcome he would have been receptive to a costs sanction.

It made none. Whether the doctrine applies turns on the practical effect of the restraint in hampering freedom to trade, as Quantum Actuarial LLP v Quantum Advisory Ltd [2021] EWCA Civ 227 confirms. It is no answer that a clause does not prevent departure. No clause ever could, given the rule against specific performance and section 236 of the 1992 Act. Financial disincentives are not exempt as a class.

The submission that the debt was unconditional, and so payable whether or not the employee resigned, fared worse. Were that sound, an employer could require a new junior employee to repay something close to his entire salary for six months, with no enquiry into reasonableness. The public policy objections, including the undermining of minimum wage legislation, were described as obvious.

Steel v Spencer Road LLP [2024] ICR 137, on which the employer leaned heavily, was correctly decided on its facts but does not confine the doctrine to provisions directly limiting post-termination activity. Bacon J's reading of Marshall v NM Financial Management Ltd was not accepted: the clause there was a restraint because it was a financial disincentive to compete, not merely because it restricted trade directly.

Reduced in retrospect to an unpaid intern

Assuming without deciding that maintaining a stable, trained workforce is a legitimate interest, following Dawnay Day and Ingham v ABC Contract Services, the clause failed the reasonableness test on two grounds.

First, it bit whatever the reason for departure, redundancy aside. Dismissal on a week's notice, resignation for a job outside the sector, or leaving to care for a relative with dementia would all trigger it.

Second, and more broadly, the effect was that an employee paid little above the then national minimum wage was reduced in retrospect, for his early months, to the position of an unpaid intern with a loan to repay.

Bean LJ also observed that the costing left the greater part of the working day unaccounted for, as though of no value to the employer, when clients were already being billed for the employee's services. The onus lies on the party invoking the restraint, and the employee had no independent legal advice, being unable to afford it.