Employers often invest significant time and money in training employees, whether through professional qualifications, external courses or internal development programmes. To protect that investment, many employers include training repayment clauses requiring employees to repay some or all of the costs if they leave within a specified period.
A recent Court of Appeal decision serves as an important reminder that these clauses must be carefully drafted to ensure they remain enforceable.
The background: Geeks Ltd v Watts
The recent case of Geeks Ltd v Watts considered whether a training repayment clause went too far and amounted to an unlawful restraint of trade (a contractual restriction that limits someone’s ability to work or do business freely).
Mr Watts worked as a Trainee Quality Assurance Engineer with Geeks Ltd on a starting salary of £18,000. As part of his employment, he signed a separate training agreement estimating the costs of training and mentoring at £8,108.
The agreement provided that after the first 12 months, the amount repayable would reduce by one-eighteenth each month. However, if Mr Watts left before the debt was extinguished, he would be required to repay the outstanding balance in monthly instalments. The provision applied regardless of the reason for leaving, except in cases of redundancy.
After eight months, Mr Watts resigned to take up employment elsewhere and Geeks Ltd sought to recover the full £8,108.
What did the Court decide?
The county court found in favour of Geeks Ltd and concluded that the repayment terms were reasonable.
However, the Court of Appeal reached a different conclusion.
They found that the repayment provision amounted to an unreasonable restraint of trade and was therefore unenforceable. While the clause did not expressly prevent Mr Watts from working elsewhere, it created a significant financial disincentive to doing so.
Importantly, the Court held that restraints of trade are not limited to clauses that directly restrict where someone can work. Financial obligations can also have that effect if they place a disproportionate burden on an employee seeking to move jobs.
Several factors influenced the Court’s decision:
- The repayment obligation applied regardless of the reason for leaving.
- It was not limited to situations where the employee joined a competitor.
- The repayment amount was substantial when compared with Mr Watts’ salary.
- The clause required repayment of the full training cost despite only eight months having elapsed.
Taken together, these factors made the provision unreasonable and unenforceable.
What does this mean for employers?
This decision does not prevent employers from recovering genuine training costs.
However, it reinforces the need for repayment clauses to be proportionate and designed to protect legitimate business interests rather than discourage employees from leaving.
When drafting or reviewing training repayment provisions, employers should consider:
- Whether the amount to be repaid genuinely reflects the cost incurred.
- Including a clear tapering or reduction mechanism over time.
- Whether repayment should apply in all circumstances or only in specific situations.
- Ensuring the repayment obligation is proportionate to the employee’s earnings and role.
- Regularly reviewing existing clauses to ensure they remain enforceable.
Employers should be particularly cautious about broad, “one-size-fits-all” repayment provisions that don’t distinguish between different reasons for termination.
Key takeaway
The Geeks Ltd v Watts decision is a useful reminder that courts will look beyond the wording of a training repayment clause and consider its practical effect on an employee’s ability to move freely within the job market.
A carefully drafted and proportionate clause is far more likely to withstand scrutiny than one that imposes an excessive financial burden on departing employees.
If your business relies on training agreements or repayment provisions to protect investment in employee development, now is a good time to review them. Our Employment Law team can help ensure your employment contracts strike the right balance between protecting your business interests and remaining legally enforceable.
To discuss your training agreements or any employment law issue, contact a member of our Employment Law team on 03456 465 465 or email enquiries@rotherabray.co.uk
