Training Repayment Clauses After Geeks v Watts

The bill came to £8,108, which was, in the Court of Appeal's words, "curiously £2 less than the total of the listed sums". It was addressed to a man who had studied music at university and then spent eight months testing software on a salary of £18,000 a year. It fell due because he left for a better job.

The legal question in Geeks Ltd v Watts [2026] EWCA Civ 889, [2026] ICR 975 was whether that bill was a debt or an unlawful restraint of trade. A debt is enforced as written. A restraint is unenforceable unless the employer proves it reasonable.

The clause and the money

Geeks Ltd, an IT company in Sutton, hires trainee quality assurance engineers. Mr Watts applied in 2019, in considerable debt and after more than fifty applications for jobs in the IT industry ([4]). On 15 March 2019 he signed two documents: an employment contract on £18,000 a year, rising to £20,000 and then to £22,000, and a "Contract of Training Investment" ([5]–[9]).

The second document fixed a "Training Cost Debt" of £8,108. Most of it was mentoring, costed at £60 an hour; £1,300 was 100 hours of his own time on "study and practice", costed at £13 an hour ([10]–[12]). Once he had worked twelve months, the debt would be written off at a rate of one eighteenth a month. If he left before it reached zero, he would repay the balance over eighteen monthly instalments ([14]–[15]).

The document was drafted with litigation in mind. It said he would not be in breach of contract if he chose to leave, and that "Nothing in [the Training Contract] is intended to restrict you from pursuing other employment". Bean LJ, the Vice-President of the Court of Appeal's Civil Division, read the second recital as "an attempt to defeat, or at least weaken, any argument about restraint of trade" ([15]).

Mr Watts asked for a pay rise and was refused. He resigned in November 2019 to join another firm at £30,000 ([18]). Geeks sued for the £8,108. Deputy District Judge Hope held the clawback was a restraint of trade but a reasonable one, and HHJ Evans-Gordon dismissed the appeal ([21], [29]). An employment tribunal had already upheld the same scheme: in Bennett v Geeks Ltd (ET/2303060/2019, 23 February 2021) Employment Judge Ferguson dismissed two former trainees' claims for deductions from their final pay, holding the provisions either outside the doctrine or justified.

Two authorities: losing money for competing vs losing money for leaving

By way of background, we should consider two decisions in apparent tension with one another.

In Marshall v NM Financial Management Ltd [1997] ICR 1065 a salesman would keep receiving commission after his agency ended, but only if he did not go to work for a competitor within a year. That condition was a restraint of trade. Millett LJ put it in terms that leave little room: there is no difference between promising not to trade and losing a benefit if you do ([59]).

Contrast Steel v Spencer Road LLP [2023] EWHC 2492 (Ch), [2024] ICR 137, where an employee's annual bonus was repayable if he left or gave notice within three months. Bacon J held that was not a restraint. She read Marshall narrowly: she held the commission condition was caught because it restricted what the salesman could do after he left, whereas a provision that simply costs an employee something for leaving is a different thing ([60]).

So which was the Geeks clause? It did not care where Mr Watts went next. It charged him for going. On Steel's reading it was a properly payable debt; on Marshall's it looked like a disincentive tantamount to a restraint. HHJ Evans-Gordon said that, "left to myself, I would apply the principles set out in Steel" ([28]). In the Court of Appeal, Geeks's primary case was that the clawback was no restraint at all. It relied strongly on Steel ([44], [55]).

Substance, not form

At the County Court trial the deputy district judge had treated the clawback as a restraint of trade and found for Geeks on the footing that it was a lawful one ([20]–[21]). On the first appeal to a circuit judge, Geeks tried to argue, by a late Respondent's Notice relying on Steel, that it was in fact no restraint at all but a simple debt; offered an adjournment, its counsel declined, and the appeal proceeded on the basis that the clauses were a restraint ([27]–[28]). Geeks then revived the point in the Court of Appeal ([39]). Bean LJ let it be argued as a pure point of law raising an important point of principle, adding that, had it changed the outcome, he would have been "amenable to a submission that the Respondent should be penalised in costs" ([42]–[43]).

Bean LJ started by citing the canonical law of restraint per Lord Parker of Waddington in Herbert Morris Ltd v Saxelby [1916] 1 AC 688, and took the test for when the doctrine applies from Carr LJ (as she then was) in Quantum Actuarial LLP v Quantum Advisory Ltd [2021] EWCA Civ 227 at [60]: it turns on the practical effect of a clause, judged when the contract is made ([45], [48]–[49]). In Bean LJ's words, "it is a question of substance, not form" ([49]).

It is not sufficient that an employer assert the clause does not stop the employee leaving: "No clause ever could do so", because the courts will not order an employee to work.^[1] Rather, the question is whether, viewed at signing, the provision "will or may have the effect of hampering the employee's ability to trade freely", where "financial disincentives are not exempt as a class from scrutiny" ([49]).

Two further arguments for Geeks failed. The first argument, a temporal one, was that the clause regulated only the period of employment. The Court's interest was in "whether they constituted an unreasonable indirect restraint when they came into effect", that is, after Mr Watts had gone ([51]). The second argument was that the debt was unconditional, payable whether he stayed or left, so it could not disincentivise anything. Bean LJ called it a "bold assertion" ([51]). If it were right, an employer could make a junior repay roughly six months' salary as the cost of being "trained", with no enquiry into reasonableness, and the public policy objections, "the undermining of national minimum wage legislation" among them, were obvious ([53]).

The ratio is at [54]. A term under which "all or part of the salary which he has been paid may be repayable" in specified circumstances "engages the restraint of trade doctrine". In legal terms, my view is that this paragraph of the judgment is of great importance for current restraint of trade contractual analysis.

That left Steel. Bean LJ accepted half of its ratio: a condition that pay depends on continuing employment or a period of service, which does not otherwise restrict the employee's freedom to work elsewhere, "is not a restraint of trade, or at least not one which is unreasonable": Peninsula Business Services Ltd v Sweeney [2004] IRLR 49, where Rimer J decided as much in the Employment Appeal Tribunal ([61]). The other half went. Marshall did not turn on an actual restriction of the salesman's later trade; Jonathan Sumption QC, at first instance, had held the condition was "a financial disincentive to the plaintiff not to compete with the defendant" ([61]). "While the result in Steel was no doubt correct", it is not authority that the doctrine reaches only clauses that directly limit what an employee does after leaving ([62]).

Why the Geeks clause failed

Bean LJ set out four ground rules ([66]). The employer bears the burden of proving the restraint reasonable, as the Supreme Court restated in Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32 at [48]. The absence of independent legal advice points away from reasonableness (Proactive Sports Management Ltd v Rooney [2011] EWCA Civ 1444), and a recital that the employee had the chance to take advice is "neither here nor there". "Inequality of bargaining power may be highly significant", as in Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308, and usually is in employment at low wages. Reasonableness is judged at signing, so Mr Watts's later £30,000 salary "cannot be determinative of reasonableness at the time of signing".

Geeks got some credit. Repayment by instalments was "more reasonable than the contract would have been" with a lump sum or an acceleration clause ([67]). The £8,108 was not itself a ground of appeal, but Bean LJ would have found its calculation "highly questionable". Mentoring was charged at £60 an hour: on Mr Watts's evidence, "five to six times what his mentor Mr Deering was actually paid". The scheme also counted only the hour or two a day the trainee spent being mentored or studying, as if the rest of his working day were worth nothing to Geeks. That, Bean LJ said, was "highly artificial" if clients were already being billed for his work ([68]).

Two reasons decided it. First, the clause applied "whatever the reasons for the employee's departure (with the single exception of redundancy)": dismissal on a week's notice, a move to a job with no pay rise, or no job at all; "he might have become a carer for his grandfather who suffered from dementia" ([69]). Second, the broader picture. A trainee paid not much more than the minimum wage was "reduced in retrospect to the equivalent of an unpaid intern", with a loan to repay ([70]). The appeal was allowed and the county court's orders set aside; Males LJ and Jeremy Baker LJ agreed ([71]–[73]).

The Geeks three-step test

Still open: what an employer may protect

A second pair of authorities sits underneath the first, and the Court of Appeal stepped round ruling on further matters.

Herbert Morris says an employee may take the skill and knowledge he gained in the job to a competitor; an employer can protect trade secrets and customer connections, but nothing more. An employer who restrains competition as such is, in Lord Parker's words, "not endeavouring to protect what he has, but to gain a special advantage" ([46]–[47]). Against that, Ingham v ABC Contract Services Ltd (Court of Appeal, 1993, unreported) allowed an employment agency to protect "a stable, trained work force" against a former employee poaching its staff, and Dawnay, Day & Co Ltd v De Braconier D'Alphen [1998] ICR 1068 is the authority usually cited for covenants against poaching staff ([63]–[64]).

A training clawback falls between Herbert Morris and Ingham. It protects the employer's investment in skills that Herbert Morris says belong to the employee, by a means that resembles Ingham's retention interest rather than a covenant against poaching. The scope of that interest "has not been defined in the 33 years since Ingham v ABC Services"; Bean LJ assumed it without deciding it ([65]).

There is something more to be said for the employer's side. HHJ Evans-Gordon cited Geeks's evidence that "We take a risk on inexperienced people", training them on a salary and comparing the scheme to Government apprenticeships ([31]). A rule that makes every clawback hard to enforce may mean fewer such jobs.

That is now for the Supreme Court. Permission to appeal was granted on 29 October 2026 by Lord Sales, Lord Burrows and Lady Simler (UKSC 2026/0126). The issue as the Court has stated it is whether a contractual scheme entitling a company to recover training costs from an employee is unenforceable as an unlawful restraint of trade. Until it rules, Geeks binds the county courts and employment tribunals on comparable clauses.

Practical points

• Treat every clawback as a restraint. The debt label, the "free to leave" recital and the advice recital carry little or no weight ([15], [49], [66]).
• Narrow the trigger. A clause that bites on dismissal, or whatever the reason for leaving, failed on that ground alone ([69]). Confine repayment to resignation within a defined period.
• Recover real money. Fees paid to a third party for a course or a qualification the employee keeps are the strongest case. Notional mentoring time and the employee's own salary are the weakest ([10]–[11], [68]).
• Scale it to the pay. The lower the salary, the harder it is to justify a sum that turns early wages into a loan ([70]). Instalments help but did not save this clause ([67]).
• Deductions from final pay. An employer who deducts training costs relies on the term as authority for the deduction under section 13 of the Employment Rights Act 1996. If the term is an unenforceable restraint, that authority is in doubt. Bennett v Geeks Ltd was decided on the footing that the scheme was valid, and the Court of Appeal was not shown it ([30]).
• Claims already on foot. The Supreme Court may change the law. A defendant to a county court claim for training costs now has Geeks in hand; an employer pressing such a claim should consider whether to ask for a stay until the appeal is decided.

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