Geeks Limited v. Joseph Henry Watts [2026] EWCA Civ 889
The Court of Appeal in England and Wales hold that a training fee clawback clause in an employment contract is unenforceable as a restraint of trade.
Background
In March 2019, Mr Watts applied for a trainee quality assurance position at Geeks Ltd – a firm providing IT services. Mr Watts who had studied music at University, was living with considerable debt and had applied for more than 50 roles in the IT industry.
Following a successful application process, Mr Watts entered into an employment contract and a separate “Contract of Training Investment” with Geeks Ltd.
His salary was £18,000 in the first year, increasing to £20,000 and £22,000 in the second and third years. The training contract stated that Mr Watts had agreed to meet a “Training Cost Debt” of £8,108. The amount included mentoring, study and practice activities and other employment-related costs.
The debt could be repaid through continued employment. However, none of it would be written off until Mr Watts had completed 12 months’ service. It would then reduce by one eighteenth for each further complete month of employment. His contract stated that if his employment ended before the debt was fully written off, Mr Watts would be required to repay the outstanding amount in monthly instalments.
Mr Watts’ resignation
Mr Watts started work on 18 March 2019.
After Geeks Ltd refused his request for a pay rise, he resigned in November 2019 and accepted another quality assurance role with a salary of £30,000 with another company. As he had not completed 12 months’ employment, as stated in the Contract of Training Investment, none of the £8,108 training debt had been written off.
Geeks Ltd commenced County Court proceedings to recover the full amount. Mr Watts argued that these repayment provisions constituted an unlawful restraint of trade. Initially, the Deputy District Judge found in favour of Geeks Ltd, holding that although the clawback provisions did amount to a restraint of trade, they protected a legitimate interest and were not unreasonable. The legitimate interest was to retain employees that Geeks had invested time and money in training. The Court also ruled that there was “no particular inequality in Mr Watts’ bargaining power beyond that typical in employer-employee relationships”. [24] The County Court also found that Geeks’ calculations of Mr Watt’s training costs to be a genuine attempt at estimating the cost of the training received.
Mr Watts appealed the case to a Circuit Judge, Judge Evans-Gordon, who dismissed the appeal on 15 January 2024, upholding the previous decision of the County Court.
Mr Watts was then granted permission to appeal to the Court of Appeal on two grounds. First, that the Circuit Judge was wrong to hold that Geeks Ltd had a legitimate interest for the purpose of justifying the restraint of trade. Secondly, the Circuit Judge was wrong to hold that the restraint went no further than reasonably necessary to protect those interests.
Analysis of the Training Repayment Agreement and Associated Training Debt
Did the restraint of trade doctrine apply?
Geeks Ltd argued that the provisions did not engage the restraint of trade doctrine and simply created an enforceable debt.
The Court of Appeal rejected that argument. The fact that the contract did not expressly prevent Mr Watts from leaving his employment was not sufficient to defeat the restraint of trade argument. The relevant question was whether the provision, viewed at the date the contract was made, would or could practically affect the employee’s ability to trade freely.
The Court concluded:
“I am in no doubt that a clause in an employment contract… which provides that in specified circumstances all or part of the salary which he has been paid may be repayable to the employer, engages the restraint of trade doctrine.” [54]
The contractual statement that Mr Watts was free to leave his employment did not prevent the Court from considering the practical financial effect of him doing so.
Legitimate interest
The Court considered the validity of Geeks Ltd’s legitimate interest in “maintaining a stable, trained workforce”.
Lord Justice Bean did not definitively decide the scope of that interest. Instead, he proceeded on the assumption that Geeks Ltd had such a legitimate interest and considered whether the repayment provisions went further than was reasonably necessary to protect it.
The decision should therefore not be read as establishing that employers will always have a legitimate interest in retaining trained staff. The existence and scope of any legitimate interest will be situation dependant.
Reasonableness
Once the Court held that the training contract provisions did engage the restraint of trade doctrine, the question turned to whether they went no further than reasonably necessary to protect the legitimate interest of Geeks Ltd in “maintaining a stable, trained workforce”.
In considering this question, the Court identified several relevant factors.
- The onus was on Geeks Ltd to show that the clause went no further than necessary, not Mr Watts, as Geeks Ltd were the party invoking the restraint.
- Mr Watts did not receive independent legal advice when he signed the contracts. Whilst this was not conclusive, it pointed away from reasonableness.
- Lord Justice Bean stated that “inequality of bargaining power may be highly significant”, especially in the context of lower paid contracts of employment. He noted that “cases such as those of highly paid City brokers, or film stars… are not of much assistance…”. [66]
- The reasonableness of the provision also had to be assessed when the contracts were signed. The fact that Mr Watts later obtained a better-paid position could not retrospectively establish that the clause had been reasonable at the outset.
The Court accepted that allowing repayment by instalments was more reasonable than requiring an immediate lump-sum payment. However, this did not make the overall scheme reasonable.
The calculation of the training debt
Lord Justice Bean described aspects of the calculation as “highly questionable”. [68]
In particular, mentoring time was valued at £60 per hour, which Mr Watts claimed was five or six times the amount actually paid to his mentor.
The calculation also appeared to treat much of Mr Watts’ working day, outside of training, as being of no value to Geeks Ltd.
Why the provisions were unenforceable
The Court identified two reasons why the repayment provisions were unreasonable and unenforceable.
1. The reason for leaving employment was irrelevant
The provisions applied however the employment ended, except in cases of redundancy.
They applied whether Mr Watts resigned voluntarily or was dismissed, whether he joined a competitor or left the technology sector, and whether he left for higher pay, no pay or personal reasons.
The clause therefore operated far more widely than situations in which Geeks Ltd’s training investment might genuinely be at risk.
2. The practical effect on Mr Watts’ remuneration
The Court also considered the overall effect of requiring a relatively low-paid employee to repay £8,108 after only eight months’ employment.
Lord Justice Bean concluded:
“The effect of the clawback provisions is that in the early months of his employment Mr Watts, who was paid not very much more than what was then the level of the national minimum wage, was reduced in retrospect to the equivalent of an unpaid intern albeit with a loan repayable over a period.” [70]
He continued:
“I cannot accept that these repayment provisions went no further than reasonably necessary to protect the legitimate interests of Geeks in maintaining the stability of their trained workforce.” [70]
The training fee clawback provisions were therefore unreasonable and unenforceable.
Conclusion
Geeks Ltd v Watts confirms that a financial obligation may amount to a restraint of trade even where the employee is not expressly prohibited from leaving employment.
Once the doctrine is engaged, the employer must show that the clause protects a legitimate interest and goes no further than reasonably necessary.
Relevant factors in assessing reasonableness are if the clause applies irrespective of the employee’s reason for leaving employment and if it retrospectively reduces the employee’s wage to below the National Minimum Wage.
While the decision is not formally binding on the courts in Northern Ireland, it is nevertheless likely to be persuasive in Employment Tribunals.