Training cost clawbacks: enforceable or a restraint of trade?

Many employers provide training to their staff, and in return for that investment they expect, in time, to benefit from the employee's increased skills. That position needs to be considered against the background that if employees leave shortly after completing their training:

The employer will likely have incurred costs to provide the training
The employer may not get the benefit of that training
The employer may find their newly skilled staff being picked up by competitors who have not incurred the time, effort and cost of the training, and instead simply offer higher wages to newly qualified staff they have not invested in

To avoid this, employers may (and indeed may be encouraged to) put in place training agreements which seek to claw back training costs. Such agreements do not prevent an employee from leaving. Indeed, the ability to force an employee to remain or carry out work is prohibited under s.236 of the Trade Union and Labour Relations (Consolidation) Act 1992. But they may give rise to a question as to whether, in practice, they amount to a restraint of trade.

If they are a restraint of trade, the enforceability of such an agreement becomes open to question.

This very question has come into the spotlight in Geeks Ltd v Watts [2026] EWCA Civ 889.

The decision

In this case:

Lord Justice Bean found that the existence of the training clawback agreement did amount to a restraint of trade. He did, however, go on to make the point that "not every provision which leads to the forfeiture of a benefit if the employee leaves the relevant employment is a restraint of trade".
That finding did not immediately make the agreement void. The Court had to consider whether there was a legitimate interest to protect, and in this case it was accepted (notwithstanding some criticism) that "maintaining a stable, trained workforce" was such an interest, and was engaged.
Finally, the test of reasonableness was applied, and the Court considered whether the restriction went further than necessary to protect that interest. On this last test it was found that the restriction went too far, and as such the clawback was held to be unenforceable.

With this decision, there has been some concern and debate as to whether training clawback agreements are enforceable at all.

Commentary

The case is important as it reminds us that a restraint of trade can go beyond a simple prohibition on undertaking an activity. It can be anything which practically restrains freedom of trade.

However, just because the Court made these findings does not mean all training agreements are invalidated.

There are certain key features of this case that should be borne in mind:

This was a case not for the recovery of tuition fees but of "training costs". These were internal training costs, including for services by the employee's "mentor" who was also employed by the company, and for general training undertaken on client files. This does not appear to be a case where the employee gained new formal qualifications.
The costs for the mentor were set at £60 per hour. In practice, that was noted as being "five to six times what his mentor ... was actually paid". As such, this was found to be "highly questionable".
There was also a general charge for his training, which suggested that part of the working day was unaccounted for, as if during that time what Mr Watts was doing could be treated as effectively of no value to the employer. This was described as highly artificial where, as the evidence indicated, clients were already being billed by the company for his services.
The Court also had a clear issue with the fact that the clawback would effectively have taken back all of the monies paid to the employee during the period, essentially reducing his wages significantly, if not extinguishing them. As the Court put it: "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. 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."
The Court also drew a distinction between reasons for leaving the employment. Interestingly, it noted the difference between leaving to take up caring duties for a parent and leaving for any other reason. The agreement in question excluded repayment where the reason for leaving was redundancy. It is, however, hard to see how a clause could be effectively drafted to cover all such eventualities while at the same time avoiding abuse.

One suspects this decision may have fallen very differently if:

The sums related to course fees actually incurred, and/or
The sums claimed were more reasonable

Key takeaway points

The key points to consider when reviewing training agreements are:

Training agreements and clawbacks of costs are not automatically void. However, each needs to be looked at carefully.
Employers need to consider what it is they are protecting, look at the steps they are taking to do so, and ensure that, viewed in the round, those steps are reasonable.
Consideration should be given to the value taken from the employee and the skills gained, with a run-off of costs that sees a decreasing scale of repayment reflecting the benefit the employer gains from the training.
In this case, comment was made that allowing the employee to pay by instalments, if sums became due, was a notably reasonable step taken by the employer.

Jason Alcock is a solicitor and Head of our Dispute Resolution and Employment Department. If you have any questions regarding any of the issues addressed in this article, or employment law generally, please do contact us.

Contact us to speak with a member of our Employment Law Team.

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This article is for general information only and does not constitute legal advice. If you have a specific query, please contact us directly.