In this article, Alex Christen and Seán Davies examine the Court of Appeal’s decision in Geeks Ltd v Watts and consider the key lessons for employers using repayment clauses, including in the context of training and immigration-related costs.
Repayment clauses are commonly used by employers seeking to protect investments made in their workforce, particularly where significant costs have been incurred in relation to training, professional qualifications or immigration.
However, the recent Court of Appeal decision in Geeks Ltd v Watts [2026] EWCA Civ 889 provides an important reminder that these provisions need to be drafted carefully. A repayment obligation may engage the restraint of trade doctrine even where it does not expressly prevent an employee from leaving or working elsewhere. What matters is the practical effect of the provision.
The decision does not mean that repayment clauses are inherently unenforceable. Instead, it highlights the importance of ensuring that they are appropriately tailored, proportionate, and go no further than reasonably necessary to protect the employer’s legitimate interests.
What happened in Geeks v Watts?
Mr Watts joined Geeks Ltd as a trainee quality assurance engineer in March 2019 on a starting salary of £18,000. Alongside his employment contract, he entered into a separate training agreement under which Geeks attributed a value of £8,108 to the cost of supporting and training him.
The debt would only begin reducing after 12 months’ employment. If Mr Watts’ employment ended before it had been cleared, the outstanding amount became repayable, with redundancy being the only exception.
Mr Watts resigned after eight months to take a higher-paid role elsewhere. As he left before the debt had begun reducing, Geeks sought to recover the full £8,108.
The dispute eventually reached the Court of Appeal.
Can a repayment clause amount to a restraint of trade?
Geeks argued that the £8,108 represented a debt which existed from the outset and that leaving employment simply changed the way in which it was repaid.
The Court rejected this approach. The restraint of trade doctrine looks at the substance and practical effect of an arrangement rather than simply the label attached to it. A significant financial consequence attached to leaving employment can therefore engage the doctrine even though the employee remains legally free to resign.
Once the doctrine is engaged, the employer must justify the restriction by reference to a legitimate business interest and show that its terms are reasonably necessary to protect that interest. Although the Court accepted that, for the purposes of its analysis, Geeks had an interest in retaining a stable and trained workforce, it found that the breadth and effect of the particular arrangement could not be justified.
Two features of the arrangement were particularly important to the Court’s conclusion. The first was how widely the repayment obligation applied; the second was the severity of its financial impact on Mr Watts.
Seven lessons for employers
1. Carefully consider when repayment should be triggered
Geeks’ provision applied whenever Mr Watts’ employment ended, with redundancy being the only exception. This meant that broadly the same liability could arise whether he resigned voluntarily, was dismissed, moved into another industry, or stopped working for personal reasons.
Employers should avoid automatically requiring repayment whenever employment terminates. Instead, the clause should identify the circumstances in which recovery is genuinely justified. There may, for example, be a stronger case for repayment following voluntary resignation shortly after significant expenditure, or dismissal for gross misconduct, than where employment ends through redundancy or other circumstances outside the employee’s control.
2. Connect the repayment obligation to the legitimate interest being protected
Identifying a legitimate business interest is only the starting point. The scope of the repayment provision must also be capable of justification by reference to that interest.
In Geeks, the repayment obligation extended to a wide range of departures without distinguishing between the circumstances in which Mr Watts’ employment came to an end. This called into question whether the full scope of the provision was genuinely required to protect the interest relied upon by Geeks.
Employers should therefore identify precisely what the clause is intended to protect and ask whether each aspect of the repayment obligation is genuinely necessary to achieve that objective.
3. Make sure the amount can be justified
Although calculation of the £8,108 was not itself a ground of appeal, the Court expressed reservations about how Geeks had arrived at the figure.
Mentor time had been valued at £60 per hour, which on Mr Watts’ evidence was several times what the mentor was actually paid. The calculation also appeared to attribute no value to significant periods of Mr Watts’ working time despite evidence that clients were already being charged for his services.
Repayment figures should therefore have a genuine and defensible relationship with the costs incurred. Employers should retain records showing what expenditure was incurred and how the amount recoverable has been calculated.
4. Keep the financial impact proportionate
Mr Watts was a relatively junior employee earning £18,000 per year but faced an £8,108 repayment obligation. The scale of that liability was substantial when viewed against his level of earnings. The Court considered that the effect of the arrangement during the early months of his employment was retrospectively to reduce him to the equivalent of an unpaid intern.
Employers should therefore consider the repayment obligation in the context of the employee’s remuneration and circumstances. A sliding scale can assist, but its design matters. Employers should consider when reductions begin, how quickly liability decreases and whether the overall repayment period is proportionate.
Importantly, reasonableness is assessed when the agreement is entered into. Mr Watts’ subsequent move to a £30,000 role could not retrospectively make the original arrangement reasonable.
5. Avoid a ‘one size fits all’ approach
Repayment provisions should be tailored to the particular investment and circumstances rather than applied mechanically across a workforce.
Mr Watts’ relatively junior position and low salary formed part of the context in which the provision operated. Employers should therefore consider factors such as the value of the investment, the employee’s remuneration and seniority, and the likely financial effect of the provision when deciding its scope and duration.
This does not necessarily require an entirely bespoke agreement for every employee, but employers should be able to explain why the particular repayment arrangement is appropriate.
6. Consider bargaining power and independent advice
The Court noted that Mr Watts was a relatively low-paid junior employee who had not obtained independent legal advice. The absence of advice was not decisive, but was a relevant pointer away from reasonableness, while inequality of bargaining power may be particularly significant in the employment context.
Employers should therefore give employees sufficient time and opportunity to understand the repayment obligation and obtain independent advice before signing, particularly where significant sums are involved. Keeping a record that this opportunity was provided may also assist if the reasonableness of the arrangement is later challenged.
7. A legitimate interest is not enough on its own
Even assuming that Geeks was entitled to protect its interest in retaining a trained and stable workforce, that did not justify the particular terms it had chosen. The repayment obligation still had to be no wider than was reasonably necessary to protect that interest.
Employers should therefore be able to explain not only what interest they are protecting, but why the particular amount, duration, scope and repayment triggers are necessary and proportionate.
That assessment should ideally be undertaken when the agreement is drafted rather than only once enforcement becomes necessary.
What does this mean for immigration repayment clauses?
The decision is also particularly relevant for employers that use repayment provisions in connection with immigration and sponsorship costs.
Sponsoring a worker can involve significant expenditure, and employers may understandably want to protect some of that investment where an employee leaves shortly afterwards. However, Geeks v Watts reinforces the need to ensure that an immigration repayment provision does not operate simply as a substantial financial deterrent to leaving employment.
Employers must also distinguish between immigration costs, which may potentially form part of a repayment arrangement, and sponsorship costs, which cannot lawfully be passed on to sponsored workers. Depending on the circumstances, this may mean distinguishing costs such as immigration application fees, priority services, and the Immigration Health Surcharge from prohibited sponsorship costs, including relevant sponsor licence fees, Certificate of Sponsorship and Immigration Skills Charge costs.
The same principles should then be applied: the costs should be identifiable and evidenced, repayment should arise only in appropriate circumstances, liability should reduce on a proportionate basis and the overall financial impact on the employee should be considered.
Employers should also be alert to potential discrimination issues where the operation of a repayment period disadvantages employees because, for example, certain periods of family-related absence do not count towards reducing their liability.
Don’t overlook deductions from wages
An enforceable repayment obligation does not automatically give an employer the right to deduct the outstanding amount from an employee’s wages.
Employers intending to recover sums from salary or final payments should ensure that they have appropriate contractual or written authority for the deduction and should also consider the interaction with National Minimum Wage requirements.
What should employers do now?
Geeks v Watts does not spell the end of repayment clauses. Properly structured arrangements seeking proportionate recovery of genuine expenditure remain capable of enforcement.
However, the decision is a useful prompt for employers to review existing repayment arrangements now rather than waiting until enforcement becomes necessary.
When drafting or reviewing a repayment provision, employers should ultimately ask four questions:
- What legitimate interest are we seeking to protect?
- Which costs are we seeking to recover, and can we evidence them?
- In what circumstances is it genuinely appropriate for the employee to repay those costs?
- Is the resulting obligation proportionate and no wider than necessary to protect our interest?
Carefully addressing those questions at the outset should put employers in a stronger position to protect their investment while reducing the risk that a repayment provision is ultimately found to be an unreasonable restraint of trade.
How can we help?
If you have concerns about the way your repayment provisions are drafted, please contact a member of our Employment team today.
Alex Christen
Partner
Business Immigration, Employment, Employment Investigations, Equality & Diversity, International
Alex is a Partner in our Employment and Immigration team. Alex leads the business immigration team, successfully supporting companies and individuals with immigration issues, including understandin... Read More
Seán is a Trainee Solicitor in the Employment & Immigration team. Seán studied both Politics & International Relations and LLB Law at the University of Birmingham, before going on to complete the... Read More
