In a recent case called Geeks v Watts, Mr Watts joined Geeks, an IT services company, as a trainee engineer earning £18,000 a year. His contract required him to repay £8,108 of training costs if his employment ended for any reason other than redundancy, with the debt reducing for each month worked after the first 12 months of employment. He resigned after eight months for a better paid job and Geeks sued him for the full amount of the training costs!
The Court of Appeal held the repayment clause was an unreasonable restraint of trade and unenforceable. A clause requiring an employee to repay money on leaving can restrain trade even though it does not directly stop them working elsewhere. The financial disincentive to leave is enough to bring the clause within the orbit of restraint of trade principles, and under scrutiny for reasonableness.
The Court acknowledged that Geeks had a legitimate interest in keeping a stable, trained workforce, but the repayment clause went further than necessary to protect it. It applied, with the sole exception of redundancy, regardless of how employment ended, and whatever the employee went on to do next. Its practical effect was to turn a low paid trainee retrospectively into something close to an unpaid intern.
Lucky Mr Watts you might say, but this case serves as a very useful reminder that such training repayment clauses need to be drafted very carefully by (or for) employers to ensure they have the maximum chance of being enforceable.