John Platts-Mills led by Adam Solomon KC of Littleton Chambers, instructed by Aman Thakar of Leigh Day, in successful appeal to the Court of Appeal. The case was supported by the Good Law Project.

The case is the first occasion on which the Court of Appeal has had the opportunity to consider in detail the application of the doctrine, legitimate interest and reasonableness in the context of training fee clawback schemes.

At the time of commencing his employment with Geeks, Mr Watts, and other graduates, was required to enter a “training fee clawback” scheme. Pursuant to the scheme, Mr Watts accrued a debt to Geeks including 1.5 x his salary during the first month of his employment and the “cost” or “mentoring” provided by colleagues during the first six months of his employment.

On completing 12 months of employment, the debt reduced in increments of 1/18^th per subsequent complete month of employment until it reached zero. If his employment terminated within the first two and a half years, Mr Watts was contractually obliged to pay the outstanding amount of the debt to Geeks.

Mr Watts commenced his employment on 15 March 2019 and resigned on 12 November 2019. He was one of multiple employees at Geeks to be dissatisfied with their working conditions, including the debt obligation. 

Geeks issued a claim against Mr Watts (and other former employees) seeking payment of a debt in the sum of £8,108. At first instance the trial judge accepted John Platts-Mills case that the “training fee clawback” scheme was in restraint of trade but held that Geeks had a legitimate interest and the restraint was justified. A first appeal was unsuccessful.

In the Court of Appeal, Bean LJ (Males and Jeremy Baker LJJ agreeing) rejected Geeks’ submission that the “training fee clawback” scheme was not in restraint of trade. Bean LJ addressed the line of cases delineating between restraints operating pre-termination (e.g. a contingent bonus) and post-termination (e.g. a non-compete) and characterised the provisions in issue as “an unreasonable indirect restraint [coming] into effect [post-termination]”. Bean LJ held that whether the restraint of trade doctrine is engaged in any particular circumstance is fact specific and a question of substance.

As regards legitimate interest, the CA addressed the well-known case of Dawnay, Day & Co Ltd v de Braconier D’Alphen [1997] IRLR 442. During the hearing it was apparent that Bean LJ was conscious of the potential implications for clauses that make provision for the repayment of externally sourced training. He appears to have dealt with this by reaching no firm conclusion as regards the legitimate interest in this case and proceeded on the assumption “for present purposes” that it was “maintaining a stable, trained workforce”, noting such a legitimate interest has not been defined in the 33 years since Ingham v ABC Services.

Bean LJ had little difficulty in concluding that even on the assumption Geeks had a legitimate interest, it could not justify the restraint. The CA placed reliance upon two points. The first is that the provisions applied whatever the reasons for Mr Watts’ departure, including his dismissal. The second involved standing back and noting that “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”.

Multiple further issues of law and procedure relating to restraint of trade disputes arose at trial, on first appeal and before the Court of Appeal. John Platts-Mills is available to discuss them with employers and employees alike. Geeks are understood to be seeking permission to appeal to the Supreme Court.

The judgement can be read in full here.