Training repayment clauses must be proportionate or face unenforceability

Employers who use training repayment clauses should review them carefully. In a recent Court of Appeal case, the court confirmed that training repayment clauses can amount to an unlawful restraint of trade and will be unenforceable if they go beyond what is reasonably necessary to protect the employer's legitimate interests.

Training repayment clauses are contractual provisions that require employees to repay the cost of training if they leave employment within a specified period. While such clauses can be legitimate tools for protecting an employer's investment in employee development, they must be carefully drafted.

The Court of Appeal's decision emphasizes that training repayment clauses will be scrutinized under the common law doctrine of restraint of trade. Any clause seeking to restrict an employee's freedom to work must be reasonable in scope, duration, and geographical area to be enforceable.

Key considerations for employers include: proportionality of the repayment amount to actual training costs; reasonableness of the repayment period; demonstration of genuine business interests; connection between training and the restraint; and fairness in application. Generic training may not justify a broad repayment obligation. Clauses that fail these standards risk being struck down as unenforceable restraints of trade.