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Bonus clawback was not a restraint on trade

In the recent case of Steel v Spencer Road LLP (t/a The Omerta Group) [2023] EWHC 2492 (Ch), the High Court ruled that a bonus clawback provision in an employment contract did not amount to a restraint of trade.

In January 2022 Mr Steel, the claimant received a bonus of £187,500 from his employer, Omerta. In February 2022 he resigned from the company.

Mr Steel’s employment contract contained a clawback clause which required him to repay the bonus if he left or was given or gave notice within 3 months of it being paid. As a result of him resigning this activated the clause.

The claimant refused to repay the bonus back, therefore Omerta served a statutory demand on him.  The claimant appealed to the Insolvency and Companies Court (ICC) to have the demand set aside and argued that the clawback provision was an unreasonable restraint of trade. The ICC dismissed this argument, but the claimant later appealed to the High Court.

The High Court dismissed the appeal and held that:

  • The ICC was correct to  conclude that a contractual clawback provision was not a restraint to trade.  Even though a bonus scheme was conditional on the employee staying in his employment for a certain amount of time, it operated as a disincentive to resigning. The clawback clause did not amount to a restraint of trade.