Bonus Clawback Provisions

In Steel vs Spencer Road LLP the High Court held that a bonus clawback provision was enforceable and did not unreasonably punish the employee so as to be a restraint of trade clause.

Steel vs Spencer Road LLP

Facts of the case

In the case, Mr. Steel worked for Omerta and received a basic salary of £65,000 and an annual discretionary bonus. In 2022 that bonus amounted to £187,500. Mr. Steel then resigned a month after receiving the bonus but, in his contract, there was a bonus clawback provision which provided that it had to be repaid in full if he left his job or was given notice within 3 months of the bonus being paid. Mr. Steel then refused to repay the bonus arguing that the bonus clawback provision amounted to an unreasonable restraint of trade and discouraged employees from leaving employment.

The case originally went to the Insolvency and Companies Court (ICC) and Mr. Steel lost, the Court finding that the restraint of trade did not restrict him from leaving employment. He then appealed to the High Court.

The High Court dismissed the appeal. The High Court held that although there was no doubt that the employee bonus or commission scheme was conditional on the employee remaining in employment, that did not in itself make it a restraint of trade. It refused to look at the other post-termination restrictive covenants in the contract which, it held, had no bearing on the interpretation of the bonus clawback provision. The High Court referred to an earlier Judgment in a case called Tullet, which essentially held that bonus clawback provisions in a contract of employment, without something new or additional, would not generally be a restraint of trade even if they required the employee to remain in employment for a specified period to avoid their effect. Later case law, which for a time appeared to have muddied the waters, was on different facts and therefore could be disregarded.


The case is good news for employers who may wish to prevent a senior or important employees leaving without warning. It affirms that bonus clawback provisions are worth considering. The High Court’s refusal to strike it down now gives clear guidance in this area and therefore clawback provisions can be a strong disincentive for employees to leave at short notice and, indeed, are less vulnerable to challenge via the Courts than restrictive covenants.