In the recent High Court case of Steel v. Spencer, the court looked at the operation of clawback clauses in employment contracts, and rejected the argument that a clawback clause, stipulating the repayment of a bonus under certain circumstances, amounted to s restraint of trade or a penalty clause.
The contested clawback clause required employees to repay the bonus if they left the employment or were under notice within three months of receiving it. Despite being acknowledged as a disincentive to resign, the court determined that it did not amount to a restraint of trade. One main reason being that the clause did not prohibit the employee from seeking alternative employment elsewhere.
This decision highlights that enforceability of clawback clauses depends on the specific contractual terms and conditions.