Non-compete clauses have been one of the cornerstones of employment agreements as they provide a safe space to employers in terms of safeguarding know-how and reducing employee turnovers. On the other hand, rules restricting the scope of non-compete clauses are applied to liberate the employee mobility, which also contributes to the development and innovation of the relevant sector.
Rules on Non-Compete Clauses in Turkey
In Turkey, employees’ duty of diligence and loyalty to their employers are regulated under the Code of Obligations with no. 6098, where employees are obliged to act faithfully in protecting the rightful interests of the employer. As long as the employment relationship continues, employees are prohibited to serve third parties for a fee contrary to their loyalty duty and in particular, to compete with their employer. Additionally, to the extent necessary for the protection of employers’ rightful interests, employees are also obliged to keep trade secrets after the employment relationship end.
The Code of Obligations further sets forth that employees may agree to refrain from competing with their employer after the termination of the employment agreement, i.e. from establishing a competing business on their own account, working for another competing business or entering into a relationship of interest with a competing business, by signing an additional agreement or including a clause in their employment agreement. On the other hand, the non-compete clauses are only applicable in cases where (i) the employment relationship provides the employee with the opportunity to obtain information about the employer’s customer portfolio or trade secrets, and (ii) the use of this information will cause significant harm to the employer.
The terms of non-compete clauses are also defined under the Code of Obligations in a way to prevent unfairly jeopardizing the economic future of employees. Accordingly, the non-compete clauses may not impose (i) unreasonable restrictions in terms of place, time and type of work, and (ii) its duration may not exceed two years, except in special circumstances and conditions.
Furthermore, non-compete clauses should not completely restrict employees from performing work with their existing knowledge and experience after the termination of the employment relationship. In this regard, the courts have the authority to limit the excessive non-compete clauses in terms of its scope or duration, by evaluating all the circumstances and conditions and considering the counteraction that employers may have undertaken in return.
Interpretation of the Rules on Non-Compete in a Globalized Landscape
Considering the dynamic nature of the world, the application of territorial restrictions in non-compete clauses present significant challenges for both the employees and the employers. The traditional boundaries defining workplaces and customer residencies have become increasingly fluid and limitless, complicating the enforcement and practicality of such restrictions. For instance, the territorial restrictions in non-compete clauses are hardly applicable in the gaming industry, which stands out as one of the most global and interconnected sectors, where the notion of territorial boundaries is virtually obsolete.
Although the rules on non-compete clauses lack sufficiency in this regard, the case-law provides a direction in individual cases. The Court of Cassation’s decision (No. 2019/6672) underlines that excessive restrictions in non-compete clauses may be intervened and amended by the courts, where the agreement of the parties is kept alive, but the excessive restrictions are prevented.
Another decision by a Regional Courts of Justice (No. 2023/1725, File No. 2022/1742) emphasizes that the workplaces of employees do not indicate that they are actually competing in that region. With the adoption of remote work policies, the traditional understanding of a workplace, where the workplace of an establishment is the region where it competes, has become obsolete. Instead, the Turkish courts are placing emphasis on the locations where actual competition occurs, regardless of the physical workplaces of the parties involved.
Even though the case-laws may provide a guidance, legislative rules and legal precedents still fall short in adequately addressing the complexities of competition in a globalized context; and legislation changes are a necessity to achieve the objective of non-compete clauses.
Authors: Hatice Ekici Tağa, Begüm Alara Şahinkaya, Göksu Tuğrul