11111. NTRODUCTION

Competition can be defined as the struggle between individuals or entities aiming to achieve the same objective, seeking superiority or greater profit. As one of the most significant dynamics of economic and commercial life, competition is also particularly relevant in employment relationships. Employees may gain access to strategic information regarding their employer’s business, clientele, and operational areas. The use of such information after the termination of the employment contract may pose serious risks to the employer, which is why the legal system provides for the institution of “non-competition agreements.”

While the primary obligation of an employee under an employment contract is the performance of work, one of the most fundamental ancillary obligations is the duty of loyalty. During the existence of the employment relationship, the employee’s obligation not to compete with the employer is not an independent duty but a natural consequence of the duty of loyalty. Therefore, even if a non-competition clause is not explicitly stipulated in the employment contract, it remains binding during the employment relationship. However, once the employment relationship ceases, the duty of loyalty also terminates. Should the employer wish for the employee’s non-competition obligation to extend beyond the term of employment, this must be expressly stipulated in the employment contract or established through a separate non-competition agreement.

A non-competition agreement aims to protect the legitimate interests of the employer, preventing the employee from using acquired knowledge to harm the employer or gain an unfair competitive advantage. At the same time, such provisions must not excessively restrict the employee’s freedom to work or freedom of contract. In this context, the conditions and limits of non-competition obligations post-termination are regulated under Articles 444 et seq. of the Turkish Code of Obligations (“TCO”).

This study examines non-competition agreements from the perspective of Turkish labor law and analyzes their implications for employee–employer relations.

2. CONDITIONS FOR THE VALIDITY OF A NON-COMPETITION AGREEMENT

Pursuant to Article 444(1) of the Turkish Code of Obligations, the employee may, by means of a written undertaking, agree to refrain from engaging in any form of competition with the employer subsequent to the termination of the employment contract. This includes, in particular, establishing a competing enterprise on their own behalf, being employed by another competing enterprise, or, more generally, entering into any other form of interest-based relationship with a competing enterprise. For a non-competition agreement to attain validity, the legislator has prescribed certain conditions. In this context, the rationale underlying the limitation of the principle of contractual freedom is, in the view of the legislator, to secure the protection of the employee, who is regarded as occupying a weaker bargaining position vis-à-vis the employer.

2.1. Capacity to Act (Legal Capacity)

For a non-competition agreement to be valid, the employee must possess legal capacity. Pursuant to Article 9 of the Turkish Civil Code, legal capacity is defined as the ability of an individual to acquire rights and assume obligations through their own acts, to terminate such rights and obligations, or to create new legal relationships.

It is sufficient, for the recognition of the employee’s legal capacity, that such capacity exists at the time the non-competition agreement is executed. Conversely, in cases where the employee does not possess legal capacity on the date of execution, the non-competition agreement must be deemed invalid.

2.2. Existence of an Employment Contract

The provisions concerning non-competition agreements are regulated under Chapter Six of the Turkish Code of Obligations, entitled Contracts of Employment. This is because the conclusion of a non-competition agreement is contingent upon the existence of an employment relationship between the parties. In connection with their employment relationship, the employee and the employer may either incorporate a non-competition clause into the employment contract, to become effective following its termination, or execute a separate non-competition agreement for the same purpose. Whether the employment contract is concluded for a definite or indefinite term does not give rise to any distinction in this respect.

A non-competition agreement must be executed either at the time the employment contract is signed or during the subsistence of the employment relationship. Agreements concluded prior to the execution of the employment contract, or subsequent to the termination of the employment relationship, do not fall within the scope of Articles 444 et seq. of the Turkish Code of Obligations. Furthermore, where a non-competition agreement is sought to be executed after the conclusion of the employment contract and during the continuation of the employment relationship, such an agreement may be regarded, pursuant to Article 22 of the Labor Act, as constituting a substantial alteration in the conditions of employment.

2.3. Form

Pursuant to Article 444(1) of the Turkish Code of Obligations, the validity of a non-competition agreement is expressly made contingent upon its execution in writing. The relevant provision establishes the written form as a condition of validity, and any agreement to the contrary shall be deemed invalid.

A non-competition obligation may either be incorporated within the employment contract or regulated through a separate agreement during the course of the employment relationship. Irrespective of the form chosen, the written form remains a prerequisite for the validity of the non-competition agreement. The purpose of the written form is to ensure the protection of the employee and to provide clarity regarding the scope of the restriction. Since no special formal requirements are prescribed, execution in simple written form is sufficient.

While the validity of the agreement is linked to the written form, no formal requirement has been prescribed for its termination. The prevailing view in doctrine holds that, since the purpose of the form requirement is the protection of the employee, the prohibition ceases upon termination of the employment relationship, and the employee no longer possesses any protectable right. However, any amendments to the content of a non-competition agreement must also be made in writing. Pursuant to Article 13 of the Turkish Code of Obligations, any modification of an agreement that is required by law to be executed in writing must itself comply with the written form requirement

2.4. The Employee’s Access to Certain Trade Secrets of the Employer

In order to largely prevent undue interference with the employees’ right to work, the legislator has recognized that a non-competition agreement may only be concluded where the employer has a significant interest. It is generally accepted that the existence of a significant interest arises particularly in relation to the protection of the employer’s clientele or trade secrets. Indeed, the case law of the Court of Cassation confirms that a non-competition agreement is valid only where the employee has the opportunity to access the employer’s clientele or trade secrets, and, as a result, there exists a real risk of substantial harm to the employer.

2.4.1. The Element of Familiarity with Customer

Pursuant to Article 444(2) of the Turkish Code of Obligations, for a non-competition to occur, the employee must have the opportunity, by virtue of the employment relationship, to acquire knowledge regarding the employer’s clientele. In doctrine, the term “clientele” is defined as a group of persons who regularly purchase goods or services from a business and maintain a continuous relationship with that business. Conversely, individuals who engage in a single transaction or receive a service only once are excluded from this definition.

The element of familiarity with customers arises where the employee possesses knowledge concerning the commercial and personal relations of the employer’s clientele and has the capacity to use such knowledge for economic gain in their own favor. The validity of the non-competition agreement does not depend on the employer necessarily treating the clientele as a trade secret or maintaining it in strict confidence. It is sufficient that, due to the employment relationship, the employee becomes familiar with the employer’s clientele and, upon termination of the employment relationship, has the potential to exploit this clientele to the detriment of the employer.

2.4.2. The Element of Knowledge of Trade Secrets

Non-competition, apart from the element of familiarity with the clientele, may also occur where the employee acquires knowledge of the employer’s manufacturing processes or trade secrets. Pursuant to Article 444(2) of the Turkish Code of Obligations, a non-competition agreement may be established if the employee becomes aware of trade secrets that the employer is obliged to keep confidential. In order for information to qualify as a trade secret, it must relate to the employer’s business, be known only to a limited circle, and be subject to the employer’s intention to maintain its confidentiality. Whether a particular piece of information constitutes a trade secret must be determined on a case-by-case basis, taking into account the specific circumstances.

Where an employee acquires knowledge of a trade secret from a limited circle, and the employer subsequently discloses such information to third parties, the information loses its character as a trade secret, as the possibility of harm to the employer arising from its disclosure is thereby eliminated.

2.4.3. Existence of a Real Risk of Substantial Harm to the Employer

The mere fact that the employee is familiar with the employer’s clientele or acquires knowledge of trade secrets is not, by itself, sufficient to satisfy the validity requirements of a non-competition agreement. Rather, it is also required that the employer faces a real risk of substantial harm arising from such knowledge.

For harm to the employer to be considered significant, it must result from the employee’s use of commercial and technical information or knowledge of the clientele acquired during the employment relationship. Otherwise, the exercise of professional knowledge, expertise, or marketing skills by the employee, after the termination of the employment contract, in order to compete on their own behalf or for another employer, and thereby place the employer in an economically difficult position, does not fall within this scope.

The criterion for the validity of a post-contractual non-competition obligation is not actual harm, but the likelihood of substantial harm occurring. Accordingly, it is not necessary for the harm to have materialized; it is sufficient that, in the ordinary course of business, there exists a real risk that the employer may suffer significant damage. However, the term “harm” here does not refer to any economic or competitive disadvantage the employer may face, but rather to a substantial level of economic detriment as envisaged by the law.

3. LIMITATIONS

A non-competition agreement imposes certain restrictive obligations on an employee, ultimately limiting their economic freedom. Often, the employee may experience economic disadvantage as a direct consequence of such agreements. This necessitates that non-competition agreements be drafted within defined limits and not extended to the detriment of the employee. In other words, post-employment non-competition obligations can only be enforced in a manner that does not unjustifiably jeopardize the employee’s economic future.

When balancing the employer’s interests with the employee’s circumstances, limitations must consider opportunities for the employee’s professional development. Non-competition agreements also implicate constitutional rights, such as the freedom of employment and the freedom of contract.

Article 48 of the Constitution guarantees that “everyone has the right to work and to freely choose their profession,” while Article 49 recognizes that “work is both a right and duty of everyone.” Accordingly, to ensure a fair balance between these competing interests, post-employment non-competition obligations are subject to limitations under Article 445(1) of the TCO.

3.1. Temporal Scope

An indefinite post-employment non-competition obligation could economically ruin an employee. To prevent such outcomes, Article 445(1) of the TCO provides that, except under special circumstances, the duration of post-employment non-competition obligations cannot exceed two years.

Court practice supports this interpretation. For instance, in its decision dated 24 October 2019, the 11th Civil Chamber of the Court of Cassation held that a ten-year non-competition clause with an excessively broad geographic scope violated Article 445(1) of the TCO. The Court further noted that, under paragraph 2 of the same article, judges have the authority to limit overly burdensome non-competition clauses with respect to duration and scope. This confirms that non-competition obligations must not be applied disproportionately to the detriment of the employee.

Nonetheless, exceptions are recognized. The employee’s position, level of expertise, access to trade secrets, or influence over client relations may justify extending the duration beyond two years, provided that misuse of such specialized knowledge could substantially harm the employer’s competitive position.

3.2. Geographic Scope

Another critical aspect of assessing the validity of a non-competition agreement is its geographic scope. Just as indefinite temporal restrictions would unreasonably restrict the employee’s right to work, undefined or excessively broad geographic limitations may effectively preclude employment anywhere. Such restrictions impose severe economic and social consequences on the employee.

Accordingly, Article 445(1) TCO requires that the geographic area in which the restriction applies be clearly defined, limiting protection to the employer’s legitimate business interests while avoiding unnecessary deprivation of the employee’s freedom to work.

The geographic scope of a non-competition agreement is limited to the area in which the employer actually conducts commercial activities. In other words, the inclusion of a region where the employer has no business operations or commercial relations is inconsistent with the employer’s protectable interests and renders the non-competition clause invalid. For instance, the use of information relating to customer relations or trade secrets in a region where the employer maintains such connections may directly affect the employer’s interests; however, the use of the same information in a geographic area where the employer has no presence or activity would ordinarily not cause any harm.

Court practice generally invalidates nationwide restrictions unless the employee predominantly works outside Turkey for a foreign employer. In exceptional cases, such as a chemist responsible for producing a unique pharmaceutical product, a worldwide restriction may be justified.

3.3. Subject Matter Scope

The limitation of a non-compete clause in terms of scope essentially determines in which sectors or fields of activity the employee shall be prohibited from working following the termination of the employment contract. Although a detailed analysis may be carried out, it must first be emphasized that the scope of the non-compete obligation should be confined solely to the employer’s actual field of activity and to the professional knowledge acquired by the employee during the employment relationship. In other words, in light of the nature of the work, the prohibition of competition can only extend to activities that are directly related to the employer’s business operations.

The sole purpose of restricting the non-compete obligation to a particular field is to prevent the employee from suffering economic loss resulting from being unable to utilize the only professional skill set he or she possesses. The most crucial point to be considered here is that the relevant field of activity must be determined as of the date on which the employment relationship terminates. Activities that the employer had previously abandoned or commenced only after the termination of employment cannot be protected under the scope of the non-compete clause. Particularly in jurisdictions such as Türkiye, where companies often register a broad range of business activities in the trade registry, imposing a prohibition that prevents the employee from engaging in competition across all such areas would be unreasonable.

4. JUDICIAL INTERVENTION

Pursuant to the principle of pacta sunt servanda (the principle of contractual fidelity), a contract must be performed exactly as agreed at the time of its conclusion. In other words, even if the obligations under the contract have become more onerous for the obligor, or the balance of performances has changed due to subsequent events, the obligor is still required to perform their contractual obligations in full. The principle of contractual fidelity constitutes a fundamental rule of contract law, reflecting legal certainty as well as the general principles of good faith and honesty. However, this principle is limited by other principles of private law. In Turkish law, inspired in part by Articles 2 and 4 of the Civil Code, the doctrines of Clausula Rebus Sic Stantibus and the theory of the Collapse of the Basis of Transaction have been applied to allow contracts to be adapted to current circumstances.

The parties may themselves provide for the adaptation of the contract to changing conditions. Where the contract or the law does not include a provision for such adaptation, one of the parties may request judicial intervention. In order for judicial intervention to be requested, the requesting party must not be at fault, and the contractual obligations must not yet have been performed.

Pursuant to Article 445 of the Turkish Code of Obligations, where any of the spatial, temporal, or subject-matter limitations imposed on a non-competition obligation are exceeded, the employee is not bound by the non-competition provisions to the extent that they exceed those limits. In cases of partial excess, the court intervenes only in respect of the excessive part concerning place, time, or subject matter, rather than invalidating the entire non-competition agreement. However, if the non-competition obligation poses a serious threat to the employee’s economic future, the court may declare the entire agreement null and void. In cases of deficiencies in capacity or non-compliance with formal requirements, which fall outside the limitations regarding time, place, and subject matter, the agreement is invalid, and judicial intervention is not applicable.

The court’s authority to narrow the scope of a non-competition agreement is grounded in the principle, set out in Article 445 of the Turkish Code of Obligations, that the restriction must be proportionate and equitable. The court may exercise this discretion either in the context of a declaratory action or as a defense raised by the employee in a suit brought by the employer alleging a breach of the non-competition obligation. Any decision by the court to modify an excessive non-competition obligation to restore equity produces retroactive effect.

5. CONSEQUENCES OF BREACH OF THE NON-COMPETITION AGREEMENT

The principal purpose of a non-competition agreement is to prevent the employer from suffering harm resulting from the employee’s breach of the duty of loyalty. Accordingly, the sanctions and liabilities applicable in the event of a violation of the non-competition obligation are regulated under Article 446 of the Turkish Code of Obligations (“TCO”).

Pursuant to this provision, an employee who acts in breach of a non-competition covenant is obliged to compensate the employer for all losses arising from such conduct. The general principles of liability for breach of contract also apply to the violation of a non-competition agreement. Within this framework, the burden of proving the existence and quantum of damage lies with the employer. However, the employer is not required to prove the employee’s fault, as fault is presumed by law. The employee may, nevertheless, exonerate themselves from liability by demonstrating, in accordance with Article 112 TCO, that they were not at fault in the occurrence of the breach. This mechanism not only prevents the imposition of disproportionate liability upon the employee but also ensures compensation for the employer’s loss, thereby preserving the balance of interests between the parties.

Where the breach of the non-competition obligation is secured by a contractual penalty clause, the employee may be released from the obligation by paying the agreed penalty amount. In such cases, the employer may claim the contractual penalty without being required to prove the existence of actual damage. Under Article 180 TCO, the penalty becomes payable even if the obligee has not suffered any loss. This rule serves as an important mechanism in practice, as it alleviates the employer’s burden of proof and enhances deterrence. Determining the precise amount of damage caused by a breach of a non-competition clause is often difficult—particularly given the challenges of proving the causal link between the breach and the damage, and the practical obstacles in accessing evidence held by the new employer. Hence, the contractual penalty functions as an effective protective tool, both by facilitating proof and by incentivizing the employee to comply with contractual obligations.

Nevertheless, pursuant to Article 446(2) TCO, unless otherwise agreed, the employee may be released from the non-competition obligation upon payment of the stipulated penalty; however, if the damage exceeds this amount, the employee remains liable for the excess. Since the provisions on penalty clauses are of a supplementary nature, the parties may stipulate otherwise. In accordance with Article 182 TCO, the judge may, ex officio, reduce the penalty if deemed excessive, taking into account factors such as the employee’s remuneration, the economic impact of the penalty, and the duration of the breach. Therefore, the enforceability of a contractual penalty must always be assessed within the framework of equity, considering the specific circumstances of each case.

Under Article 446(3) TCO, the employer may, under certain conditions, request the termination of the employee’s ongoing breach of a non-competition obligation. For such a claim to be admissible, the employer must have expressly and in writing reserved this right in the agreement, and both the significance of the employer’s infringed interests and the nature of the employee’s conduct must justify judicial intervention. The harm suffered by the employer must be of such gravity that it cannot be adequately remedied by damages or penalties, and the employee’s conduct must constitute a manifest breach of the principle of good faith. This provision aims to maintain a fair balance between the employer’s legitimate interests and the employee’s freedom to work. Consequently, an injunction to cease a breach of non-competition may only be sought in exceptional circumstances and as a measure of last resort (ultima ratio).

In conclusion, where an employee violates a non-competition covenant, liability arises both through compensation for breach of contractual obligation and, where applicable, the enforcement of the contractual penalty. In this way, the legislator has established a balanced system of sanctions that safeguards the employer’s legitimate interests without disproportionately restricting the employee’s economic freedom.

6. COMPETENT COURT IN DISPUTES ARISING FROM NON-COMPETITION OBLIGATIONS

On 12 September 2025, the Court of Cassation’s Grand General Assembly for the Unification of Case Law, by its decision numbered 2023/1 and dated 13 June 2025, held that the competent court for disputes arising from non-competition agreements is the commercial court of first instance.

For a long time, there had been a divergence of opinion between the chambers of the Court of Cassation and the General Assembly of Civil Law regarding which court should hear cases arising from violations of non-competition obligations applicable after the termination of an employment contract. This divergence was resolved by the Grand General Assembly’s decision of 13 June 2025, numbered 2023/1.

In its reasoning, the Assembly noted the following:

A non-competition obligation, which becomes effective after the termination of the employment contract, is not considered an extension of the employee’s duty of loyalty. Rather, a non-competition obligation arises through a separate, independently negotiated and written agreement or clause between the parties. Disputes relating to non-competition obligations pertain less to the principle of employee protection—a cornerstone of labor law—and more to principles such as maintaining competitive order in commercial life and freedom of contract. Furthermore, the Assembly observed that the assessment of concepts such as “clientele” and “trade secrets” falls within the specialized domain of commercial courts, which are knowledgeable in commercial practices and market conditions.

Moreover, Article 4 of the Turkish Commercial Code No. 6102 explicitly classifies disputes arising from non-competition agreements based on Articles 444–447 of the Turkish Code of Obligations as “absolute commercial disputes.” Accordingly, the Assembly concluded that commercial courts of first instance have jurisdiction over non-competition disputes arising from employment contracts.

This decision applies exclusively to non-competition agreements falling within Articles 444–447 of the Turkish Code of Obligations. Classical labor law disputes arising from an employee’s duty of loyalty or obligation to maintain confidentiality during the continuance of the employment relationship, as well as claims under the Labor Law No. 4857, remain within the jurisdiction of labor courts.

In conclusion, the Assembly definitively held that the competent court for cases involving violations of post-contractual non-competition obligations is the commercial court of first instance. However, a dissenting opinion was expressed, arguing that because such disputes are fundamentally rooted in the employment relationship, labor courts should retain jurisdiction.

7. CONCLUSION

Non-competition agreements serve to protect the employer’s clientele, trade secrets, and economic interests after the termination of employment. However, as such restrictions significantly impact the employee’s freedom to work and economic prospects, they are subject to limitations.

Under the TCO, non-competition agreements must be in writing, executed by legally competent employees, justified by the employer’s protectable interests, and limited in duration, geographic scope, and subject matter. Typically, the duration cannot exceed two years, and the geographic and subject matter restrictions should correspond to the employer’s actual business activities. The central principle is to balance the employer’s legitimate interests with the employee’s economic freedom.

Disputes over post-employment non-competition obligations fall under the jurisdiction of commercial courts, as clarified by the 2025 decision of the Court of Cassation’s Grand General Assembly. While non-competition obligations are independent agreements distinct from loyalty duties, courts must carefully balance the protection of the employer with the employee’s right to livelihood. Non-competition clauses are exceptional, enforceable only when damages or penalties are insufficient and as a measure of last resort. Thus, non-competition agreements intersect both the social protective function of labor law and the regulatory framework of commercial law, maintaining their significance in Turkish legal practice.