As long as the employment agreement between the employee and employer is applicable; due to the employee’s duty of loyalty, the employee is under obligation to refrain from any acts which may harm the employer’s interests. As per the Article 396/3 of Turkish Code of Obligations (“TCO”) “the employee, as long as the employment agreement continues; cannot provide service to a third party in exchange for payment in violation of the duty of loyalty and especially cannot compete with the employer”, the employee’s acts against the duty of non-competition are considered as the breach of duty of loyalty. As the duty in question is regulated by law, even though the parties do not agree on duty of loyalty specifically, the employee cannot act against the duty of loyalty as long as the employment agreement continues.
If the parties would like to extend application of duty of non-competition after the end of employment agreement; as the law does not burden an obligation to the employee after the end of the employment agreement, parties have to sign a separate “prohibition of competition agreement”. Parties, as it will be discussed in detail below, within the framework of the mandatory provisions in Turkish law, may determine the limits and conditions of the duty of non-competition in the prohibition of competition agreement.
The validity conditions of the prohibition of competition agreement made between the employee and employer are; making a written agreement, the employee’s possession of capacity to act and existence of the employer’s justified interests that worth preserving. The prohibition of competition agreement must be made specific to the employee and its scope must be explicitly defined. Addition of certain provisions to the agreement by making reference to the internal regulations drafted by the employer is not possible. The agreement must clearly determine what kind of obligations the employee undertakes.
As per the article 444/2 of TCO; in order to make a valid prohibition of competition agreement; the employee has to work in a position which provides opportunity to obtain information on the employer’s customer portfolio, production secrets or the employer’s business transactions and using of this information must be convenient to harm the employer heavily. To exemplify; solely having access to the information on customers’ name-surnames, addresses and telephone numbers do not impose duty of non-competition to the employee. In addition to these, the employee should have personal relation with clients, know their needs and this information should be convenient for the employee to obtain economic benefit. If the employer, in a legal dispute, cannot prove that the employee was working in such position, the prohibition of competition agreement will not be applied. Therefore, it was prevented in a sense that making a prohibition of competition agreement between the employer and lower-positioned workers.
In line with the Article 445/1 of TCO; “Prohibition of competition which may peril the employee’s economic future cannot contain inappropriate limitations on place, time and type of works and its duration, apart from the special circumstances and conditions, cannot exceed two years.”, apart from the extraordinary circumstances, application of the prohibition of competition agreement against the employee is limited with two years. However, although the duration of time is determined within two year period, courts examine the facts of each case and conditions and determine whether this time period can be regarded as reasonable and in line with the honesty principle referred in the Article 2 of Turkish Civil Law. Pursuant to this provision, for a valid prohibition, it should also be limited with a particular place. Place limitation could be limited with a certain city (Bursa, Yalova, etc.), a particular region (Thrace, Marmara region, etc.) or geographical area which the employer has business activities (Istanbul European side, inner Aegean region etc.). However, in any case, prohibition of competition provisions cannot be applied in outside of the employer’s business activity area as it does not violate the employer’s justified interests that worth preserving. In addition, as the determination of a very broad area could harm the interests of employees, prohibition of competition provisions shall not be applied. As per the Article 445/2 of TCO “the judge, by means of evaluation of all the facts and circumstances freely and by keeping in mind the employer’s counter performance that he/she may undertake with fairly manner, may limit the excessive prohibition of competition provisions within the context of its scope and duration.”, the excessive prohibition of competition provisions could be limited by the judges, within the context of the scope and duration, due to their authority to limit.
Prohibition of competition provisions that are applied to the employee must also be limited within the context of the scope. Since the employee’s liberty of labor and economic freedom could be periled, this prohibition of competition provisions shall not be determined excessively and must be limited reasonably. The prohibition of competition provisions must be applied with respect to the activities that the employer carries out and limiting provisions shall be written explicitly and leave no room for any doubt. As can be seen in the decision of the Court of Appeals cited; “At the case at hand, defendant quitted the job while serving as medical researcher at the plaintiff company, later on started to work as specialist in corporate relations at the extrajudicial pharmaceutical company, … it was decided to dismiss the lawsuit as the defendant’s line of work is different. On the other hand, in accordance with the Article 348/2 of TCO, by virtue of the defendant’s position in the pharmaceutical company, it is possible for (the employee) to reach the plaintiff company's manufacturing secrets and to obtain information on the employer's business transactions, as well as it is highly possible that (the employee) could use this information and cause substantial damage to the employer. Moreover, restrictions on place, time and kind of business matters between the parties agreed on the agreement are suitable for the conditions stated in the Article 349 of TCO. In this regard, it should be recognized by the court that the defendant's actions are within the scope of the prohibition of competition and the court should render its decision based on that inference” the Court of Appeals does not stipulate that the employee must work at the same position at these two competing companies. As it understood from the cited decision; within the scope of the prohibition of competition, the main thing is the existence of the risk on the employer’s justified interests that worth preserving.
Eventually; as agreements concerning the prohibition of competition are bound with the strict conditions by law; the preparation of these agreements, determination of the details and drafting the provisions in compliance with the Court of Appeals decisions are of great importance. Otherwise, provisions that are out of context of the Court of Appeals’ determination may lead to invalidation of entire or some parts of the agreement and the employer’s loss of right and incurrence of irrevocable damages.