Turkey: The Supreme Court Changes Its Precedent Regarding Non-Compete Agreements

Recent Development

The 9^th Civil Chamber of the Supreme Court ("9^th Civil Chamber"), with its decision numbered 2021/3076 E. and 2021/9789 K., ruled that the labor courts are the competent courts for lawsuits regarding the penalty and compensation that might be demanded due to violations of post-employment non-competition obligations. The 9th Civil Chamber has thus changed its settled precedent on this subject.

What does the Supreme Court Decision Say?

Although the Turkish Commercial Code (No. 6102) states that lawsuits related to post-employment non-competition obligations are commercial lawsuits, the 9th Civil Chamber stated that Article 5 of the Turkish Commercial Code reserves anomalistic regulations in this respect. This article reads as "Unless otherwise regulated, commercial courts of first instance are the competent courts with respect to all commercial cases and non-contentious commercial matters."

The 9th Civil Chamber expressed that the Labor Courts Code (No. 7036), which is a special code, was issued to ensure that employees receive their rights more easily. The 9th Civil Chamber also emphasized that Article 5 of the Labor Courts Code states that labor courts are competent to resolve contractual disputes arising between the employer and the employee due to the employment relationship. The 9th Civil Chamber indicated that this provision in the Labor Courts Code reflects the phrase "unless otherwise agreed" in Article 5 of the Turkish Commercial Code.

As a result, the 9th Civil Chamber ruled that lawsuits regarding penalty and compensation requests due to violations of a post-employment non-competition agreement are disputes arising from employment agreements; therefore, a different approach needs to be adopted with respect to its previous decisions, where it had ruled that such lawsuits are commercial lawsuits and that labor courts are the competent courts.

Conclusion

Although it was stated in the previous decisions of the 9th Civil Chamber that penalty and compensation lawsuits related to post-employment non-competition agreements are commercial lawsuits, the 9th Civil Chamber adopted a different approach with respect to these decisions, ruling that labor courts are the competent courts. We recommend that employers closely monitor the decisions that the 9th Civil Chamber will issue on this subject after this precedent change.

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