One of the most important principles of commercial life is the preservation of relationships based on honesty and trust. However, the issue of non-competition clauses often becomes a subject of debate in relationships between employer and employee, partner and partner, or company and distributor. A non-compete clause is an obligation for one party not to engage in the same activities within a specified period, location, or field in order to protect the interests of the other party. This prohibition is supported not only by contractual agreements but also by legal regulations such as the Turkish Code of Obligations (TBK) and the Turkish Commercial Code (TTK).
The most important mechanism that comes into play in the event of a breach of the non-competition clause is the application of penalty clauses. A penalty clause refers to the amount that must be paid by a party in the event of a breach of contract. This ensures deterrence between the parties and facilitates the compensation of potential damages.
What is a Non-Competition Agreement?
Non-compete clauses are important not only for protecting economic interests but also for strengthening business ethics. The relationship of loyalty between employer and employee continues for a period of time even after the employee’s employment contract ends. Therefore, non-compete clauses prevent employees from engaging in activities that would harm their employer by using the confidential information they acquired while working for them.
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After the employment contract ends, the employee cannot work for a competitor in the same industry for a certain period of time.
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Partners cannot engage in independent business activities in the company’s field of activity after leaving the company.
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Dealers may not enter into commercial relations with competing companies during or after the term of the contract.
The purpose of the non-compete clause is to protect the trade secrets obtained by the parties, to prevent the customer base from being affected by unfair competition, and to maintain the relationship of trust between the parties.
Legal Basis for Non-Competition Agreements
When regulating non-competition clauses, the legislator has sought to strike a balance between the right to free employment and the protection of employers. If the scope of the prohibition is too broad, the employee’s right to practice their profession may be infringed; if it is too narrow, the employer’s trade secrets cannot be protected. For this reason, the provisions of the Turkish Civil Code (TBK) and the Turkish Commercial Code (TTK) both safeguard the rights of employers and restrict the rights of employees to a limited extent.
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Turkish Code of Obligations (TBK) Art. 444-447: It regulates the prohibition of competition between employees and employers.
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Turkish Commercial Code (TCC): Contains provisions regarding the non-competition clause for partners and company executives.
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General provisions of the Law of Obligations: Within the framework of contractual freedom, it allows for the regulation of penalty clauses.
These legal grounds allow the parties to include non-competition and penalty clauses in their contracts.
Conditions for the Validity of the Non-Competition Clause
The time, place, and subject limitations imposed on the validity of a non-compete clause are, in fact, a reflection of the principle of proportionality. For example, a non-compete clause covering the entire country and lasting for 5 years may be deemed invalid as it would violate the employee’s freedom to work. In contrast, a clause limited to a specific city and restricted to the employer’s field of activity would be considered valid.
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Duration: The non-compete clause should be limited to a reasonable period. According to the Turkish Commercial Code, this period is a maximum of two years.
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Location: The geographical scope of the non-compete clause must be defined.
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Subject: The scope of the ban should be limited to the employer’s field of activity.
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Written Form: The non-competition clause must be included in a written contract.
Non-compete clauses that do not comply with these conditions shall be deemed invalid.
The Importance of Non-Competition Agreements for Employers
From the employer’s perspective, non-compete clauses ensure the protection of information and customer networks acquired by employees during their employment. In particular, the disclosure of trade secrets can weaken the employer’s position in the market.
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Protection of the customer environment
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Confidentiality of production and marketing strategies
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Strengthening employees’ duty of loyalty to the employer
For employers, non-compete agreements serve as a strategic safeguard for the company’s long-term sustainability.
Violation of the Non-Competition Clause and Consequences
If one of the parties violates the non-competition clause, legal sanctions will be imposed.
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If an employee works for a competing company, they may be required to pay damages to the employer.
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If the partner violates the non-compete clause, the company may demand a penalty.
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Dealers may have their contracts terminated if they work with competing companies.
The purpose of these sanctions is to ensure that the parties comply with the contract and to prevent unfair competition.
What is a Penalty Clause?
A penalty clause is the amount that one of the parties agrees to pay in the event that the other party breaches the contract. It is one of the most common methods used in cases of breach of non-competition agreements.
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It provides deterrence.
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It facilitates the proof of damage.
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It strengthens the parties’ commitment to the contract.
For a penalty clause to be enforceable, it must be expressly stipulated in the contract.
Types of Penalty Clauses
Penal clauses can be arranged differently in each contract as they are determined by the parties’ will. For example, some contracts may require an employee who violates a non-compete clause to pay a specific monetary penalty, while others may require the employee to pay compensation equivalent to one year’s salary. This situation is a result of the principle of contractual freedom; however, courts ensure balance between the parties by reducing penalty clauses that are contrary to fairness.
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Penalty clause: Applies in the event that the contract is not performed at all or is not performed properly.
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Optional penalty clause: The party shall either perform the contract or pay the penalty.
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Performance and penalty clause: Both performance and the penalty clause may be claimed simultaneously.
Penalty clauses are generally preferred in non-compete agreements.
Conditions for the Validity of a Penalty Clause
The validity of penalty clause provisions is also subject to certain conditions.
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It must be clearly stated in the written contract.
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It should be measured and reasonable.
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It must not be contrary to morality and public order.
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It should be determined by the free will of the parties.
Excessively high penalties may be reduced by the court in the interests of fairness.
Non-Competition Clauses and Penalty Clauses in Light of Supreme Court Decisions
The Supreme Court issues rulings that protect the economic freedom of employees, particularly in cases between employees and employers. Accordingly, contracts that cover all sectors in which an employee can work and contain excessively high penalty clauses are deemed invalid. However, in cases where the employer’s customer base or trade secrets have genuinely been harmed, the application of penalty clauses is approved, and a ruling is made against the employee.
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A non-compete clause without restrictions on duration, location, or subject matter is deemed invalid.
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Excessively high penalties are being reduced.
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If the violation is proven, compensation is awarded in favor of the employer.
These decisions highlight the points that should be considered when preparing a contract.
Non-Competition Agreement in the Digital Age (2025)
Violations of non-compete agreements in the digital environment are now easier to detect. For example, an employee who leaves a company announcing on LinkedIn that they have started working for a competitor or making posts on social media targeting their former employer’s customer portfolio can be presented as evidence of violation in court. For this reason, employers today have started to include language in their contracts covering digital activities when stipulating non-compete clauses.
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evidence of violation
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Customer contact via social media
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Digital data theft
This situation is leading employers to resort to non-compete clauses more frequently.
Professional Legal Support
Non-compete clauses and penalty clauses can have serious consequences for both employers and employees. Therefore, it is crucial to seek professional legal advice when drafting a contract or in the event of a breach.
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Preparation and revision of contracts for employers
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Defense methods against unfair penal clauses for workers
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Consulting on the implementation of non-compete agreements for companies
Legal counsel helps prevent loss of rights for both parties.
Non-competition clauses and penalty clauses are of vital importance in maintaining trust in business relationships and preventing unfair competition. The Turkish Code of Obligations and the Turkish Commercial Code aim to balance the interests of the parties by providing detailed regulations on this matter.
In 2025, non-compete clauses are becoming increasingly important in the digitalizing business world. As these clauses can have serious consequences for both employers and employees, contracts must be prepared with great care and expert support should be sought.
