Non‑Compete & Penalty Clause Balance in Turkish Service Contracts

yazarı lawyerfbc

açık Kasım 10, 2025

Executive Summary:

Under the Turkish Code of Obligations (TBK), a post‑termination non‑compete in a service (employment) contract is valid only if it protects a legitimate interest, and is narrowly tailored by time (typically ≤ 2 years), territory, and scope of activities (TBK 444‑447).
Penalty clauses (cezaî şart) are enforceable to secure a non‑compete, but courts may moderate (reduce) excessive amounts (TBK 182). If drafted as a liberatory penalty, the employee may exit the restriction by paying the agreed sum (TBK 446), unless the contract says otherwise.
If the employer terminates without just cause or the employee resigns for just cause, the non‑compete falls away (TBK 447). In such cases, penalty claims are usually rejected.
The Court of Cassation (Yargıtay) consistently requires a reasonable balance: the broader the restriction, the stronger the justification and compensation to the employee should be. Overbroad “anywhere/any business/for three years” clauses are routinely narrowed or voided.
Best practice: Combine tight tailoring, clear definitions, measurable consideration (e.g., monthly non‑compete pay), and a graduated, proportionate penalty with a judicial moderation and severability clause.

What counts as a “service contract” and why non‑compete matters
Core legal framework: TBK 444‑447 (non‑compete) & TBK 179‑182 (penalty)
Validity conditions for employee non‑competes in Turkey
Penalty clauses explained: types, functions, and court control
Balancing the non‑compete and the penalty: proportionality in practice
How termination scenarios affect enforceability
Drafting strategies that survive in court
Model clauses (balanced versions you can adapt)
Example penalty calculations and judicial moderation
Evidence, enforcement, and litigation playbook
Non‑compete vs non‑solicit vs confidentiality: choosing the right tool
Comparative notes (EU and common‑law touchpoints)
Compliance and HR implementation checklist
Common mistakes and red flags
FAQs (schema included)
Conclusion

1) What counts as a “service contract” and why non‑compete matters

In Turkish law, a service contract is the agreement under which an employee undertakes to work personally under the employer’s direction and supervision in return for wages. During employment, the employee owes a duty of loyalty and confidentiality; after termination, that duty does not automatically continue—hence the need for a post‑termination non‑compete to protect trade secrets, customer connections, confidential methods, pricing, and know‑how.

Unlike broad commercial non‑competes between businesses, employee non‑competes are narrowly policed in Turkey because they directly affect a person’s right to work and economic future. This is why Turkish courts demand both a legitimate interest and strict tailoring.

2) Core legal framework: TBK 444‑447 (non‑compete) & TBK 179‑182 (penalty)

TBK 444 – A post‑termination non‑compete is valid only to the extent required to protect the employer’s legitimate interests arising from the employee’s access to customer relations or trade secrets.
TBK 445 – The clause must be limited in place, time, and subject matter. Time should not exceed two years as a rule; longer periods demand special justification and are frequently reduced by courts.
TBK 446 – Consequences of breach: parties can agree a penalty; unless otherwise agreed, paying the penalty lets the employee free themself from the restraint (the so‑called liberatory penalty). The employer may also seek an injunction (cessation of competition) where appropriate.
TBK 447 – The non‑compete becomes invalid if it unduly endangers the employee’s economic future; it also ceases to bind if the employer terminates without just cause or the employee resigns for just cause.
TBK 179‑182 – General rules on penalty clauses (cezaî şart): valid to secure performance, payable without proving damage; courts may reduce excessive penalties (judicial moderation, TBK 182). Unless the contract says otherwise, creditor cannot claim both performance and penalty for the same breach; parties may agree otherwise.

Yargıtay’s angle: The Court of Cassation enforces non‑competes only if the sum of limitations (time, territory, scope) is proportionate to the employer’s interest, and will trim or void overbroad clauses. It also cuts down penalties that would punish rather than protect a legitimate interest—especially where no or minimal harm is shown, or where the restriction is already heavy.

3) Validity conditions for employee non‑competes in Turkey

3.1 Legitimate interest & access to protectable assets

You should be able to show that the employee had real exposure to customers, pricing, strategy, code, formulas, source lists, or sensitive know‑how. The stronger the exposure, the easier it is to justify a wider (but still reasonable) restraint.

3.2 Tight tailoring: time, territory, and scope

Time: Up to 24 months is the mainstream ceiling; 12–18 months is common in practice. Longer periods are exceptional.
Territory: Tie the territory to where the employee worked or where the employer competes (e.g., Istanbul, Marmara Region, or specific countries if it’s a regional role). “Worldwide” is usually excessive unless the business is truly global and the employee had matching reach.
Scope: Define Restricted Business narrowly. Example: “development and sale of SaaS hotel PMS software,” not “information technology.” Add explicit carve‑outs: general professional skills, passive investments, or roles outside the restricted product line.

3.3 Do not endanger economic future

If a restriction would realistically prevent the employee from earning a living, the courts will pare it back or scrap it. Paying non‑compete compensation (e.g., 20–50% of last gross salary per restricted month) helps rebalance.

3.4 Written form and clarity

Always use a stand‑alone written clause (or a clear appendix) signed by both parties. Ambiguity works against the drafter.

4) Penalty clauses explained: types, functions, and court control

4.1 What a penalty clause does

A penalty clause fixes an amount payable upon breach without the need to prove actual damages. In the non‑compete context, it deterrs breach and gives the employer a clean remedy even when damages are hard to quantify (lost customers, diluted goodwill).

4.2 Types you will see

Performance penalty : Payable in addition to or instead of performance, depending on wording. Typical for one‑off breaches (e.g., taking a client).
Liberatory penalty : Lets the employee buy out of the restriction by paying the pre‑agreed sum (TBK 446 default rule unless excluded).
Continuing/daily penalty: A per‑day or per‑month amount for continuing breach, capped to avoid excess.

4.3 Judicial moderation (TBK 182)

Courts may reduce a penalty if it is manifestly excessive, considering:

Duration and breadth of the restriction
Employee’s role and pay level
Actual or likely harm
Whether the employer paid non‑compete compensation
Cumulative effect of multiple remedies (injunction + penalty)

Practice tip: A graduated penalty tied to salary (e.g., 1×–2× last gross monthly wage per month of breach) is far more defensible than a flat, outsized lump sum.

5) Balancing the non‑compete and the penalty: proportionality in practice

The wider your restraint, the more modest your penalty should be—or the higher your non‑compete compensation to the employee should run. Turkish courts look for a fair exchange:

Narrow scope + short time + small territory → higher penalty tolerable
Wide scope + long time + broad territory → lower penalty or substantial compensation needed
If you want the penalty to function as a buy‑out, say so—and set a single, transparent amount the employee can pay to exit. Otherwise, the default of TBK 446 can create unwanted buy‑out effects.

Yargıtay’s trend: clauses that stack a broad non‑compete with an eye‑watering penalty (e.g., 24 months worldwide + TRY 2,000,000) invite modification or nullity. On the other hand, a precisely drawn 12‑month market‑limited restriction with a calibrated penalty commonly survives.

6) How termination scenarios affect enforceability (TBK 447)

If the employer terminates without just cause, the non‑compete falls. You cannot invoke the penalty for post‑termination acts.
If the employee resigns for just cause (e.g., wage not paid, harassment, unsafe workplace), the non‑compete also falls.
If the employee resigns without just cause, the clause generally remains enforceable subject to proportionality and other limits.
If the employer materially breaches the contract (e.g., fails to pay agreed non‑compete compensation), courts are reluctant to enforce the restraint or penalty.

Drafting note: Always pair the non‑compete with a condition that it applies only while the employer is not in material breach and has paid any promised non‑compete compensation.

7) Drafting strategies that survive in court

Define Restricted Business with laser precision (product families, service lines, customer segments). Add illustrative examples.
Map the territory to where the employee actually operated and where the employer truly competes. Consider city/region rather than country‑wide.
Match duration to risk half‑life (how long does know‑how stay hot?). 6–12 months for sales staff; up to 24 months for senior roles with deep strategic exposure.
Choose the right remedy: injunction, penalty, or buy‑out. If you want both injunction and penalty, say so expressly (and keep the numbers moderate).
Use caps and graduations to avoid excess. For continuing breaches, cap total penalty at, say, 6–12 months of gross salary.
Pay consideration: monthly non‑compete compensation (e.g., 30% of last gross wage) during the restricted period—this is a strong indicator of fairness.
Add severability & judicial moderation language inviting the court to trim rather than void the clause.
Carve‑outs: general skills, academic work, passive shareholdings <5%, activities outside Restricted Business.
Notification & cure: For curable breaches (e.g., inadvertent solicitation), allow a short cure period before the penalty accrues.
Evidence plan: define permissible monitoring and data preservation (in line with personal‑data rules) to prove breach without privacy overreach.

8) Model clauses (balanced versions to adapt)

Disclaimer: These samples are illustrative. Always tailor to your facts and ensure alignment with current case‑law and data‑protection rules.

8.1 Non‑Compete (Post‑Termination)

Non‑Compete. For 12 months after termination for any reason, the Employee shall not, within the Province of Istanbul and the Kocaeli and Tekirdağ regions (the “Restricted Territory”), directly or indirectly engage in, be employed by, or advise any business that develops, markets, sells or provides [define precisely: e.g., SaaS hotel property‑management software and related implementation services] (the “Restricted Business”). Passive investments below 5% of a publicly traded company’s securities are permitted. Nothing restricts the Employee from using general skills and experience acquired during employment.

Legitimate Interest. The Employee acknowledges access to confidential information, strategy, pricing, and key customer relationships, and that this clause reasonably protects the Employer’s legitimate interests.

Non‑Compete Compensation. During the Restricted Period, the Employer shall pay the Employee 30% of the Employee’s last monthly gross salary per calendar month as non‑compete compensation, subject to lawful deductions. Payment is due on the last business day of each month.

Severability & Moderation. If any part is excessive, a court may narrow scope, territory, or duration to the minimum necessary.

8.2 Non‑Solicit (Customers & Employees)

Customer Non‑Solicit. For 12 months post‑termination, the Employee shall not directly solicit business from any Active Customer with whom the Employee had material contact during the last 12 months of employment for the Restricted Business.

Employee Non‑Solicit. For 12 months post‑termination, the Employee shall not solicit or induce any Key Employee to leave the Employer.

Definitions. Active Customer means a customer that purchased or negotiated for the Restricted Business in the preceding 12 months. Key Employee means any employee at manager level or above in the Restricted Business.

8.3 Penalty Clause

Penalty for Breach. If the Employee breaches Sections 8.1 or 8.2, the Employee shall pay a penalty equal to 1.5× the Employee’s last monthly gross salary for each month (or part) of continuing breach, capped at 9× the last monthly gross salary (overall cap). This penalty is payable without proof of damage, without prejudice to the Employer’s right to seek injunctive relief and, if expressly reserved, additional damages to the extent proven.

Liberatory Effect Excluded. The parties exclude the liberatory effect under TBK 446; payment of the penalty does not entitle the Employee to continue the breach.

Judicial Moderation. The parties agree that, if necessary, a court may moderate the penalty to a reasonable level under TBK 182.

8.4 Buy‑Out Variant (If you want a clean exit option)

Buy‑Out Option. Instead of the foregoing, the Employee may elect to be released from the non‑compete by paying a one‑time buy‑out fee of 6× the last monthly gross salary. Upon receipt, the non‑compete terminates prospectively.

8.5 Termination Safeguards (TBK 447)

Just‑Cause Termination. This clause does not apply if the Employer terminates without just cause or the Employee resigns for just cause. Non‑compete compensation must be timely paid; otherwise the Employer may not rely on the restriction.

9) Example penalty calculations and judicial moderation

Assume last monthly gross salary is TRY 80,000 and the non‑compete is 12 months with a penalty of 1.5× gross salary per month of breach, capped at 9×.

Scenario A (short breach): Employee joins a competitor for 2 months then leaves. Penalty = 1.5 × 80,000 × 2 = TRY 240,000. If the Employer also paid non‑compete compensation (e.g., 30% × 2 months = TRY 48,000), courts are less likely to reduce the penalty.
Scenario B (long breach): Employee works at a competitor for 10 months. Uncapped penalty would be 1.5 × 80,000 × 10 = TRY 1,200,000, but the cap reduces it to 9 × 80,000 = TRY 720,000.
Scenario C (overbroad clause): Clause is 24 months, nationwide, any IT, penalty TRY 2,000,000. Expect the court to cut down the territory and reduce the penalty, particularly if no special role or no compensation was provided.

What moderation looks like: Courts often either (i) lower the multiplier (e.g., from 1.5× to 1.0×), (ii) shorten the breach period assessed (e.g., counting only months with actual competitive acts), or (iii) apply the cap strictly. A transparent, salary‑linked formula signals good faith and decreases the magnitude of judicial trimming.

10) Evidence, enforcement, and litigation playbook

Before litigation:

Preserve evidence: exit interviews; return‑of‑property checklist; IT logs; confidentiality acknowledgments; customer lists with last‑contact dates; CRM exports; project documentation.
Send a calibrated cease‑and‑desist: cite the clause, the territory, and the buy‑out (if available). Offer a settlement (e.g., release in exchange for a fee, garden leave, or narrowed scope).

During litigation:

Injunctions: ask the court to order cessation of competitive conduct. Demonstrate likelihood of success and irreparable harm (loss of goodwill, customer confusion).
Penalty claim: compute using your contractual formula and attach salary slips, HR records, and breach timelines.
Discovery (within limits): Ask for competitor employment contracts, job descriptions, and sales assignments to show similarity to the Restricted Business.

Defences you’ll face:

No legitimate interest / purely anti‑competitive motive
Overbreadth (territory/time/scope);
TBK 447 trigger (employer’s unjust termination)
Economic future endangered; no non‑compete compensation
Penalty excess → request judicial moderation

Settlement ideas:

Narrow the restriction (only top customers, shorter duration)
Convert to non‑solicit
Buy‑out fee payable in instalments
Mutual non‑disparagement and no‑poach pledges

11) Non‑compete vs non‑solicit vs confidentiality: choosing the right tool

Confidentiality (NDA): Baseline protection for all staff; unlimited in time for trade secrets; easier to enforce.
Non‑Solicit: Narrowly targets customer‑poaching and employee‑raids; usually more enforceable than a blanket non‑compete; often sufficient for sales or account roles.
Non‑Compete: Strongest remedy; best reserved for senior or specialist roles with deep exposure to competitive assets; requires compensation or tight tailoring to hold.

Pragmatic mix: NDA + Non‑Solicit for most staff; add a narrow non‑compete for key holders of strategic secrets—with fair compensation.

12) Comparative notes (EU and common‑law touchpoints)

EU trend: Many EU systems (e.g., Germany, Netherlands) encourage or require compensation (often ~50% of last pay) for post‑termination non‑competes. Turkish courts do not mandate a fixed percentage, but compensation materially helps proportionality analysis.
UK/US: Enforceability varies; recent UK consultations on non‑compete caps and several US states (e.g., California) ban employee non‑competes outright. Turkish law is stricter than typical US rules but more flexible than absolute bans; proportionality and compensation are key.

13) Common mistakes and red flags

Copy‑paste global bans (e.g., “worldwide/any role/three years”): high risk of nullity.
No compensation for a heavy restraint: tilts the balance against enforcement.
Undefined Restricted Business: invites ambiguity and employee‑friendly interpretation.
Penalty as pure punishment (e.g., fixed multimillion TRY with no relation to salary or harm): moderated down.
Silence on TBK 446: unintentionally creates a buy‑out right you did not plan for.
Ignoring TBK 447: trying to enforce after unjust employer termination.
No caps on continuing penalties: appears oppressive.
No severability/moderation clause: increases the risk of total invalidity.
Lack of evidence plan: you can’t prove solicitation or competitive activity.

14) FAQs

Q1. Is a two‑year non‑compete always valid?
No. Two years is a ceiling, not a safe harbor. It must still be proportionate given the role, territory, and scope. Courts often prefer shorter periods.

Q2. Do we have to pay non‑compete compensation?
Not strictly by statute, but strongly advisable. Paying 20–50% of last gross wage per restricted month can make the difference in enforceability.

Q3. Can we claim penalty and an injunction?
Yes, if you say so. Draft expressly that the penalty is without prejudice to injunctive relief. Otherwise, you may be limited.

Q4. Can we claim damages beyond the penalty?
Only if expressly reserved (and then proven). Courts will not normally grant additional damages where a comprehensive penalty exists and no reservation is made.

Q5. What if we terminate without just cause?
Then the non‑compete typically falls away (TBK 447), and penalty claims fail.

Q6. Does a confidentiality clause replace a non‑compete?
No. An NDA protects information, not market participation. Use both where justified.

Q7. Can we make the penalty a buy‑out price?
Yes. If that’s the intention, say so clearly and set a one‑time fee (e.g., 6× monthly salary). If not, exclude the liberatory effect (TBK 446).

Q8. Is a Turkey‑wide territory ever enforceable?
Only in truly national roles (e.g., country manager). Even then, pair with shorter duration and compensation.

Q9. What about independent contractors?
These principles inform contractor restraints too, but scrutiny is different. If the relationship is actually employment in disguise, courts may recharacterize and apply stricter employee protections.

15) Conclusion

A workable Turkish non‑compete is not a sledgehammer—it is a precision tool. If you can articulate a legitimate interest, calibrate time/territory/scope, pay reasonable compensation, and design a proportionate penalty (with thoughtful remedies language), you give courts every reason to enforce your bargain rather than rewrite it.

Action points today: (i) audit your existing templates; (ii) segment roles by risk; (iii) retrofit clauses with compensation, caps, severability, and TBK 447 safeguards; and (iv) pre‑plan your evidence to prove real‑world competition if a dispute arises.

Categories:

Genel