LEXIST

Competent court for non-compete clause violation and penalties decision

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Court of First Instance Decision:

As a result of the proceedings held by the Istanbul 24th Labour Court, it was decided that: the plaintiff was not indebted to the defendant in terms of the promissory note subject to the proceeding; the promissory note subject to the proceeding was in the nature of a security note; the enforcement proceeding was cancelled; and that the defendant was unfair and malicious in initiating the proceeding, taking into account the fact that the defendant initiated the proceeding based on the security note received by the plaintiff, even though the plaintiff knew that he was not indebted to him, and that the defendant was unfair and malicious in initiating the proceeding, it was decided to award bad faith compensation over 20% of the principal receivable subject to the proceeding.

Court of Appeal Decision:

The 29th Civil Chamber of the Istanbul Regional Court of Justice decided to reject the appeal application of the defendant’s attorney on the grounds that the basic relationship between the parties is an employee-employer relationship, the duty and jurisdiction to held the case belongs to the labour courts, the bond subject to the lawsuit was taken while the employment relationship was in effect and was in the nature of a security bond, and therefore it could not be proven that the plaintiff was indebted to the defendant employer in terms of the bond subject to the proceedings, and there was no violation of the law in terms of procedure and substance in the factual and legal evaluation of the Court of First Instance.

Relevant Legislation:

  • Article 369, first paragraph and Article 371 of Law No. 6100

  • Articles 180, 182, 396, 420, 444, 445, 446 and 447 of Law No. 6098

  • Article 72 of the Execution and Bankruptcy Law No. 2004 (Law No. 2004)

  • Article 5 of the Labor Courts Law No. 7036 (Law No. 7036)

  • Articles 4 and 5 of the Turkish Commercial Code No. 6102 (Law No. 6102)

Supreme Court Decision and Conclusion:

In the assessment made by the 9th Civil Chamber of the Supreme Court decided that,“…since the competent court to hold the cases regarding the penalty clause and compensation that the parties may request pursuant to the contractual clause regulating the consequences of the violation of non-competition for the period after the termination of the contract between the plaintiff employee and the defendant employer are the labour courts, the defendant’s appeal in this respect is not lawful” .

The decision also included the following change of opinion: “Although in the previous decisions of the Chamber, it was stated that the penalty clause and compensation cases arising from the violation of the non-compete clause for the period after the termination of the employment contract of the employee were commercial cases, as a result of the re-evaluation of the issue, it was determined that the competent court was the labour court, and the previous decision was reversed”.

Thus, the 9th Civil Chamber of the Court of Cassation accepted that the source of the dispute in the lawsuits regarding the penalty clause claim arising from the violation of the non-compete agreement is the employment contract, and accordingly, based on Article 444 and subsequent articles of Law No. 6098, it is accepted that the labour courts have jurisdiction in the lawsuits regarding the collection of the penalty clause filed due to the violation of the non-compete agreement by the person who is considered an employee under Labour Law No. 4857.

However, in the aforementioned decision, although the Court of First Instance decided to cancel the enforcement proceeding by determining that the plaintiff is not indebted on the grounds that the penalty clause was imposed only against the employee in the contract thus, in accordance with the provision of Article 420 of Law No. 6098 is invalid, when the employment contract between the parties is examined, there is no similar arrangement against the defendant (employer) and the penalty clause is not mutual, The non-compete agreement, the conditions, limits, consequences and termination of which are specifically regulated in Article 444 and the subsequent articles of Law No. 6098, is a contract that imposes obligations only on one party unless it contains a counter-performance, and for the validity of the penalty clause due to the violation of non-competition, it is not necessary to include a provision against the employer in the contract or in the non-competition record, and the condition of reciprocity is not sought due to the nature of the non-compete, by stating that; The assessment of the Court of First Instance in the context of Article 420 of Law No. 6098 regarding the penal clause in the concrete case was not deemed expedient.

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