Restrictive Covenant Clauses Q&A: Turkey
Published on Thomson Reuters:
1. In your jurisdiction, can Standard document, Restrictive covenant clauses: International be used in the following documents: • Terms of employment with the employee at the start of employment?• A simple separate agreement?• A deed? The most common way to implement restrictive covenants is to include restrictive covenant clauses in the terms of employment executed between the employer and the employee at the start of employment. However, a simple separate agreement or a deed may also be used.
2. Is it possible in your jurisdiction for employers to use restrictive covenants to protect their business by restricting an employee’s activities for a period of time after their employment has ended? It is possible under Turkish law for employers to include restrictive covenants in employment contracts or any other legal instrument to restrict the employee’s activities for a specific period of time. Non-compete, non-solicitation and confidentiality obligations are the types of restrictive covenant recognised under Turkish law. Only non-compete covenants are regulated in detail by the Turkish Code of Obligations (Code of Obligations), but the High Court accepts that non-solicitation and confidentiality covenants shall also be interpreted within the scope of the regulations on non-compete covenants.
3. Is there any definition of confidential information in your jurisdiction that is required by law or standard practice in restrictive covenants? There is no clear definition of confidential information established by Turkish law. The Code of Obligations only states that: • The employee must keep confidential during the term of their employment the information (especially production and business secrets) they have been exposed to due to their work.• Provided the employer has a legitimate interest, the confidentiality obligation will continue post-employment.The parties may freely decide on the scope of the definition of confidential information and include any business specific details. The following clause may be deemed as the standard clause used under Turkish law: ”Confidential Information means any business and trade secrets or confidential information related or belonging to the Employer including, but not limited to, any such information related to marketing and sales information, business plans or dealings, employees or officers, financial information and plans, know-how, services, research activities, findings, reports, any document marked confidential (or with a similar expression), or any information which you have been told is confidential or which you might reasonably expect the Employer would regard as confidential.”
4. Is the term Group Company recognised in your jurisdiction? If so, please can you set out an appropriate definition for Standard document, Restrictive covenant clauses: International.The term Group Company is recognised and defined under the Turkish Commercial Code (Commercial Code). A “group of companies” includes:
• The parent company.
• Its subsidiaries (that is, the companies over which the parent company has control, either by holding the majority of votes or the ability to assign the executive board of the company).
• Other related companies over which the parent company has indirect control via its subsidiaries.
The definition of a group of companies in the Commercial Code is included to determine to which companies the obligations of a group of companies regulated under the Commercial Code will apply. Parties may agree on another definition (under the principle of freedom of contract). The following clause may be used as a definition of a group company in a contract: “Group Companies means the company, and the subsidiaries, and ‘Group Company’ means any one of them or the relevant one of them, as the context requires.”
5. Are the terms subsidiary and holding company defined and recognised under the laws of your jurisdiction? If so, please can you set out an appropriate definition for Standard document, Restrictive covenant clauses: International.The terms subsidiary and holding company are recognised in Turkish law and are defined under the Commercial Code. Under the Commercial Code, a company is held to be a holding company of a subsidiary if it:
• Directly or indirectly holds the majority of the voting rights of another company, or has the right to ensure the election of members forming the majority of the managing body of another company which is able to take resolutions according to its articles of association, or holds the majority of the voting rights of another company by itself or with other shareholders or partners based on a contract in addition to its own votes.
• Holds another company under its control in accordance with a contract or through other means.Although there is a specific definition of a subsidiary and holding company in the Commercial Code, such definition is included to determine to which companies the obligations of a group of companies regulated under the Commercial Code will be applicable. Parties may designate another definition within the scope of freedom of contract. The following clause may be used as a definition of subsidiary and holding company:
”A company is a “subsidiary” of another company (its “holding company”) if that other company, directly or indirectly, through one or more subsidiaries;
(i) holds a majority of the voting rights in it;
(ii) is a member or shareholder of it and has the right to appoint or remove a majority of its board of directors or equivalent managing body;
(iii) is a member or shareholder of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it; or
(iv) has the right to exercise a dominant influence over it, for example by having the right to give directions with respect to its operating and financial policies, with which its directors are obliged to comply.”
6. In your jurisdiction, where an employer wrongfully dismisses an employee or the employee resigns in response to a repudiatory breach, is the employee released from any restrictive covenants? If an employer terminates the employment contract without a justified cause, or if the employee terminates the employment contract due to a cause attributable to the employer, any restrictive covenants applying to the employee will also be terminated (Article 447, Code of Obligations).
7.If the answer to the question above is “yes” can the employer attempt to get around this by stipulating that the restrictions apply on Termination which includes in its definition “on termination howsoever caused”, or “on termination whether lawful or not”? Would these be enforceable?An attempt to get around the termination of restrictive covenants in these circumstances (see Question 6) by adding a paragraph stating that the restrictive covenants shall be applicable irrespective of the type of termination would be ineffective (Article 447, Code of Obligations).
8. Are all the restrictions in Standard document, Restrictive covenant clauses: International: clauses 2.1 (a) – (f) recognised in your jurisdiction? Non-solicitation of business and non-solicitation of employees are recognised in Turkey. Non-employment covenants are not standard practice in Turkey. However, non-solicitation clauses are generally drafted in a way to cover non-employment. If a non-employment clause were included in an employment contract, it would be enforceable due to the principle of freedom of contract. Non-competition clauses are recognised in Turkey. Non-dealing covenants are not standard practice, but they can be included in employment contracts and would be enforceable due to the principle of freedom of contract. It is not standard practice to include a covenant requiring an employee to stop representing themselves as such after their employment ceases. However, such covenant may be encountered in employment contracts, and would be enforceable.
9. In your jurisdiction, is it common practice to include a restriction on the employee leaving the employer to work for a customer? It is not common practice to include a restriction prohibiting an employee from working for a customer.
10. Specifically, is Standard document, Restrictive covenant clauses: International: clause 2.1(c) which restrains the employee from employing or facilitating the employment of their former colleagues usually included as a restriction in your jurisdiction? If so, is it likely to be enforceable?It is not standard practice in Turkey to include non-employment restrictions in employment contracts. However, provided that the restrictions stated under the Code of Obligations are observed, non-employment clauses will be enforceable (see Question 14). Limitations on restrictions
11. In Standard document, Restrictive covenant clauses: International: clause 2.2, what percentage (%) shareholding is commonly inserted into a clause such as this clause in your jurisdiction? It is standard practice to insert a 5% shareholding.
Ambit of the restrictions
12. In your jurisdiction, does Standard document, Restrictive covenant clauses: International: clause 2.3 have the effect of ensuring that the covenants apply when necessary, even if the individual is simply providing information to others in order to allow them to compete, rather than acting in breach of the covenants themselves?Although there is no explicit authority to this effect, such clauses extending the ambit of the covenants will be enforceable under Turkish law. As is seen in practice, restrictive covenants may be drafted to restrict an employee from providing an opportunity for others, such as relatives and related parties and companies to compete with their employer. Even if such a clause is not included in the employment contract, the employer may always ask for damages based on unfair competition (Commercial Code).
13. In your jurisdiction, are restrictive covenants void as an unlawful restraint of trade?Provided the limitations designated at law are considered, restrictive covenants are deemed to be valid as lawful restraints of trade.
14.In your jurisdiction are restrictive covenants only enforceable if they are narrowly drafted?The mandatory limitations on restrictive covenants are set out in the Code of Obligations, which should be observed when drafting a restrictive covenant. They are as follows:
• Restrictive covenants should not include unfair restrictions on location, time and type of activities which put the economic future of the employee in jeopardy.
• Except under special circumstances, time restriction should be limited to two years.A restrictive covenant with a narrow scope would increase the possibility of enforcement. If the scope of the restrictive covenant is too broad, the employer would need to prove that such restrictions are reasonable and justifiable. A judge may always, evaluating all the circumstances and taking into account whether the employer has undertaken to pay any compensation in return for it, decide to limit the effect of a covenant in terms of scope and duration (Code of Obligations).
15. What terminology may be used in your jurisdiction in relation to the scope of the restrictions?Restrictive covenants should go no further than what is necessary to protect the legitimate business interests of the employer, and at the same time they should not unreasonably jeopardise the economic future of the employee.
16. To increase the enforceability of restrictive covenants in your jurisdiction, is it beneficial for the covenants to explain why the employer needs to have the protection contained in the restrictions? Explaining to the employee why the restrictive covenants are needed would be beneficial, but there are no High Court precedents stating that it will increase their enforceability.
17. What legitimate business interests may be recognised in your jurisdiction as being capable of protection by restrictive covenants? Legitimate business interests of the employer may be summarised as the employee’s access to information on the production, business secrets and client portfolio of the employer, and the effect on the employer’s profits of the use of such information.
18. To increase the enforceability of restrictive covenants in your jurisdiction, must they be limited in terms of the restricted activities? Restrictive covenants should not unreasonably put the economic future of the employee in jeopardy. Therefore, except for in special circumstances, restricted activities should be directly related to the employee’s job and should be limited to the job’s subject matter.
19. To increase the enforceability of restrictive covenants in your jurisdiction, should any competitors be specifically listed? Are there any potential disadvantages or consequences of listing the competitors, that is, those not listed may not then be included? Although it is not a statutory requirement, listing the competitors in the restrictive covenant would make it narrower and therefore more likely to be enforceable. If a list of competitors is included, any competitors not on the list (either because of accidental omission, or because they were not a competitor when the contract was executed) would be excluded from the scope of the covenant.
20. To increase the enforceability of restrictive covenants in your jurisdiction, must they be limited in terms of the restricted period of time? If so, what is this period likely to be in practice? Restrictive covenants must be limited to a specific period of time in order to be enforceable against the employee (Code of Obligations). Other than in special circumstances, the duration of restrictive covenants must not exceed two years. However, even if the duration of the restrictive covenant is less than two years, the judge may always amend the duration of the restriction if it would jeopardise the economic future of the employee.
21. To increase the enforceability of restrictive covenants in your jurisdiction, must they be limited in terms of the restricted geographical area? If so, what is this geographical area likely to be in practice? Restrictive covenants must be geographically limited to the areas where the employer is actually conducting business activities in order to be enforceable. The relevant geographical area may be a city, a region or any place where the employer is conducting business. The scope of geographical area must not be defined as the whole of Turkey, and it must not exceed the boundaries of the employer’s actual sphere of activity.
22. In your jurisdiction, is it necessary for the restriction to reflect the employee’s role and job level? The enforceability of a restrictive covenant is considerably related to the employee’s role and seniority. If the employee does not have any access to information on production, business secrets and customer information, a restrictive covenant would not be taken to protect the employer’s legitimate business interests and would therefore be void. For a restrictive covenant to be valid, the employee must have access to information related to business and production, which must qualify as confidential information and a business secret, and the employee must be able to use the information for the employee’s economic benefits. Whether particular production technologies, processes, inventions, software and hardware, financial records, business plans and strategies are business secrets will be examined by the court on a case by case basis. On the other hand, if an employee gains customers because of the employee’s skills and knowledge (as might be the case for lawyers and doctors), restrictive covenants will be void. Accordingly, restrictive covenants on employees working in lower job levels with no access to business secrets and customer information will be void.
23. Will the reasonableness of any restraints be considered more by reference to the status of the employee at the time of entering into the restraint as opposed to on termination of their employment?The reasonableness of a restrictive covenant will be determined according to the scope of the employee’s access to confidential information and business secrets. In some cases, the employee may not be in a position to obtain any confidential information at the time of entering into the employment contract but may learn them after a promotion (in this case a restrictive covenant may become effective on the promotion). Therefore, the reasonableness of each covenant will be analysed by the court on a case by case basis.
24. Can an employee be placed on garden leave prior to termination in your jurisdiction, that is a period during which the employee remains employed and bound by their employment terms but is released from their duties, usually prior to termination (see Standard document, Restrictive covenant clauses: International: clause 2.4)?Garden leave is not regulated under Turkish law. An employee whose employment contract is terminated shall continue to work during the notice period (Labour Code). However, a garden leave clause may be incorporated into an employment contract by mutual agreement of the parties, because its effect would be beneficial to the employee (in that they would be paid without working) and therefore, would not contradict the rationale of the Labour Code, as long as such garden leave is not used in a manner which prevents the employee fulfilling required conditions to be entitled for certain employment benefits (such as performance premiums).
25. If the answer to the question above is “yes”, will the inclusion of a clause such as Standard document, Restrictive covenant clauses: International: clause 2.4, (which reduces the period of the restriction by the garden leave period) increase the likelihood of the restriction being enforceable? The inclusion of such clause would be of benefit to the employee, and thus would increase the probability of the restriction being enforceable.
Potential future employer
26. Is the requirement for the employee to give any person making an offer to them a copy of these restrictions, as set out in Standard document, Restrictive covenant clauses: International: clause 2.5, permitted and enforceable in your jurisdiction?This would be permitted and enforceable, although it is not specifically regulated under Turkish law.
27. Is the requirement for the employee to tell their employer the identity of any person and business concern making an offer to the employee, as set out in Standard document, Restrictive covenant clauses: International: clause 2.5, permitted and enforceable in your jurisdiction? This would be permitted and enforceable, although it is not specifically regulated under Turkish law.
Separate legal advice
28. Is it common practice to include the wording of Standard document, Restrictive covenant clauses: International: clause 2.6 in restrictions in your jurisdiction, (that is, stating that the parties have entered into the restriction having obtained separate legal advice) so as to increase the likelihood for the restriction to be enforceable? This is not common practice under Turkish law. If a judge finds that a restrictive covenant is excessive, they may decide to limit its scope or duration (Article 455, Code of Obligations). Declaring that the employee has received separate legal advice before entering into the employment contract may help to undermine any claims of excessiveness which are based on the employee’s inexperience or negligence.
29. Is a severability clause as set out in Standard document, Restrictive covenant clauses: International: clause 2.7 likely to be valid and enforceable in your jurisdiction? Severability clauses are valid and enforceable under Turkish law. Even if part of the agreement is declared void or unenforceable by the court, the remaining parts will still be in force, provided that the void/unenforceable parts of the agreement are not material to the very existence of the agreement.
Transfer of a business
30. Is Standard document, Restrictive covenant clauses: International: clause 2.8 (requiring the employee to enter into a corresponding agreement with any new employer on the transfer of the employer’s business) common practice and likely to be enforceable in your jurisdiction? Although not common practice, Standard document, Restrictive covenant clauses: International: clause 2.8 is likely to be enforceable. Under Turkish law, restrictive covenants are not regarded as personal obligations, but rather as having an economic value to the business of the employer. Therefore, the acquirer of the business will be entitled to be protected in the same manner, as long as it continues to be active in the same field of business following the transaction. Therefore, even without a separate agreement, the restrictive covenants will continue to be applicable following the transfer of the business.
31.On the transfer of a business in your jurisdiction, will any agreement (containing restrictive covenants) entered into between the original employer and the employee transfer to the new employer automatically? On a transfer of business, all employment contracts executed between the company and its employees as of the transaction date will be automatically transferred to the acquirer of the business, together with all rights and obligations (Commercial Code and Labour Code). Since restrictive covenants are regarded as having an economic value to the business of the employer, any agreement including restrictive covenants together with the employment contracts will be transferred without the need of any further action to be taken.
32. If the answer to the above question is “yes”, will any post termination restrictions that automatically transfer continue to relate to the original employer/the transferor’s business (that is, because this was the entity that the subject matter of the restrictions applied to at the time the agreement was entered into)? Under Turkish law regardless of the date of termination of an agreement containing restrictive covenants, as long as the transfer of business is made during the period in which the restrictive covenants are still in force (including the post termination period), the restrictive covenants will continue to apply for the benefit of the acquirer not the transferor.
33. At the start of Standard document, Restrictive covenant clauses: International: clause 2.1, is the inclusion of wording that the employer is taking the benefit of the restrictive covenants “for and on behalf of any Group Company” likely to enable the interests of group companies to be protected in your jurisdiction? It is common practice under Turkish law to extend the scope of restrictive covenants to cover group companies. Such an extension is likely to be protected, since a contractual obligation to widen the scope of the covenant for the benefit of other group companies will be permissible as a contract for the benefit of a third party.
34. If a clause seeking to include the interests of group companies in relation to any restrictions is permitted in your jurisdiction, would the interests of the following entities be protected: • Subsidiaries?• Parent company?• Other companies in the group? The answer is the same for subsidiaries, the parent company and other companies in the group. The interests of all of these entities may be protected by inserting the necessary clauses that would extend the scope of the covenant to them.
35. Is Standard document, Restrictive covenant clauses: International: clause 2.9 (requiring the employee to enter into a separate agreement with any group company in respect of the restrictions) common practice and likely to be enforceable in your jurisdiction? Such clause will be deemed to be a “preliminary agreement”, which is an undertaking to enter into an agreement, regulated under Article 29 of the Code of Obligations. Accordingly, preliminary agreements will be enforceable, provided they include clear details of the agreement to be entered into and comply with any requirements as to the form of the agreement to be entered into. For the purposes of any restrictive covenants, such agreements are required to be concluded in writing. Clauses requiring an employee to enter into a separate agreement with any group company are not commonly encountered. Only multinational companies are including this kind of clause in employment contracts, although they are enforceable.
36.Is there any third-party rights legislation in your jurisdiction that would enable any group company to enforce restrictive covenants that are entered into: • in the initial contractual terms of employment between the employer and the employee; or• in a separate agreement containing the restrictions between the employer and employee (for example, a termination or settlement agreement)? The answer is the same for covenants entered into in the initial contractual terms of employment and separate agreements entered into during the employment or on termination. Contracts for the benefit of a third party are regulated under Article 129 of the Code of Obligations. There are two types of contract for the benefit of a third party: • A contract where the third party has the right to enforce its rights arising from the agreement (and the third party will have the adequate legal title to claim breach of the contract before the court).• A contract where the third party does not have the right to enforce its rights, but which enables the third party to receive the performance of the contract. In this case, the employer would need to claim damages before the court for the benefit of the group companies.For the agreement to qualify as the first type, either an explicit or an implicit indication that this is the parties’ mutual understanding will be sought. Even if an agreement cannot be deemed to be a contract for the benefit of a third party, the group may always claim damages under tort legislation should they suffer a direct loss.
37. In your jurisdiction, at the time of entering into these restrictions, does the employer need to provide consideration to the employee? Employers do not need to provide consideration to the employees in return for covenants.Employers do not need to provide consideration to the employees in return for covenants.
38. If consideration is required, what can this consideration be in your jurisdiction? N/A.
39. If it is permissible in your jurisdiction for the restrictions to apply to any group company, will that entity need to provide separate consideration from that provided by the employer when the employee entered into the restrictions? N/A.
40. What are the consequences in your jurisdiction if the employer does not provide any consideration to the employee when they enter into restrictive covenants (for example, will the restrictive covenant be void and unenforceable)? N/A.
41. In your jurisdiction, is the employer required to provide compensation to the employee in relation to the restrictive covenants (for example, payments for the period of restriction)? Employers do not need to provide employees with financial compensation in return for covenants under Turkish law. However, if it is mutually agreed, such compensation may be taken into consideration in favor of the employer once an employee claims the invalidity of the covenant.
42. If the employer is required to pay compensation to the employee, how much is payable? N/A.
43. If the employer is required to pay compensation to the employee, when is the compensation payable? N/A.
44. Is the employer able to waive any restrictive covenants at the time of termination in your jurisdiction? If so, how can the employer do this? The employer is not entitled to unilaterally waive any of the restrictive covenants on termination of the employment contract, but rather a release agreement should be executed between the employer and the employee.
45. Will the employer still have to pay the compensation during the post termination period of the restriction even if the employee finds alternative employment that does not breach the restrictive covenants with the employer?N/A.
46. If the employer is able to waive the restrictive covenants, what amounts may be payable to the employee (for example, is the compensation sill payable to the employee in full or a reduced sum)? N/A.
Execution and other formalities
47. Do restrictive covenants have to be in writing in your jurisdiction in order for them to be valid and enforceable? Restrictive covenants must be in writing to be valid and enforceable (Code of Obligations). It must be stressed, however, that restrictive covenants may not be imposed unilaterally. The written terms (whether within the employment contract or via a separate agreement) must be agreed upon between the employer and the employee. Therefore, only referring to an internal regulation or the like regarding the application of restrictive covenants will not be valid and enforceable.
48. What are the execution and other formalities that are required for restrictive covenants to be valid and enforceable in your jurisdiction? There are no execution or other formalities required for restrictive covenants to be valid and enforceable.
49. In your jurisdiction do the restrictive covenants need to be registered or require any formal approval? There are no registration requirements or any other formalities.
50. Are any of the restrictive covenant clauses set out in Standard document, Restrictive covenant clauses: International not legally valid and enforceable or not standard practice in your jurisdiction? Restrictive covenant clauses of non-employment, non-dealing and no longer representing as an employee are not defined under Turkish law and are not standard practice in Turkey. However, provided that the limitations set forth under the Code of Obligations are fulfilled, the covenants will be enforceable due to the principle of freedom of contract.
51. Are there any other clauses that would be usual to see in restrictive covenant clauses and/or that are standard practice in your jurisdiction? There are no other restrictive covenant clauses that are standard practice in Turkey.
Remedies for Breach
52. What remedies are available for breach of restrictive covenants? How long will each remedy take to obtain in your jurisdiction? Depending on the time of the breach, there are various remedies available to the employer:
• If the employee breaches the restrictive covenant during the term of the employment, the employer may:
1- claim damages for breach of a contractual duty; and/or
2- terminate the employee’s employment contract with justified reasons based on the employee’s breach of their loyalty obligation under the Labour Code (the employer will not be required to pay any compensation to the employee in this case).
• If the employee breaches the restrictive covenant after the employment has ended, the employer may:• claim damages for breach of a contractual duty;
1- demand specific performance of the penalty payment (if a penal clause is included in the contract);
2- claim compensation based on unfair competition (where the breach of the restrictive covenant amounts to unfair competition); or
3- in very exceptional cases and only if this right is explicitly reserved under the contract, demand the ceasing of the breaching activity.
Under the Code of Obligations, to claim compensation the employer must prove the wrongful behaviour of the employee and quantify the damage caused by such behaviour. The damages will be quantified by a comparison between the current assets of the employer and an “if not” situation should the breach not have taken place. The “if not” situation includes actual loss as well as loss of earnings.
Penal clause - It is therefore common practice to include a penal clause that applies in the event of a breach of a restrictive covenant. If the actual damages suffered exceed the amount of the penalty payment under the contract, the employer is entitled to claim this amount as compensation. In such a case, however, the burden of proof regarding the wrongfulness and the magnitude of the loss will again be on the employer. In the absence of agreement to the contrary between the employer and the employee, the restrictive covenants will no longer be applicable once the penalty payment is made by the employee. Finally, it must be kept in mind that if the matter is taken before the court, the court has the authority to decide whether the penalty amount is excessive or not, and may rule on a lower penalty payment.
The following wording could be included for the penal clause: ”The Employee hereby agrees, accepts and undertakes that, in case of breach of this covenant, the Employee will pay the penalty at the amount of the sum of Employee’s gross salaries for the last [INSERT 3 to 12 months depending on the seniority] months for the damages. Also, the Employer has declared that it reserves the right to claim indemnification for the surplus and that she has accepted such fact.”
If there is an explicit term in the employment contract and the breach of the restrictive covenant is due to gross negligence of the employee and this behaviour has caused the employer a significant loss, then the employer may ask the court to order the ceasing of such behaviour. However, the court’s decision will not be enforceable against third parties to the dispute. Therefore, if the restrictive covenant is breached by a new employment relationship, the court will not have jurisdiction to rule over the new employment and thus, may not urge such employment to be terminated. On the other hand, if the former employee has started their own business in breach of the restrictive covenant then the court may order the ceasing of such business. Depending on the magnitude and complexity of the claims, the trial process may take two to four years if the matter is taken before court.
53. Would a successful party be able to recover its costs from the losing party for any successful action for breach of restrictive covenants? Under the Code of Civil Procedure, the losing party must bear all the costs incurred during the litigation. However, if the winning party has unreasonably lengthened the litigation and caused unnecessary litigation costs, the court may order it to pay part or all of the litigation costs.
54. If there are no restrictive covenants with the employee, can the employer rely on any other actions or remedies to protect its business, clients, customers or confidential information in your jurisdiction? If the employee acts in bad faith during the term of the employment, the employer may, either or both:
• Claim damages for breach of a contract.
• Terminate the employee’s employment contract with justified reasons based on the employee’s breach of their loyalty obligation towards the employer. This obligation arises under the Labour Code and Code of Obligations by the mere fact of the employee signing the employment agreement.Therefore, any action contrary to the employee’s duty of loyalty that causes damages to the employer must be compensated by the employee.To claim compensation, the employer must prove the wrongful behaviour of the employee and quantify the damage caused by such behaviour (see Question 52).
In practice, a breach of loyalty is generally caused by a breach of the employee’s confidentiality and non-compete obligations. The duty of confidentiality continues to apply even after the end of the employment and even in the absence of specific agreement, if the employer has a legitimate interest in keeping such information in question confidential.
If the employer suffers a direct loss due to the wrongful behaviour of the employee during their employment or after the end of their employment, the employer is also entitled to claim damages under tort legislation (even in the absence of any restrictive covenants) if the employer is able to prove the following:
• The employee acted in bad faith.
• The employer lost or is under the risk of losing its customers due to the employee’s actions.
• The actual loss suffered.
• The employee’s negligence.
Zeynep Ünlü, Partner
BTS & Partners
Areas of practice: Employment, corporate, contracts, dispute resolution, fintech, information technologies, intellectual property.
BTS & Partners