Employee Unfair Competition and Competition Law Attorney

Employee's Unfair Competition Practices and Liability

SELF

Until the 1980s, Turkey adopted a mixed economic system. Subsequently, the 1982 Constitution introduced a liberal economic system. The free market environment brought about by liberal economics competition. This competition, arising from the free establishment of commercial relations, contributed to economic development and the flow of money. In cases of unfair competition, the state intervenes by establishing rules and regulations. The aim of these rules is to ensure fair and free competition. Regulations concerning unfair competition aim to protect the free market environment. Following recent events in Turkey and worldwide, the concept of unfair competition has gained importance, leading to the implementation of new regulations.

Keywords: Competition Law, Unfair Competition, Unfair Competition Liability

ENTRANCE

In recent centuries, competition has progressed alongside advancing economic systems. Looking at the economic policies of developed countries, competition is paramount. Taking America as an example, the competition between different brands within the country provides financial growth for both the country and the brands. Governments need to regulate such an important issue. Governments regulate internally as well as being subject to international agreements. In this way, competition is protected. Without regulation, it is impossible to speak of a free market environment. The concentration of money in a single hand is detrimental to both the state and the communities in the market. To create an honest and free market environment, regulations are put in place to eliminate unfair competition. In this context, the issue of competition between employee and employer is also very important. The employee's obligation of loyalty should prevent them from engaging in actions that create unfair competition. Care should be taken to ensure that the employee's freedom is not restricted.

Competition Law Attorney: This article will first provide relevant definitions and their scope. Following this, the non-compete clause will be discussed. The third section will explain instances of unfair competition under the law. The fourth section will describe the legal procedures arising from unfair competition by an employee.

CHAPTER ONE

1. Definitions
   • Unfair competition

Competition is the cornerstone of liberal economies. Enabling individuals to trade within a free market is a result of modern economies. We see that individuals compete not only economically but also in their social lives. Within the given conditions, competition is an important concept that enables people to do their jobs better and to produce a better product. Competition must be conducted with ethical and moral values ​​in mind. Competition that is not conducted in accordance with ethical and moral values ​​leads to unfair gain. This unfair gain and monopolization harms the liberal economy and, consequently, the state economy. Anticipating this harm and aiming to prevent it and to resolve it legally when it occurs, the legislator unfair competition. According to Article 55 of the TCC, for unfair competition to occur, there must be a competitive relationship and the principle of honesty must be violated within this competitive relationship. Article 54/2 of the TCC defines unfair competition. Accordingly:

“Deceptive or otherwise dishonest conduct and commercial practices that affect relationships between competitors or between suppliers and customers are unfair and unlawful.”

1.2. The Concept of a Business Employee

A Competition Law Attorney defines  businesses as economic, technical, social, and legal entities that produce and/or market goods or services by bringing together factors of production in a certain proportion and harmony to achieve their stated goals.[1] An employee is a human being who works in the business and contributes their labor in exchange for a specific wage.[2] There must be a duty of loyalty between the employer and the employee. Individuals considered as employees of a business should be considered as people bound by this bond and working for a specific wage. It is important not to confuse dependency on work with the duty of loyalty. In this sense, those who perform tasks such as labor, internship, commercial representation, commercial agent, marketer, and apprentice are considered employees of a business. Elements have been determined to explain who is an employee of a business. These are:

• The Existence of a Duty of Loyalty or a Duty of Confidentiality

Unfair competition arises as a result of breach of the duty of loyalty. Here, the duty of loyalty and the duty of confidentiality come into play. The duty of loyalty is defined in Article 396 of the Turkish Code of Obligations (TBK): "The legitimate interests is obliged to act loyally in the protection The inclusion of the concept of legitimate interests within the scope of the duty of loyalty is quite significant. The duty of confidentiality, on the other hand, is the fulfillment of the duty of loyalty through non-compliance. According to TBK Article 396/4, "The employee cannot use or disclose to others information learned during the course of their work, especially production and business secrets, for their own benefit during the continuation of the employment relationship. To the extent necessary for the protection of the employer's legitimate interests, the employee is obliged to maintain confidentiality even after the termination of the employment relationship." The law explicitly states the duty of confidentiality.  

• Dependence

When considered from an employee's perspective, dependency means performing work at the place and time specified by the employer, following their instructions, and adhering to the work schedule and business policy determined by the employer.[3]

• Job
• Fee

According to Article 18 of the Constitution, employees working for a business are entitled to wages in return for their work.

1.3. Persons Included in the Scope of the Business

1. Employee

According to Article 2 of the Labor Law, an employee "a natural person working based on an employment contract ." Depending on their duties, employees form the immediate environment of the business, maintaining close relationships with the products of the business and customers. Because they are aware of how the business operates, they can be a source of unfair competition.

1. Apprentices and Interns

The definition of an apprentice in Article 3 of the Law on Professional Training for Competition Law Attorneys states: “An apprentice is a person who, according to the principles of an apprenticeship contract, develops the knowledge, skills, and work habits required by the profession within the workplace.” The same article further defines internships as: “ Professional work undertaken by students in a business, outside of the theoretical and practical courses determined by the Council of Higher Education for each level of education in higher education institutions, with the aim of developing the professional knowledge, skills, attitudes, and behaviors foreseen in the curriculum, familiarizing them with the sector, adapting to working life, and training them in a real production and service environment .” Labor courts do not have jurisdiction in disputes between apprentices and employers.

1. Commercial Representation

Commercial agents have obligations of loyalty and commitment in their relationship with their principal. When they gain influence over a business due to the nature of their work, it is possible for them to engage in unfair competition and be considered as employees.[4]

1. Commercial Agent

A commercial agent performs the ordinary business operations of the enterprise in accordance with the service contract between them and the business owner. Because they interfere in the business as a commercial representative, unfair competition is a possibility.

1. Salesman

A marketing employee is a traveling sales assistant who acts as a commercial agent.[5] After the employment contract ends, the marketing employee is obliged to return the business-related models, price lists, and other specifications to the employer. If a competitive environment arises with this information, then unfair competition occurs.

PART TWO

2. Non-compete clause

ACompetition Law Attorney understands  that an employment contract exists between an employer and their employees for the duration of their employment. According to this contract, the employee receives compensation for their labor in exchange for a fixed salary. Furthermore, both parties are bound by a duty of loyalty. Upon termination of the employment contract between the employee and the employer, the obligations arising from the contract cease. However, it is possible for unfair competition to arise from the employee's acquired knowledge after the termination of the employment contract. To prevent such situations, an additional non-compete agreement is necessary. While the obligations arising from the employment contract cease after its termination, the non-compete clause does not. Ultimately, the aim is to protect the free market environment. Non-compete clauses are regulated in Article 444 and subsequent articles of the Turkish Code of Obligations (TBK). The article explains the conditions, limitations, consequences of conduct, and termination of the non-compete clause.

According to Article 444 of the Turkish Code of Obligations, the conditions for a non-compete clause are as follows:

1. The employee must have legal capacity
2. The contract must be in writing and subject to specific formats
3. A non-compete clause is valid if it would cause significant harm to the employer.

Article 445 of the Turkish Code of Obligations defines the limits of the non-compete clause.

“ARTICLE 445 - Non-compete clauses may not contain restrictions that are inappropriate in terms of location, time, and type of work in a way that unfairly jeopardizes the economic future of the worker, and their duration may not exceed two years, except in special circumstances and conditions.”.

The judge may freely apply an excessive non-compete clause, considering all circumstances and conditions

It may limit the scope or duration of an obligation by evaluating it and fairly considering any counter-obligation the employer may have undertaken.”

As a result of conduct violating the non-compete clause, the employee who committed the violation is obligated to compensate the employer for all damages incurred as a result. The non-compete clause terminates if it is determined that the employer no longer has a genuine interest in maintaining it.

CHAPTER THREE

4. Unfair Competition Situations from the Perspective of Business Employees
   • Within the scope of Article 55 of the Turkish Commercial Code

Article 55 of the Turkish Commercial Code provides examples of the main acts of unfair competition.[6] Among the exemplary provisions, the acts of "directing the assistants of third parties to violate their duties", "directing third parties to disclose or acquire production and business secrets", "unauthorized use of the products of others", "unlawfully disclosing production and business secrets" are acts of unfair competition that are directed by the employees of the business, act as instruments, or are carried out directly.[7] It is necessary to examine these individually within the scope of the law.

1. Inciting Third Parties' Assistants to Violate Their Duties

In service sectors where employees interact directly with customers, employee training, attitude, and work experience are crucial. However, due to their important positions within the company, employees can be used as tools by other parties in the market to induce breach of contract. When a third party induces a breach, unfair competition occurs. The company employee is persuaded to act in a way that is undeserved or contrary to their obligations, thereby gaining or being offered a benefit.

1. Directing third parties' assistants to disclose or obtain production and business secrets

This act industrial espionage .[8] A person who profits from violating the protection of information known to a limited number of people that is useful in business life through effective and secure methods has committed an act of unfair competition. The owner of the secret must have a legitimate interest in protecting this secret.

1. Unauthorized Use of Others' Works

Article 55 of the Turkish Commercial Code examines three actions: Unauthorized use of a work product entrusted to oneself; unauthorized use of a work product belonging to a third party, knowing that it has been entrusted to oneself; and finally, acquiring and using another person's work products through technical reproduction methods. These actions are defined as acts of unfair competition in the law.

1. Unlawfully disclosing production and business secrets

A Competition Law Attorney argues  that unfair competition occurs when a competitive environment is created by the unlawful disclosure of production and trade secrets. While the law stipulates these two elements, it does not require the perpetrator to be an employee of the company. Although it is more likely that the perpetrator is an employee of the company based on the circumstances, this requirement is not necessary. The perpetrator can be any third party. The crucial point is the unlawful disclosure of this information.

5.1. Within the scope of Article 54 of the Turkish Commercial Code

Article 54 of the Turkish Commercial Code states that "Deceptive or otherwise dishonest conduct and commercial practices affecting relations between competitors or between suppliers and customers are unfair and unlawful."

Certain categories emerge under the law. These are examined in detail below:

1. Taking Advantage of an Employee's Termination of Their Current Employment Relationship

Regardless of the reason for the termination of employment relationships, it is generally accepted in legal doctrine that former employees have ongoing obligations of loyalty and confidentiality. Acting in violation of or benefiting from these ongoing obligations after the termination of the employment contract constitutes unfair competition.

1. Improper Disclosure of Employer's Unlawful Actions and Interests by a Company Employee

We mentioned the concept of ethical reporting above. Reporting is justified by considering the best public interest. Here, alternative, non-illegal means of reporting should be sought first. It should be evaluated whether this unlawful disclosure is a last resort.

1. Placing an employee in a rival company to leak information

Placing employees within a rival company to disclose production and trade secrets constitutes a violation of ethical principles and unfair competition under general regulations.[9]

1. Employee Breach of Contract by Accepting Bribes

An employee's breach of contract by accepting a bribe is considered an act of unfair competition under general legal provisions. As a result of such unfair competition, the Supreme Court awards compensation.[10]

1. An employee's attempt to terminate their current contract in order to enter into a contract with a third party's employee

An employee receiving other job offers during the term of their contract does not directly constitute unfair competition, as it is not possible to restrict a person's constitutional right to work. However, if a competing company makes such an offer to benefit from the employee and create an unfair competitive environment, then unfair competition occurs. Unfair competition also occurs when the employer and employee act together against the current employer to create a justifiable reason for termination.

1. Manager Hunting

This refers to someone who acts as a kind of go-between for employers with management position vacancies, reaching out to suitable candidates and persuading them to fill the vacancies instead of posting job advertisements.[11]

CHAPTER FOUR

1. Legal Consequences of Violation

Article 56 of the Turkish Commercial Code regulates the legal consequences arising from unfair competition. According to the text of the article:

ARTICLE 56 - (1) Anyone whose customers, credit, professional reputation, commercial activities or other economic interests are harmed or may be threatened by unfair competition;

1. a) Determining whether the act was wrongful or not,
2. b) Prevention of unfair competition,
3. c) Eliminating the material consequences of unfair competition, correcting false or misleading statements if the unfair competition was carried out through them, and, if unavoidable to prevent the infringement, destroying the tools and goods used in the commission of the unfair competition
4. d) Compensation for damages and losses, if there is fault
5. e) The awarding of moral damages if the conditions stipulated in Article 58 of the Turkish Code of Obligations are met

The judge may request it. In favor of the plaintiff and in accordance with clause (d), the judge may also award compensation equivalent to the benefit that the defendant could have obtained as a result of the unfair competition.

1. Declaratory Action: According to Article 106 of the Code of Civil Procedure, “Through a declaratory action, the court is requested to determine the existence or non-existence of a right or legal relationship, or whether a document is forged. Except in exceptional circumstances specified in the laws, the party filing the declaratory action must have a legally protected current interest in doing so. Material facts alone cannot constitute the subject matter of a declaratory action.”
2. Action for Prevention of Unfair Competition: Since the continuation or repetition of the action is prohibited, its consequences are future-oriented.[12] The right to file a lawsuit is forfeited when the danger ceases. This does not mean that it is a statute of limitations. If the action continues, it is not subject to the statute of limitations and the party does not lose the right to file a lawsuit. We see this in the decision of the General Assembly of the Supreme Court of Appeals. “As a rule, lawsuits for the prevention of unfair competition are not subject to the statute of limitations. The condition for hearing the lawsuit is that as long as there is a danger of the unlawful behavior being repeated, the lawsuit for prevention also continues to exist. When the danger ends, the lawsuit for prevention also lapses.”[13]
3. Restitution Action: The plaintiff has the right to request the elimination of the material consequences of the act; the correction of false or misleading statements if the act was not committed through such statements; and, if unavoidable to prevent the infringement, the destruction of the means and goods that contributed to the act. This type of action is usually filed together with an injunction action. No additional compensation is awarded in this action; a separate lawsuit is required for compensation.
4. Compensation Claim: According to the relevant article, fault is a prerequisite for this type of claim. The law grants the right to claim both material and moral compensation based on the extent of the damage suffered.

1. Parties
2. Plaintiffs

• A person affected by an act of unfair competition
• Customers
• Professional and economic associations, consumer organizations, and public institutions

2. Defendants

• The person who engages in unfair competition
• Man who employs
• Press, publishing, communication and information technology organizations
• Service providers

1. Trial Procedure

Since unfair competition cases are regulated in the Turkish Commercial Code (TTK), they are absolute commercial cases, and therefore, written trial procedure is applied according to the provisions of Article 118 et seq. of the Code of Civil Procedure (HMK). However, with the amendment dated 28/07/2020, it has been stipulated that the simplified trial procedure will be applied in commercial cases where the amount or value does not exceed five hundred thousand Turkish Lira.[14] The competent court is the primary commercial court according to the TTK. The competent court is the court of the place where the tort was committed or where the damage occurred or is likely to occur, or the court of the place of residence of the injured party. Mediation is required in unfair competition cases. The mediation situation is evaluated according to the Turkish Commercial Code (İŞMK). The statute of limitations is determined by law. According to the TTK, the right of the person who has the right to sue is subject to a one-year statute of limitations from the day he/she learns of the birth of these rights, and in any case, three years from the birth of these rights.

CONCLUSION

We have provided the necessary information regarding what constitutes unfair competition by an employee, under what conditions it occurs, and what the consequences will be if it happens. The legislator has made regulations in the field of unfair competition with the aim of regulating competition and preventing monopolies. One of the areas regulated is unfair competition by employees.

Remember that every event and situation is evaluated and concluded within its own context. To obtain more detailed information, manage the process effectively, and avoid any loss of rights, you can contact our office.

Zeynep Sıla ÇARDAKBAŞI

[1] Tengilimoğlu, Dilaver / Asuman, Atilla, / Bektaş, Meral: Business Management, 6th Ed. Seçkin, Ankara, 2016, p. 28.

[2] Tengilimoğlu / Asuman / Bektaş, p. 85.

[3] Zengin, pp. 22-23

[4] Deniz AÇIKGÖZ, Employee's Unfair Competition Actions and Liability for Compensation, Seçkin Yayıncılık, 2023, p. 75.

[5] Akdeniz, Umut, Marketing Agreement, Gazi University Faculty of Law Journal, Vol. 17/2013, No. 4, p. 4.

[6] Göle / Bizer, p. 288; Karabağ, p. 123; Karasu/ Suluk / Nal, p. 416.

[7] Deniz Açıkgöz, Employee's Unfair Competition Actions and Liability for Damages, Seçkin Yayıncılık, 2023, p. 77.

[8] Imregun, 83.; Teoman / Ülgen / Helvacı / Kendigelen / Kaya / Nomer Ertan (2009), p. 463.

[9] Kayasoylu, p. 71

[10] Supreme Court 11th Civil Chamber, December 10, 2015, Case No. 2014/19065 E. and Decision No. 2015/13291 K.

[11] Şenocak, p. 242.

[12] Karayalçım, p. 469; Özdamar / Ermenek, p. 49; Gündüz, p. 52.

[13] HGK, dated 19.02.1965, case number 1966-485 E. and 130 K. (UYAP, accessed 23.05.2020)

[14] Deniz AÇIKGÖZ, Employee's Unfair Competition Actions and Liability for Compensation, Seçkin Yayıncılık, 2023, p. 132.