Constitutional court annuls law choice in employment contracts with a foreign element: Legal uncertainty and the need for further regulation

The landmark decision of the Turkish Constitutional Court dated 5 November 2024 (No. 2024/187) has brought about a fundamental shift in Turkish employment law. The Court found Article 27(1) of the Law on Private International Law and Procedural Law numbered 5718 (Milletlerarası Özel Hukuk ve Usul Hukuku Hakkında Kanun) (“MÖHUK”), which permitted parties to choose the applicable law in employment contracts with a foreign element, to be unconstitutional and annulled the provision. Following its publication in the Official Gazette on 10 March 2025, a six (6) month transition period was introduced, with the decision taking effect as of 10 September 2025. This development will have significant legal and operational consequences, particularly for companies employing an international workforce and Turkish employers operating abroad. However, the annulment has also created a degree of legal uncertainty, as no new legislative framework has yet been introduced to clarify which law will apply in such cases.

Rationale of the Decision: Constitutional Protection of Employee Rights and Inequality of Bargaining Power

The Constitutional Court’s reasoning is rooted in the inherent imbalance of power in employment relationships, where the employee is typically the weaker party. The Court highlighted the risk that employers could exploit their superior bargaining position to select a legal system offering lower levels of protection for employees. Referring to Article 49 of the Turkish Constitution the Court underlined that employee rights must be safeguarded not merely at a minimum level, but to the highest possible standard. In particular, the Court found that allowing employers to opt for a foreign law providing less protection than the mandatory provisions of the employee’s habitual workplace law could undermine the employee’s constitutional rights. Consequently, the freedom of law choice in employment contracts has been restructured to prevent its use to the detriment of employees.

Legal Uncertainty Following the Annulment and the Need for Legislative Clarification

With the entry into force of the decision, the provision that previously allowed parties to freely choose a foreign law in employment contracts with a foreign element has been annulled on constitutional grounds. As no replacement regime has yet been enacted, the question of which law governs such contracts remains unsettled in practice. As a result, the scope and limits of law choice in employment contracts with a foreign element are currently open to differing interpretations in both practice and legal scholarship.  While it is expected that the mandatory and protective provisions of Turkish employment law will apply much more broadly, until further legislative action is taken, there may be ambiguities and risks in practice. This uncertainty is particularly relevant for employers operating abroad or entering into employment contracts governed by foreign law, as it may give rise to both legal and operational risks. Employers should therefore exercise caution and consider revising their contracts to align with higher standards of employee protection under Turkish law.

Public Policy, Closest Connection, and Anticipated Practical Outcomes

Under the general structure of MÖHUK, Turkish law is to be applied where the application of foreign law would contravene Turkish public policy. The Constitutional Court further emphasised that, even where a foreign law offers greater protection to the employee, Turkish law must still be engaged to ensure the highest standard of protection. Additionally, where a law more closely connected to the employment relationship exists, its application is permitted if it provides a higher level of protection for the employee. This approach aims to ensure that employee rights are protected not just at a minimum, but at the highest possible standard.

The impact of the decision will not be limited to newly concluded contracts; it will also necessitate a review of existing agreements. In particular, Turkish employees working abroad will no longer be deprived of the protections afforded by Turkish employment law through the employer’s selection of a less protective foreign law. This will ensure the primacy of national standards in the protection of employee rights and will require employers to restructure their human resources policies accordingly. However, until a new legislative framework is enacted, there may be divergent approaches in practice, particularly regarding Turkish employees working abroad and whether they can be deprived of the protections afforded by Turkish employment law through the employer’s selection of a less protective foreign law. Accordingly, there is uncertainty as to whether national standards will always take precedence in the protection of employee rights and how employers should structure their human resources policies. Employers are advised to carefully review their contracts and practices during this transitional period to minimise potential risks.

Practical Implications for Employers and Human Resources Management

• All employment contracts should be revised in light of the Constitutional Court decision and the resulting legal uncertainty, taking into account the mandatory and protective of Turkish employment law and the potential risks that may arise until further legislative clarification is provided;
• When drafting new contracts or updating existing ones, utmost care must be taken to ensure that employee rights are protected in accordance with Turkish law;
• Turkish companies operating abroad or employing staff in foreign countries must review their employment contracts and HR practices to ensure compliance with the new legal framework;
• HR departments should restructure all processes relating to recruitment, dismissal, remuneration, leave, compensation, and other employee rights in line with Turkish employment law standards; and,
• Ongoing monitoring of developments in Turkish employment law and international labour regulations is essential. Given the current legal uncertainty and the need for new legislation, it is highly recommended that employers and HR departments seek legal advice and closely follow future regulatory changes.

Given the current legal uncertainty and the need for new legislation, it is highly recommended that employers and HR departments seek legal advice and closely follow future regulatory changes.

For further information on these developments and their implications for your business, please contact your CMS Employment Law experts or your local CMS advisors : Dr. Döne Yalçın, Aslı Budak and Erdinç Dalar.