By its decision dated 5 November 2024, numbered E.2023/158, K.2024/187 (Official Gazette: 10 March 2025, No. 32837), the Constitutional Court annulled the first paragraph of Article 27 of the Code on Private International Law and International Civil Procedure numbered 5718 (the “MÖHUK”); subsequently, fundamental amendments were made to the first and fourth paragraphs of the said article through Law numbered 7550. Under the new regime, even where the parties have chosen the law applicable to the employment contract, it is now possible to apply another law that is more closely connected with the contract. This development requires employers managing international employment relationships, in particular those involving employees seconded abroad (expats), foreign nationals, intra-group assignments and cross-border (cross-border) employment structures, to reassess their existing contractual practices.

1. Introduction

With the increasing intensification of international employment relationships, the question of which law shall apply to employment contracts with a foreign element has acquired critical importance for employers. In the case of overseas assignments, the employment of foreign nationals, intra-group postings within multinational groups, and cross-border employment models, the determination of the applicable law goes beyond a purely technical conflict-of-laws issue and becomes a strategic element directly affecting the employer’s cost structure, liability regime and potential dispute risks.

This client alert examines the system prevailing under Article 27 of the MÖHUK prior to its amendment, the approach adopted by the Constitutional Court (the “Constitutional Court”) in its annulment decision, and the new regime introduced by Law numbered 7550; and sets out our findings and recommendations for practical implementation.

2. The System Prior to the Amendment

Under Article 27 of the MÖHUK, the parties’ freedom to choose the law applicable to employment contracts with a foreign element was recognised within the protective limits established in favour of the employee. Where the parties had not made a choice of law, the law of the workplace where the employee habitually performed his/her work would, as a rule, apply; in cases where the work was continuously performed in more than one country, the law of the country where the employer’s principal place of business is located would be determinative. The provision further contained an “escape clause” allowing the court, where the circumstances of the specific case indicated that another law was more closely connected with the contract, to apply that more closely connected law.

The fundamental limitation of the repealed regime, however, was that the said escape clause could only be invoked where the parties had not made a choice of law. This structure prevented the application of another law that was much more closely connected with the employment relationship and that would have afforded the employee stronger protection whenever a valid choice of law was in place, and gave rise to significant debate in legal doctrine and practice.

3. The Constitutional Court’s Annulment Decision

By its decision dated 5 November 2024, numbered E.2023/158, K.2024/187, the Constitutional Court annulled the provision under Article 27/1 of the MÖHUK. The decision was published in the Official Gazette dated 10 March 2025 and numbered 32837.

The reasoning of the High Court placed particular emphasis on the following points:

• The State’s positive constitutional obligation to protect employees applies equally to employment relationships with a foreign element.
• It is incompatible with the balance that the Constitution seeks to establish in favour of the employee for the employee — already in a weaker position vis-à-vis the employer — to be required to settle for only the minimum protection afforded by the law of the habitual workplace and to be deprived, on account of the existence of a choice of law, of the more advanced protection that would be provided by the law most closely connected with the contract.
• What is required is not the outright prohibition of choice of law, but rather the prevention of its instrumentalisation in a manner that would override higher protection standards available to the employee.

Within this framework, the Constitutional Court has adopted a more balanced position between constitutional protection and freedom of contract by precluding the choice of law from being transformed into an unlimited instrument in favour of the employer.

4. The New Regime Introduced by Law numbered 7550

Following the Constitutional Court’s decision, the legislator amended the first and fourth paragraphs of Article 27 of the MÖHUK through Law numbered 7550.

4.1. Broadening the Scope of the “More Closely Connected Law” Mechanism

The most significant change brought by the new regime is that the “more closely connected law” mechanism has now been made applicable not only in cases where no choice of law has been made, but also in cases where the parties have made such a choice. As a result, even where the parties have chosen a specific law in the contract, it has become possible — upon consideration of all circumstances of the concrete case — for another law that is more closely connected with the employment contract to be applied. This amendment constitutes a noteworthy step towards remedying the systemic deficiency identified by the Constitutional Court.

4.2. Preservation of the Mandatory Provisions of the Law of the Place of Work

The expression “the provisions of the law of the place where the work is performed that must be applied at the time the work is performed”, inserted into Article 27/4 of the MÖHUK by Law numbered 7550, provides for the direct application of certain mandatory employment rules (overriding mandatory rules) of the law of the country where the employment is actually performed. The legislative justification refers in this context to, by way of example, rules concerning working time, weekly rest, paid annual leave and overtime work.

5. Assessment: Does the New Regime Fully Resolve the Issue?

While the new regime provides a significant gain in terms of employee protection by paving the way for the application of the more closely connected law notwithstanding the existence of a choice of law, certain reservations have been raised in legal doctrine.

In particular, with respect to employees sent abroad to work, the fact that certain mandatory rules of the law of the place where the work is performed have now become directly applicable, beyond the discretion of the court, may restrict the possibility of a flexible assessment tailored to the specific circumstances of the case. From this perspective, it should not be overlooked that the new regime, while strengthening the employee protection mechanism, may also give rise to new debates in practice.

6. Conclusion and Recommendations for Employers

Following the Constitutional Court’s decision and Law numbered 7550, the applicable law in employment contracts with a foreign element can no longer be determined solely on the basis of the choice-of-law clause set out in the contract. The determination of the applicable law now requires a holistic analysis that takes into account, together, the factual connecting factors of the employment relationship, the place where the work is performed and the legal system most closely connected with the contract.

In this context, we recommend that, in particular, the following types of contracts and structures be reviewed and, where necessary, revised:

• Service contracts of employees seconded abroad (expats),
• Employment contracts entered into with foreign-national employees,
• Assignment documents between group companies (secondment / intra-group assignment),
• Cross-border (cross-border employment) employment structures,
• Template contracts and standard choice-of-law clauses applied to multi-jurisdictional employment relationships.

It is of paramount importance that employers promptly reassess their existing employment contracts and standard choice-of-law clauses in light of the Constitutional Court’s decision, Law numbered 7550 and current judicial approach, and that they conduct a risk-mapping exercise that takes into account both the geographical and substantive connecting factors of the employment relationship.

Best regards,

DT Law