I. INTRODUCTION
Although the service contract regulated under the Turkish Code of Obligations No. 6098 (“TCO”) and the employment contract governed by labor law appear to share similar elements, they differ significantly in terms of their legal nature. At the core of this distinction lies the element of “dependency,” the presence or absence of which constitutes the principal criterion for determining the legal regime applicable to the contract. Indeed, the classification of a legal relationship as an employment contract entails the application of the mandatory and employee-protective provisions of labor law, directly affecting fundamental rights such as job security, severance and notice compensation, overtime pay, and annual leave entitlement. Conversely, where the relationship is characterized as a service contract within the meaning of the TCO, the balance between the parties is shaped predominantly by the principle of freedom of contract.
Accordingly, accurately delineating the boundary between service contracts and employment contracts is not merely a theoretical exercise; rather, it constitutes a critical legal determination that directly defines the rights and obligations of the parties in practice.
II. EXAMINATION OF THE CONSTITUTIVE ELEMENTS OF CONTRACTS IN LIGHT OF COURT OF CASSATION DECISIONS
Pursuant to Article 393/1 of the Turkish Code of Obligations (“TCO”), a service contract is defined as a contract whereby one party (the employee) undertakes to perform work in a dependent manner, and the other party (the employer) undertakes to pay remuneration. The explicit reference to performance “in a dependent manner” demonstrates that dependency constitutes the constitutive and distinguishing element of the service contract.
In doctrine and practice, it is accepted that a service contract consists of three essential elements:
- the obligation to perform work,
- the relationship of dependency, and
- the obligation to pay remuneration.
The obligation to perform work refers to the employee’s commitment to devote his or her personal labor to the benefit of the employer for a certain period. Remuneration, in turn, represents the consideration to be paid by the employer in return for such labor. However, the fundamental element distinguishing the service contract from other contracts involving the performance of work is the relationship of dependency.
The element of dependency denotes that the employee performs his or her work within the employer’s organizational structure and under the employer’s instructions and supervision. The existence of this element plays a decisive role in determining the legal characterization of the contract. In practice, particularly in situations where dependency appears weak or where the relationship resembles the exercise of an independent professional activity, it becomes difficult to draw the boundary between a service contract and independent work arrangements. Therefore, the scope and intensity of dependency constitute the primary criterion for determining the legal regime applicable to the contractual relationship.
Article 8/1 of the Labor Law No. 4857 (“Law No. 4857”) similarly defines an employment contract as a contract whereby one party undertakes to perform work in a dependent manner and the other party undertakes to pay remuneration. Although this definition closely resembles that found in the TCO, the concept of dependency under labor law is interpreted more broadly and more intensively. In employment relationships, dependency encompasses not only legal dependency but also economic and factual dependency, reflecting a multidimensional structure.
Indeed, the 22nd Civil Chamber of the Court of Cassation, in its decision dated 21.02.2014 (Merits No. 2013/5135, Decision No. 2014/3338), held:
“The criterion determining an employment contract is legal-personal dependency. Genuine legal dependency arises when the employee undertakes the obligation to comply with instructions relating to the performance of the work and conduct within the workplace. The employee performs his or her duties within the framework of the employer’s decisions and instructions. In this sense, the employee’s personal dependency on the employer comes to the forefront. Accordingly, there exists a hierarchical relationship between the employer and the employee. The dependency is legal because it is based on the employment contract, and personal because it binds the employee personally to the employer.”
And
In its decision dated 04.02.2025 (Merits No. 2024/11370, Decision No. 2025/1431), the 10th Civil Chamber of the Court of Cassation stated:
“The most important criterion distinguishing an employment contract from contracts of work, partnership, mandate, and other agreements involving the performance of work is the relationship of dependency. In such contracts, the person performing the work is economically dependent on the recipient of the work (the employer, the owner of the work, or the principal). The most significant criterion defining an employment contract is legal-personal dependency.
…
Dependency, and the time element to be considered within this context, constitutes the distinguishing feature of the contract of service.”
As can be seen from the jurisprudence of the Court of Cassation, the element of dependency is concretized through criteria such as the employee’s performance of work at the employer’s workplace or within the employer’s organizational structure, the obligation to comply with the employer’s instructions, the employer’s authority over the organization and execution of the work, and the determination of working hours and workplace by the employer. These criteria are decisive in assessing whether the worker is subject to the employer’s managerial authority and, consequently, whether the contractual relationship qualifies as an employment contract.
III. LEGAL CRITERIA FOR DISTINGUISHING SERVICE CONTRACTS FROM EMPLOYMENT CONTRACTS
The distinction between service contracts and employment contracts is primarily determined by the intensity and manifestation of the element of dependency. In practice, the following criteria are taken into account in order to concretize this distinction:
1. Dependency
In an employment contract, dependency appears as a legal-personal and continuous form of subordination. The employee operates within the employer’s organisational structure and is integrated into a hierarchical framework under the employer’s managerial authority. In contrast, under a service contract, dependency is more limited and less rigid. Independent professionals or consultants carry out their activities within their own organisational structures and make technical and professional decisions autonomously.
2. Time and Place of Work
Under an employment contract, the employee is, as a rule, obliged to perform work at the place and during the working hours determined by the employer. The duration of work and the location where it is performed are designated by the employer. In independent service arrangements, however, the service provider undertakes to achieve a particular result but retains broader discretion regarding when and how the work is performed.
3. Subordination to Instructions
In employment contracts, the employee is subject to the employer’s authority to give instructions, and a hierarchical superior–subordinate relationship exists between the parties. In the face of the employer’s managerial power, the employee has a duty to comply with instructions. In service contracts, by contrast, the service provider is bound by the general framework of the agreed result but remains technically and professionally independent in the execution of the work.
4. Provision of Equipment and Organisational Structure
In employment relationships, the employee operates within the organisational framework established by the employer, and the tools and equipment necessary for the performance of the work are generally provided by the employer. In independent service arrangements, the service provider typically uses his or her own tools and equipment and operates within his or her own organization. This serves as an indication of economic and organisational independence.
Nevertheless, none of these criteria is decisive on its own. The assessment must be conducted by considering all the characteristics of the specific case, with particular emphasis on the factual manifestation of dependency.
In practice, one of the most common issues arises when contractual relationships are deliberately structured under titles such as “service contract,” “consultancy agreement,” or “subcontracting arrangement.” Employers may attempt to avoid financial and legal obligations arising from labor law (such as severance and notice compensation, overtime pay, annual leave entitlements, and social security contributions) by establishing relationships that, in substance, qualify as employment contracts under the guise of a different contractual form.
In such cases, it is not the title of the contract but the true nature of the factual working relationship that is determinative. If the worker operates within the employer’s organisational structure, performs work under the employer’s instructions and supervision, and is economically dependent to a significant extent on the employer, the relationship must be characterized as an employment contract.
The legal consequences of such characterization are substantial. Where the relationship is recognized as an employment contract, the employee benefits from the protective provisions of labor law, including job security, entitlement to severance and notice compensation, overtime and annual leave pay, and full access to social security rights. Conversely, if the relationship is classified as a service contract, it will be governed by the general provisions of contract law, and the mandatory protective mechanisms of labor law will not apply.
IV. CONCLUSION AND EVALUATION
The distinction between service contracts and employment contracts, despite the similarities in their statutory definitions, ultimately turns on the nature and intensity of the element of dependency. While both contract types require the performance of work in return for remuneration, employment contracts are characterized by a structured and continuous form of legal-personal subordination, integrating the worker into the employer’s organisational and hierarchical framework. In contrast, service contracts generally involve a more limited and flexible form of dependency, allowing for a greater degree of technical and organisational autonomy.
The determination of the contractual nature cannot be based solely on formal classifications or the terminology chosen by the parties. Rather, it requires a comprehensive assessment of the factual circumstances, particularly the extent to which the worker is subject to the employer’s managerial authority, organisational integration, and economic control. The intensity of dependency remains the decisive factor in this analysis.
In practice, the correct legal characterization of the relationship carries significant consequences. Classifying a relationship as an employment contract triggers the application of mandatory and employee-protective provisions of labor law, ensuring rights such as job security, severance and notice compensation, overtime pay, annual leave, and social security protection. Conversely, where the relationship is deemed to constitute a service contract, it falls within the scope of general contract law, and the protective regime of labor law does not apply.
Accordingly, maintaining a clear and principled distinction between these two contractual forms is essential both for safeguarding the protective function of labor law and for preserving the principle of freedom of contract. Achieving this balance requires a careful, case-specific evaluation grounded in the factual manifestation of dependency rather than in the formal designation of the agreement.
