Turkey: The Severance Pay On The Termination Of The Fixed Term Agreements

There are no clear provisions or regulations under Labor Law and relevant legislation as to whether to pay a severance pay to the employee with the termination of the Fixed-Term Employment Agreement. Therefore, the solution to this problem is based on the decisions of the Supreme Court (Yargıtay).

"Principle of interpretation in favor of the employee" is embraced under the Labor Law and such principle has also been adopted by the Supreme Court which delivers its judgments by considering to protect the employee. There is a common practice of the Supreme Court in which the employee is entitled to severance pay if the employer terminates the fixed term employment agreement by noticing the employee that the employment agreement will not be renewed at the end of its term and if such decision of the employer is not based on a valid reason.

9th Civil Chamber of the Supreme Court, in its decision numbered 2009/22355E., 2011/34265K. dated 03.10.2011 states that:

By clearly stating that "The agreements of the employees who are subject to this Law..." the Article 14 of The Labor Law No. 1475, which regulates the severance pay, reveals that there is no difference between the employment agreements with fixed term and indefinite term with regard to receiving a severance payment. What is essentially important here is the party wishing to terminate the agreement and whether the conditions required for the severance pay have been met.  For example, the employee who has terminated his/her fixed term agreement based on a valid/just reason in accordance with the Article 24 of the Labor Law No. 4857, shall be entitled to severance payment provided he/she has been employed for 1 year. Clearly, in principle, the fixed term agreement would be automatically terminated at the end of its term if neither of the parties wished to terminate the agreement any earlier. However, in case one of the parties revealed before the end of the employment agreement's term that he/she does not wish to renew the agreement, the decision on whether to pay a severance pay shall be made pursuant to the will of the party not wishing to renew the agreement. If the employer does not want to renew the agreement without any valid reason, the severance pay shall be paid to the employee provided that the employee has been employed for 1 year."

As it can be inferred, with regard to severance pay the Supreme Court does not make any distinction as to fixed termed or indefinite termed  employment agreements, but draws attention to the way of employment agreement's termination. In this regard, in case the employer notifies the employee that his/her fixed term employment agreement is not going to be renewed at the end of its term, the Supreme Court considers such notice as the declaration of the will to terminate the agreement. Additionally, if the employer's will on terminating the agreement is not based on any valid reason, the Supreme Court decides that the employee is entitled to severance pay.

9th Civil Chamber of the Supreme Court, in a similar decision numbered 2008/13489E., 2008/16388K. dated 17.06.2008 stated that:

"It is understood that the plaintiff employee is employed under the fixed term employment agreement as per the Law No.625 for minimum of one year term, and such agreement is terminated by the defendant employer by stating that the agreement will not be renewed in the upcoming academic year. In accordance with the established implementation of our Chamber, in case the employer terminates the fixed term employment agreement by notifying the employee that the agreement will not be renewed at the end of its term, severance pay shall be paid to the employee under the condition that the employee has been employed for at least one year under such agreement. In the present case, it is undisputed that the plaintiff had worked in the defendant education institution for one year. Thus, considering that the agreement was terminated by the employer by not renewing it, the employee must be paid severance pay."

9th Civil Chamber of the Supreme Court, in another decision numbered 2009/16390E., 2011/36851K. dated 11.10.2011 stated that:

"In accordance with the established implementation of our Chamber, the party which notifies the other party that the agreement will not be renewed, will be deemed to have terminated the agreement and in the case before us it is the employer who served such notice.  Such notification is not an immediate termination, and the agreement is to be terminated at the end of its term. During such term, obligations of the parties under such agreement continue to be in force. That being said, in the present case, the employer notified the employee in summer season in which the work specified under the agreement has been finished. The defendant employee is not required to work until the end of the agreement which is 4.9.2004. Therefore, the defendant employee had started enforcement proceedings without waiting for the expiration date of the agreement.  Considering the nature of the case, the damage claims of the plaintiff cannot be considered as the termination of the agreement. As the employer's notice of not renewal is construed as termination of the agreement, the abovementioned demand of the employee is in fact a demand of right directed prematurely. It would not be in accordance with the principle of equity to prevent an employee, who has worked for the employer for 10 years, from the severance pay based on the fact that such employee started debt enforcement proceedings against the employer upon employer's notification of not renewal. In that respect, for the purposes of severance pay, the agreement is terminated on the date of 4.9.2004 upon the notification of the employer to the employee that the agreement will not be renewed. .Even though the severance pay to the defendant employee is made upon the debt enforcement proceedings become definite and such payment did not have a valid reason at the moment of the claim; it gained a valid reason with the termination of the agreement on 4.9.2004. Thus, it is not legal to reclaim the severance pay from the employer. " With such ruling, the said Chamber ruled that the employee is entitled to receive a severance payment, and accordingly, the severance pay that was received by the employee cannot be reclaimed.

Thus, since the Article 14 of The Labor Law No. 1475 does not imply any difference between the employment agreements with fixed term and indefinite term with regard to receiving a severance pay; and if the employee is entitled to receive a severance pay, in other words, if the employer's reason of not renewal is not based on valid grounds, the severance pay must be paid to the employee.

The rationale of the Labor Law can be explained as such: In principle, employment agreements are concluded with indefinite-term. Nevertheless, the Law and the Supreme Court acknowledge that fixed term employment agreements can be valid in exceptional cases. These agreements may be concluded for workers and engineers who work in a dam construction or a construction project. In such projects, the subject matter of the work will be completed at the end of the employment agreement's term and therefore, this issue by itself will constitute a valid reason for not renewing the agreement.

In that respect, the employers should consider the fixed-term agreements as an exception, and note that such agreements can only be concluded in case of a certain project. In other words, concluding a fixed term agreement with a worker or a senior administrator does not mean that such employer will not make any severance payment. In order for an employer not to make such severance pay, the employment agreement must be terminated with a valid reason.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.