A "release of claims", or "certificate of release", ("ibraname" in Turkish) is a document which declares the release or discharge from debt or another liability. Release of claims are most commonly used following the termination of an employment contract in Turkish law in order to evidence that the employee has released the employer from the liabilities arising from the employment contract.
Despite the wide spread use and importance given by the parties to the Release of Claims, until the recent promulgation of the new Code of Obligations on July 1st, 2012 (hereinafter referred to as the "Code of Obligations"), the Labor Law numbered 4857 and the former Code of Obligations numbered 818 had no specific provisions relating to Release of Claims.
The gap in the law had been filled by the precedent decisions of the Court of Appeals. The Court of Appeals had the general tendency to declare Release of Claims null and void in accordance with the "interpretation in advantage of employee" principle. In time, the Court of Appeals established principles for the validity of Release of Claims by consistent decisions in the matter.
However, the practice of the courts was not completely uniform and the subtle ambiguities in the decisions and lack of certainty caused problems for employers acting in good faith who wished to enter into agreements with their employees in return for a release of claims.
In accordance with article 132 of the Code of Obligations, for the first time in Turkish law, it has clearly been stipulated that the parties may release their debts in part or in full by a "release of claims agreement". Furthermore, the validity conditions of the Release of Claims signed under an service contract have been set out under article 420 of the Code of Obligations. Unsurprisingly, the relevant articles of the code have been drafted in accordance with the principles set out in the precedent Court of Appeals decisions, and have resolved the uncertainty regarding the matter.
Accordingly, a Release of Claims in return for payments under the termination of an employment agreement should comply with following conditions in order to be valid;
A Written form
Release of Claims under an employment agreement should be in written form for validity. The main reason to request the signature of a Release of Claims from the employee is to limit risk of future claims and possible court procedures. Therefore, the written form of employee's intention is crucial in case of a dispute between the parties, and now with the new law it is mandatory.
B Entered into at least one month after the termination date
The Court of Appeals required the signing of the Release of Claims after the termination date. However, there was no specific time period mentioned in the decisions between the termination date and release of claims. Nevertheless, the Release of Claims signed on the same date as the termination was determined null and void without any exception. In other words, the Court of Appeals wanted to ensure that the employee did not forfeit rights with Release of Claims by being pressured and without obtaining their legal rights. The one month stipulated in the Code of Obligations is a reflection of the one moth duration for the employee to file a reinstatement lawsuit in our opinion and is therefore in the interest of both the employee and the employer.
C The type and amount of the subject matter debt must be specified
The Court of Appeals decisions in this matter were not unified and there was uncertainty in the practice. Previously the Court of Appeals had resolved in some decisions that the exact amount needs to be stipulated and in other decisions the Court of Appeals had resolved that a Release of Claims that included exact amounts would only be accepted as payment receipts. The Code of Obligations has finally resolved this uncertainty and specifying of the type and amounts in the Release of Claims became obligatory.
D The payment should be realized in full and via bank transfer
There was neither a stipulation nor a court decision regarding the payment method of the redundancy payments before the promulgation of the Code of Obligations. However, the burden of proof lies with the one who realizes the payment. Therefore, employers generally preferred to realize the payments via bank transfers in order to evidence the payments. Now it is deemed as obligatory by the law maker which shall cause the courts to give their decisions easily. In the event the employer does not fully pay the legal entitlements of the employee the release of claims is limited to a receipt for the amounts paid.
Accordingly, the legislation followed the court practice and set out some rules which are already used in practice. It is now clear that the Release of Claims which do not meet the requirements stated above shall be deemed null and void without any question.
As a general note Turkish Labor Courts have the tendency to decide in favor of the employee in the absence of the necessary documentation and evidence. For this reason, employers need to follow the legal requirements precisely and prepare all relevant documentation.
In our opinion, the clarity provided for the validity of release of claims in the new Code of Obligations is in the interest of all parties acting in good faith.
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.