Turkey: Termination Of The Definite-Term Employment Agreements Under Turkish Law

Abstract:

Definite-term employments agreements, which may be only executed in exceptional circumstances where there is an objective reason, differ from indefinite-term employment agreements in terms of the legal consequences of termination. Therefore, this article will discuss the legal consequences of the termination of definite-term employment agreements, whether at the end of their duration or before they expire, by the employer, or by the employee, within the perspective of the Labour Law numbered 4857 and Turkish Obligation Law numbered 6098.

Keywords: Definite-term employment agreements, employment agreements, termination of employment agreements, severance pay, notice pay.

TERMINATION OF THE DEFINITE-TERM EMPLOYMENT AGREEMENT

The main distinction between definite-term and indefinite-term employment agreements reveals itself in the legal consequences of their termination. Indeed, definite-term employment agreements do not fall within the scope of the job security provisions contained in the Labour Law numbered 4857 ("Labour Law") under Article 181. Hence, definite-term employment agreements are exceptional under the Labour Law and subject to unique limitations in comparison to indefinite-term employment agreements, so as to ensure the protection of the employees as much as possible2.

A definite-term employment agreement is explicitly described by the Labour Law and is indeed subject to restrictions. Under Article 11 of the Labour Law, an employment agreement placed between an employee and an employer in writing is considered to be executed for a definite-term if the employment agreement is based on objectives like a specific work to be performed or a work to be completed within a definite period. Thus, a defined objective for the employment has to exist in order to constitute a definite-term employment agreement. Moreover, definite-term employment agreements should not be extended more than once consecutively unless an essential reason exists. As per the High Court of Appeals for the 9th Circuit's decision dated 01.03.2012, numbered 2009/46799 E. and 2012/6562 K, even if the employment agreement was initially made as a definite-term employment agreement by the parties, upon being renewed three times, the employment agreement will be considered as an indefinite-term employment agreement. In addition, the employment agreement will be deemed to have been made for an indefinite period from the beginning. Furthermore, as per Article 12 of the Labour Law, which was influenced by the Framework Agreement on Definite-Term Employment Agreements signed on 18.03.1999 and adopted by European Community Council Directive numbered 1999/70, any employee working under a definite-term employment agreement cannot be treated differently than an equivalent employee employed under an indefinite-term employment agreement, merely on the grounds that his/her employment agreement has a definite term, unless a reason justifying the discrimination exists. Those limitations are provided to protect employees working on definite-term employment agreement who are in a weak position in terms of termination.

This article aims to shed light on the question of why definite-term employment agreements are of an exceptional nature under the Labour Law, by discussing the termination of definite-term employment agreements and its legal consequences, along with the perspective of the Labour Law and Turkish Obligation Law numbered 6098 ("TOL"), which together ensure a maximum protection of employees when their definite-term employment agreements are terminated. As will be clear, the legal consequences of terminating a definite-term employment agreement depends in large part on who terminates the agreement, at what point in time, and based on what justification.

1. Termination of Definite-Term Employment Agreement on Its Expiration Date

Article 11 of the Labour Law, which defines indefinite and definite-term employment agreements, does not address the termination of a definite-term employment agreement and its legal consequences after its term has expired. Nevertheless, Article 430 of TOL states that definite-term agreements terminate automatically (i) on the expiry date, (ii) upon its conversion into an indefinite-term employment agreement or (iii) upon a termination notice of six months if the employment agreement is signed for a period of ten years or more.

As per Article 430/1 of TOL, unless otherwise agreed by the parties, a definite-term employment agreement terminates without the need of a termination notice when its term expires. Hence, it is not needed for the parties to declare their intention to terminate the employment agreement in those circumstances3. Moreover, Article 430/2 of TOL stipulates that a definite-term employment agreement converts into an indefinite-term employment agreement if the definite-term agreement implicitly continues by the parties after expiry of its term.

Despite the fact that the most important feature of a definite-term employment agreement is that it automatically terminates at the end of its term, an exception is stipulated under Article 430/3 of TOL. The relevant article mentions that the employer and the employee may terminate a definite-term employment agreement made for ten years or more, provided that they comply with a termination notice period of six months. However, this article has been criticized since it gives the employee and the employer the right to terminate the definite-term employment agreement after a period of ten years, which is fairly long4.

Neither the Labour Law nor TOL regulate the legal consequences of the termination of definite-term employment agreements at the end of their duration and, as such, there is a legal gap on that subject. Additionally, Article 14 of the Labour Law numbered 1475, which stipulates severance pay, does not indicate whether an employee may seek severance pay in case the definite-term employment agreement terminates automatically at the end of its term. However, as per the High Court of Appeals for the 9th Circuit's decision dated 01.02.2005, numbered 2004/7467 E., 2005/2746 K., the employee is not entitled to request severance or notice pay where a definite-term agreement terminates automatically5.Therefore, the termination of a definite-term employment agreement does not grant the employee right to obtain severance pay, assuming that the termination of the agreement is automatic and mutually agreed to6. Furthermore, payment in lieu of notice is not paid on the termination of a definite-term agreement since the duration of definite-term employment agreements are known from the beginning by the parties7.

On the other hand, it is of crucial importance to note that the High Court of Appeals pays strict attention to narrowly interpreting definite-term agreements in favour of employees, so as to fill the legal gap in the relevant statutes. For instance, pursuant to two decisions of the High Court of Appeals for the 9th Circuit (dated 17.06.2008, numbered 2008/13489 E. and 2008/16388 K. and dated 03.10.2011, numbered 2009/22355 E. and 2011/34265 K.), the employee gains the right to seek severance pay if the employer terminates the employment agreement at the end of its duration, in case the employer notifies the employee that the employment agreement will not be renewed, or if the employer does not allow the employee to continue to work even though the employee desires to work despite the expired duration of the employment agreement.

In conclusion, the Labour Law, TOL and High Court of Appeals precedents do not allow employers to use definite-term agreements as a shield to not pay severance and notice pay to the employees. Therefore, definite-term employment agreements are narrowly interpreted.8 On the other hand, in case the employee does not prefer to work at the relevant workplace at the end of the duration of his/her agreement, and there is a mutual consensus by the parties that the employment agreement is made for a definite-term, the employee is not entitled to request severance and notice pay since the definite-term agreement terminates automatically.

2. Termination of Definite-Term Employment Agreement Before Its Expiration Date

2.1 Termination of Definite-Term Employment Agreement Before Its Expiration Date by the Employer:

The legal consequences of the termination of a definite-term employment agreement before its expiration date by the employer have not been regulated under the scope of Labour Law. Definite-term employment agreements may be terminated before their expiration date by the employer provided that a just cause is presented based on Article 25 of Labour Law9. This article stipulates just cause for terminating an indefinite-term employment agreement but it is also applicable for definite-term employment agreements. Hence, regardless of whether it is for a definite or an indefinite term, an employment agreement may be terminated immediately before it expires, without complying with the notice periods, due to (i) health reasons, (ii) immoral or dishonourable conduct or other similar behaviour or (iii) force majeure events, as follows:

  1. In case the employee is infected with a disease or incurs a disability resulting from his/her own will, improper life style or his/her alcoholism habit, and therefore, does not come to work for three consecutive business days or more than five business days within a month;
  2. In case it is determined by the medical board that employee is infected with a disease that cannot be cured and is not suitable for employment;
  3. In case the employee misleads the employer by representing that he/she does have the necessary qualifications or conditions required for one of the essential aspects of the employment agreement, despite the fact that he/she does not have those qualifications or conditions; or provides false information and promises;
  4. In case an employee says words infringing the dignity and honour of the employer or one of his/her family members or behaves likewise, or shall make false, honour/dignity-damaging imputations;
  5. In case the employee sexually harasses another employee;
  6. In case the employee disturbs the employer, one of his/her family members or another employee, or drinks alcohol or uses drugs in the workplace;
  7. In case the employee engages in behaviours that are against honesty and fidelity, such as the misuse of the employer's trust, theft, or disclosing the trade secrets of the employer;
  8. In case the employee commits a crime in the workplace that is punishable with an imprisonment of more than seven days or with a penalty that cannot be deferred;
  9. If the employee does not come to work for two consecutive business days, for any two business days in one month following a holiday or for three business days in one month, without obtaining prior permission from the employer or without basing the relevant act on a justifiable ground;
  10. In case the employee does not fulfil his/her duties although he/she has been warned to fulfil them;
  11. If the employee willfully or neglectfully endangers the work safety, causes damage or loss to the properties or machines, facilities or other goods and materials that are owned or possessed by the employer in such a way that the damage or loss cannot be remedied with his/her thirty days salary;
  12. In case of hardship conditions which occurred in the workplace that obstruct the employee to execute his duty for more than one week;
  13. Absence of the employee lasting more than the notification periods, in case he is arrested or is taken into custody.

Under Article 26 of the Labour Law, the right to terminate a definite-term employment agreement on the basis of immoral or dishonourable conduct should be exercised within 6 business days as of the date on which the employer becomes aware of the immoral or dishonourable action of the other party and, in any case, within 1 year of the occurrence of the immoral or dishonourable act.

According to the High Court of Appeals decision dated 05.02.2010, an employer may not terminate a definite-term employment agreement based on a reason (i) concerning the capacity or the conduct of the employee or (ii) based on the operational requirements of the workplace, work or enterprise10. Accordingly, by entering into a definite-term employment agreement, the parties suspend their intention to terminate the employment agreement until its expiration date, unless a just cause mentioned under Article 25 exists. In fact, the High Court of Appeals decision is convenient since Article 18 of the Labour Law stipulates the valid reasons that an employer may terminate an indefinite-term agreement.

2.1.2. Legal Consequences of Termination of Definite-Term Employment Agreement Before Its Expiration Date by the Employer.

In case the employer terminates the definite-term employment agreement with just cause stated under Article 25 of the Labour Law, the payment in lieu of notice is irrelevant, as there is no need to comply with a termination period if there is a justifiable reason for immediate termination11. Furthermore, as per Article 14 of the Labour Law, the employee is entitled to severance pay unless the definite-term employment agreement is terminated due to the employee's immoral or dishonorable conduct or other similar behaviours. On the other hand, the payments of the employee's (i) unpaid salary (ii), unused annual leave pay (iii) overtime payment (iv) premium/bonus receivable (v) social rights, to the extent any of those are applicable, should be paid in all cases.

TOL explicitly establishes new principles under Article 438 regarding the legal consequences of the termination of a definite-term employment agreement by the employer before its term without just cause. If the employer terminates a definite-term employment agreement without just cause before its expiration date, the provisions of TOL's provisions are applied, just as the job security provisions stated under Article 18, 20 and 21 of the Labour Law are applied in case the employer terminates the indefinite-term employment agreement without just cause or a valid reason.

As per Article 438 of TOL, if the employer terminates a definite-term employment agreement without just cause, the employee may request compensation equal to the amount that he/she could have acquired until the expiration date of the employment agreement. Although under Swiss Law the net salary of the employer is taken into account along with all receivables paid to the employee while calculating remaining receivables, Turkish law states that only the net salary of the employee should be considered12.

Furthermore, the earnings that the employer has generated or refrained from acquiring from another job are deducted from any granted compensation. However, the High Court of Appeals' precedents and doctrine do not include any guidance on how the compensation itself should be determined13. Whilst the doctrine points out that the burden of proof is on the employer regarding the amount to be deducted in accordance with Article 6 of Civil Law; the High Court of Appeals' precedents state that the court ought to examine ex-officio, without the need of the parties' request, whether there are appropriate deductions from the compensation stipulated under Article 438 of TOL14. The High Court of Appeals for the 9th Circuit also decided that the salary earned by the employee before the termination of definite-term employment agreement has to be deducted from the compensation which will be granted by the employee15. Accordingly, the court will examine whether the employee is searching for another job or has already acquired any salary from another job after the termination of the definite-term employment agreement as part of its ex-officio examination16.

In addition, in case the employer terminates a definite-term employment agreement without just cause before its duration, the judge may decide the employer to pay additional compensation of up to six months of the employee's salary17. However, this compensation is not considered as severance pay. Hence, the employee having one year of seniority is entitled to also request severance pay along with his/her (i) unpaid salary receivable, (ii) unused annual leave pay, (iii) overtime payment, (iv) premium/bonus receivables or (v) social rights, to the extent any of those exist.

Furthermore, the employer and the employee may agree on a penalty clause to be paid in case definite-term employment agreement terminates before its term. Nevertheless, according to the High Court of Appeals' precedents, as a result of the interpretation of the Labour Law's provisions in favour of employees, a penalty clause merely against the employee will be deemed invalid18. Moreover, the amount and the conditions of the penalty clause should also ensure equality between the employee and the employer. Hence, the High Court of Appeals' precedents have been enacted under Article 420 of TOL, which states that "penalty clauses that appear within the scope of employment agreements that are solely against the employee are invalid".

2.1.3 Termination of Definite-Term Employment Agreement Before Its Expiration Date by the Employee.

As per Article 24 of Labour Law regardless of whether an employment agreement is for a definite or an indefinite term, it can be terminated immediately by the employee before it expires or without complying with the notice periods on the following grounds:

  1. In case the work conditions are dangerous for the health or life of the employee, due to a reason arising from the characteristics of the work;
  2. In case the employer, or another employee who continuously works closely or together with the employee, is infected with an epidemic disease or a disease that is incompatible with the work;
  3. In case the employer misleads the employee with respect to the essential aspects of the employment agreement at the time of the conclusion of the employment agreement;
  4. In case the employer says words infringing the dignity and honour of the employee or one of his/her family members, behaves likewise or sexually harasses the employee;
  5. In case the employer annoys or threatens the employee or one of his/her family members or encourages, tempts or drags the employee or one of his family members to an unlawful action or commits a crime against the employee or one of his family members that requires imprisonment or makes false, honour and dignity damaging imputations or acquisitions;
  6. In case the employee is sexually harassed in the workplace by other employee or third parties and employer does not take necessary precautions even when this fact is notified to the same;
  7. In case the salary of the employee is not calculated or not paid in accordance with the law or the provisions of the employment agreement;
  8. In case it is agreed that the employee will be paid per piece or quantity of work and however he/she has been given a work that is less than the agreed piece or quantity that he/she can manage to do, if the salary difference has been paid on an hourly basis and the deficient part of the salary has not been paid to the employee, or the employment terms are not applied;
  9. In case of hardship conditions that cause the work to be discontinued for more than one week occurred in the workplace in which the employee works.

2.1.4. Legal Consequences of Termination of Definite-Term Employment Agreement Before Its Expiration Date by the Employee.

The employee is entitled to have his/her (i) unpaid salary, (ii) unused annual leave pay, (iii) overtime payment, (iv) premium/bonus receivable and (v) social rights, to the extent any are applicable, along with severance pay, in case he/she terminates the employment agreement with just cause, provided that the conditions of Article 14 of Labour Law numbered 1475, which governs severance pay, are met. Additionally, as stated before, payment in lieu of notice is not relevant to definite-term employment agreements as the duration of the employment agreement is determined by the parties.

The legal consequences of the termination of definite-term employment agreements by the employee without justifiable reason are set forth under Article 439 of TOL. Under that article, if the employee does not start work or leaves the job instantly without just cause, the employer may request compensation equal to one quarter of the employee's monthly salary. In that case, to avoid liability, the employee must prove that the damages suffered by the employer are less than the relevant amount, by establishing that the employer immediately found a replacement employee or did not suffer any damages19.

In fact, Article 439 of TOL embodies the legal gap of Article 23 of the Labour Law, since the Labour Law had not addressed the obligations of the employee and the new employer in case the employee quits before the expiration of a definite-term employment agreement and starts to work in a new employer's workplace.

The request of the employer for compensation is subject to a statute of limitation. The employer should exercise its right through a lawsuit or an execution proceeding within thirty days of the date that the employer did not start work or quit the job, provided that the right of the employee is not terminated due to the barter of receivables. Within this respect, the employer may not barter the receivables of the employee without the employee's consent. The employer may barter seizable receivables without the employee's consent if arising from the employee's fault as determined in a court decision. However, this probability is difficult in practice, as the thirty day statute of limitations is not enough in Turkey to have a court's decision.

The employer may request additional compensation beyond the abovementioned compensation. As stated above, the employer may also request the amount stated within the penalty clause, if any. Moreover, any additional compensation may be requested by both the employer and the employee in case the definite-term employment agreement is terminated based upon immoral or dishonourable conduct or other similar behaviour of the employer. This additional compensation is calculated according to Article 408 of TOL.

CONCLUSION

In conclusion, the definite-term employment agreements are of exceptional nature as they weaken the position of the employee who cannot benefit from the job security provisions provided to employees who work with indefinite-term agreements under the Labour Law. As such, both the Labour Law and TOL, along with the High Court of Appeals' precedents, continue to be interpreted in favour of the employee in order to ensure protection of the employees, by limiting the definite-term employment agreements.

Furthermore, TOL introduced significant developments and approaches in terms of the termination of definite-term employment agreements and the legal consequences of such terminations. In that sense, despite the fact that the Labour Law is of lex specialis nature, TOL's provisions are applied in case there are no explicit provisions stipulated in the Labour Law, and therefore fill some legal gaps of the Labour Law by embodying the High Court of Appeals' precedents as provisions.

Footnotes

1 High Court of Appeals for 9th Circuit's decision dated 17.03.2008, numbered 2007/27679 E. and 2008/5301 K.

2 Kadir Has University Seminar Notes; Current Problems On Labour Law; 2012, p.101

3 Güler, Asst. Mikdat; Definite-Term Agreements, Legal Bulletin on Labour Law and Social Security Law, 2005, No:5, p. 59.

4 Soyer, Polat; New Turkish Code Of Obligation Regarding The Termination of Employment Agreement and Its Importance With Regard To The Labour Law, Bulletin of Registration, June 2011, p. 13, 22.

5 See also the High Court of Appeals for the 22nd Circuit's decision dated 04.02.2013, numbered 2013/71 E., 2013/1642 K..

6 Tufan, Bekir; Severance and Notice Pay On the Termination of Definite-Term Employment Agreements, Legal Bulletin on Labour Law and Social Security Law, 2011, No:32, p. 1446.

7 Güler, Asst. Mikdat; Definite-Term Agreements, Legal Bulletin on Labour Law and Social Security Law, 2005, No:5, p.59.

8 High Court of Appeals for 9th Circuit's decision dated 22.09.2005, numbered 2005/308 E. and 2005/30969 K.

9 Çelik, Nuri; The Labour Law Lessons, 2011, Beta Press, p.84.

10 High Court of Appeals for 9th Circuit's decision dated 05.02.2010, numbered 2009/9593 E. and 2010/2288 K.

11 Süzek, Saper; Labour Law (General Principles – Individual Labour Law), 2011, Beta Press, p. 683.

12 Kadir Has University Seminar; Current Problems On Labour Law; May 2012, p.122.

13 Alpagut, Prof. Dr. Gülsevil; The Termination, The Transfer of Employment Agreement, Penalty Clause , Non-Compete Clause and Certificate of Release under the New Turkish Obligation Law, Legal Bulletin on Labour Law and Social Security Law, 2011, No:31, p.934.

14 High Court of Appeals Assembly Civil Chamber decision dated 01.02.1984, numbered 1981/9-761 E. and 1984/52 K.

15 High Court of Appeals for the 9th Circuit decision dated 02.07.2007, numbered 2006/36876 E. and 2007/21373 K.

16 High Court of Appeals for the 9th Circuit decision dated 05.02.2010, numbered 2009/9593 E. and 2010/2288 K.

17 Article 438/3 of TOL.

18 High Court of Appeals for the 9th Circuit decision dated 20.06.2008, numbered 2007/22709 E. and 2008/16626 K.

19 Kadir Has University Seminar; Current Problems On Labour Law, May 2012, p.127.

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