However, history has demonstrated that there can be hazardous consequences of sub-contracting if not applied in accordance with the law.
The employment of sub-contractors might seem like an effective method of production practice for companies to utilize. There are many reasons for employers in Turkey to choose to use subcontractors. However, history has demonstrated that there can be hazardous consequences of sub-contracting if not applied in accordance with the law. For instance, the mining disaster that occurred on May 13, 2014 at Soma, Manisa, resulted in an official death toll of 301 workers. This was followed by several accidents in a billion dollar residence project construction site in September 2014. Because of these tragedies, the Turkish media and public opinion have begun discussions regarding the repercussions of sustaining such practices, considering the resulting risks.
Before discussing the changes brought by Law No. 65521, a brief introduction to the current sub-contractor regulations is necessary in order to understand what the new law brings to the table. There are two important pieces of legislation available under Turkish law. These are contained in the Labor Code, with Law No. 4857 (the "Labor Code"), and the Sub-Contractors Regulation based on Article 3 of the Labor Code (the "Regulation").
The Labor Code provides that only (i) ancillary work and (ii) work that requires technological expertise may be assigned to sub-contractors. The Regulation further emphasizes that the main work of the principal employer cannot be divided and assigned to sub-contractors. In light of these regulations, one may assume that Turkish policymakers aim to limit the scope of sub-contractor employment to specialized technological projects and/or ancillary work such as security or catering.
Pursuant to the regulations on sub-contractor employment, in theory the Labor Code and the Regulation emphasize that there are only a limited number of opportunities in which subcontractors can be employed. However, in reality the technology criteria becomes a vague concept since most of the principal employers arbitrarily determine that certain part of their production line falls outside their scope of business and therefore employ sub-contractors in many non-specialized fields of their businesses. Many principal employers believe that unless they are faced with administrative fines or a number of reinstatement claims from the sub-contractor employees, they would cut down their expenses by using sub-contractors.
As per the Labor Code and the Regulation, the principal employer and the sub-contractor are jointly and severally liable for the subcontractor's employees' employment benefits. This is due to the fact that, despite being employed by a different employer, the subcontractor employees are dedicated only for the principal employer's tasks at the principal employer's workplace. Therefore, even though there is no direct employment relationship on paper, it is generally agreed in the legal community and by the Court of Appeals case law that the principal employer has a direct benefit from the services of the personnel in question.
The more problematic aspect of sub-contracting relationships arises in scenarios where the subcontractor is either not providing ancillary work or the tasks do not require specific technical knowledge. A typical example would be the employment of small groups of personnel to provide services in a certain part of the production, working side by side with the principal employer's employees. This clearly is a prohibited version of a sub-contracting relationship and would be deemed as fictitious under the Labor Code. The Regulation sets forth a number of non-exhaustive examples of fictitious subcontracting relationships, and there are indeed a number of reasons for a sub-contracting relationship to be deemed fictitious. The Regulation also incorporates a wide range of examples for what is considered fictitious. Such an example would be if it is determined that the sub-contracting relationship was established in order to prevent employees from enjoying their collective or individual rights. Indeed, in many instances, in addition to the economic benefit to the employer, another significant reason for subcontracting would be to prevent the unionization of employees.
A vital consequence of a sub-contracting relationship being deemed as "fictitious" is the following: when deemed fictitious, all employees of a sub-contractor are assumed to be the principal employer's employees. In other words, this means that all of the liabilities of employing an employee will be transferred to the principal employer instead of the sub-contractor. The liabilities consist of a long list, including but not limited to, social security premiums, taxes in relation to the salary of the employee in question, and all employment benefits equal to employees of the principle employer.
In addition to the monetary consequences resulting from the employment o of a fictitious sub-contractor, it is also an act punishable by law. The Labor Code envisages an administrative fine of TL 15.2262 (for the year 2014) to be imposed on the principal employer or the employer's representatives.
As one may note, considering the monetary benefits of sub-contractor employment, the administrative fine is a rather small punishment, and this is one of the main reasons why employers take the risk of continuing to use subcontractors. After recent major accidents in the workplace, there were reports in the summer of 2014 that the government was working to draft a new law to alleviate the damages and to prevent future workplace accidents. On September 11, 2014, Law No. 6552 was published in the Official Gazette that would supposedly address some of the core problems associated with the use of subcontracting relationships. The expectations have fallen short, however, as there were only three significant amendments enacted by Law No. 6552.
- The Ministry of Labor Regional Directorates which are assigned to prepare audit reports on whether a subcontractor relationship is fictitious or not. Upon official service of such report, the employer had 6 business days to object to the report. The Law No. 6552 extended this period to 30 business days.
- The principal employers are required to investigate upon a sub-contractor employee's request or by itself whether the sub-contractor has properly paid the salary of a sub-contractor employee. If the sub-contractor has failed to make such payment in partial or full, the principal employer is required to deduct such amount from the monthly payments to be made to the sub-contractor and pay it to the relevant sub-contractor employee.
- In cases where the sub-contracting company changes ownership while the employees working at a given workplace remain the same, the new sub-contractor is now obliged to give annual leave periods to the employees based on their total working period in a given workplace, while the principal employer is now obliged to monitor this practice and safeguard annual leave period of the sub-contractor employees.
In addition to the above, there are some significant improvements in the mining sector. However, the amendments are focused on the mining sector employees and, thus, do not cover the entire labor market. Apart from that, even though the amendments will have some positive effects, they fail to address the core problems of the sub-contracting system in general and are far from being a major reform. Aside from the minor new obligations imposed on the principal employers, the amendments have no significant effect on the employment of sub-contractors; nor do they remediate the aggrieved sub-contractor employees throughout the rest of the country.
1. Published on September 11, 2014 in the Official Gazette, No 29116 (Repeat 1).
2. As of October 27, 2014, approximately USD 6,700.00 (Exchange rate: USD 1 = TL 2.25).
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.