Article by Business Consulting Team
The Turkish economy has come a long way and maintained significant growth within the last decade. With a rapidly-growing open market, the Turkish economy now embraces new foreign investors and this also makes employment-related issues important more than ever. Therefore, the aim of this article is to briefly inform possible foreign investors regarding Turkish labor legislation which regulates the issue of employment contracts.
The Employment Act (EA) No. 4857 of 2003 is the main source of employment legislation in Turkey. According to the Act, an employment contract is a contract whereby a person agrees to work as an employee and the employer undertakes to pay the wages. Unless otherwise stipulated in the Act, an employment contract does not have any special form. There is a legal requirement for contracts to be in writing if they are signed for a definite period, i.e. for contracts that are for one year or more. These contracts are exempt from stamp duty, other duties and fees. If there is no written contract, the employer is obliged to submit to the employee, within two months from the start of the employment at the latest, a written document indicating the general and special working conditions, daily or weekly work period, basic salary and salary additions (if any), salary payment period, term of contract (if definite), and the provisions that the parties should observe in case of termination.
Under Turkish Labor Law, there are mainly four types of employment contracts according to their terms.
- Unlimited duration contracts can be for full-time or part-time work. This is the preferred type of employment arrangement in Turkey.
- Fixed term contracts can be for part-time or full-time work. In addition, the provisions of Article 11 of the Act regulate and prevent the use of temporary and fixed-term contracts by stating that "an employment contract for a definite period must not be concluded more than once, except when there is an essential reason which may necessitate repeated (chain) contracts. Otherwise, the employment contract is deemed to have been made for an indefinite period from the beginning." Fixed term employees cannot be treated less favorably than indefinite term employees.
- "On call" contracts, which are a specific type of part-time contract, can be signed between employers and employees within the scope of this Act.
- Transitory and continual contracts. Employment which, owing to its nature, lasts only up to 30 days is transitory while employment which requires a longer period is continual.
Moreover, as a general principle, it should be kept in mind that the terms and conditions of employment contracts are only applicable to the extent where they are compatible with the irrevocable rights of the employees as stated in the EA, i.e. that is to say that the EA sets the minimal standards that all employment contracts must meet.
As for the issue of the probationary period under the Act, this period may not exceed two months and should be indicated in the employment contract. The probationary period may be extended up to four months under collective labor agreements. The parties may, within this period, terminate the employment contract without being subject to termination clauses of the EA which will be explained below. The employee's right to salary and other entitlements for the days s/he has worked are non-waiverable.
In general, the duration of work may be a maximum of 45 hours per week. This should be divided equally between the working days of the week. However, with the consent of both parties, the normal working hours may be distributed unevenly over working days provided that the daily working hours do not exceed eleven hours on any one working day. In this case, the average of the weekly working hours of the employee over a two-month period should not exceed normal weekly working hours.
The legal effect of employees of transfer of workplace is another important subject since it is frequently observed in practice. In the event that the work place or a part thereof is being transferred to any party based on a legal transaction, according to the Article 6 of the Act, all the employment contracts effective on the date of transfer are assigned to the transferee together with all rights and liabilities. Thus in such a case, both transferor and transferee employers are jointly liable for the debts accrued before the transfer, and any such debts become due on the date of transfer. However, the transferor employer's responsibility for such liabilities is limited to two years from the date of the transfer. It should be kept in mind that neither the transferor nor the transferee may terminate employment contracts due to a transfer of the work place or part thereof and such transfer cannot justify termination of employment contracts at all.
At this point, a brief explanation should be given regarding the issue of termination of employment contracts, which, in practice, is quite a problematic one. There are two kinds of terminations of employment contracts under the Turkish Labor Law. The first kind concerns termination with a term of notice. The second kind is known as 'termination without term of notice' or 'terminating (or breaking) the contract for just cause.' Termination with a term of notice is only applicable to employment contracts for an indefinite period, but the second one is applicable to both contracts for a fixed-term as well as to contracts for an indefinite period.
Pursuant to Article 17 of the EA, both the employee and employer are entitled to terminate employment contracts for an indefinite period by observing the following minimum notification periods that are based on the length of service of the employee. The notice periods can be increased if both parties agree to it. The employer may terminate the employment contract by paying in advance the wages corresponding to the term of notice. Termination of this kind is possible either without having to present any valid/reasonable cause or with a valid/reasonable cause.
Article 18 of the EA states that an employer, who employs at least thirty employees has to state a valid cause when laying off an employee who has worked at least six months at a particular workplace and who has an indefinite-term contract with the employer ("job security provisions" of the EA). Under this provision, the employment of an employee can only be ended for a valid reason concerning the capacity or conduct of the employee or based on the operational requirements of the undertaking, establishment or service. According to Article 19 of the EA, employers are obliged to provide written notification to their employees that contain a clear and definite justification for the termination. An employee whose contract is terminated has the right to file a lawsuit against the employer within one month from the date of notification of the termination of the contract if the reasons of termination are not defined in the notification or if the reason is considered to be invalid. In such a case, if the Court decides that the termination is invalid or groundless, the employer is obliged to re-instate the employee within one month, or is obliged to pay compensation to the employee corresponding to at least four months' salary, at most eight months' salary, unless he re-employs the employee within one month after his/her application. Moreover, in line with the principles of ILO (International Labor Organization), employers cannot terminate an unlimited duration contract in the absence of an opportunity for the employee to provide a statement in defense. It should be noted that the employers should also produce documentation for the court to justify the termination.
The second kind of termination of an employment contract, known as "termination of the contract for just cause" exists in the cases where the employer or the employee unilaterally and immediately terminates the individual employment contract for just cause. Articles 24 and 25 of the EA regulate the reasons for terminating the contract, such as "reasons of health, immoral or dishonorable conduct or other similar behavior and force majeure." Please note that the right to terminate the contract on the grounds of circumstances that are immoral or dishonorable may not be exercised after a period of six working days has elapsed from the date on which the other party has been notified of the immoral action of the other party and, in any case, after a period of one year has elapsed since the occurrence of the immoral act.
Besides this reason, the employment contract can be terminated, without the initiative of either the employer or employee in certain circumstances, including by the expiration of a fixed-term contract, mutual consent of the parties, the death of the employee, and the death of the employer if it has been concluded intuitu personae of the employer.
As for the issue of severance pay, under the Article 14 of the EA, in cases where the employment contract of an employee is terminated after at least one year of service by the employer for reasons other than those set forth in Article 17/II of this Act (for malicious, immoral or dishonorable conduct or other similar behavior):
- by the employee under the provisions of Article 16 of this Act ( termination of the contract by the employee for just cause"), or
- on account of compulsory military service, or
- for the purpose of qualifying for an old-age or disability insurance pension or a lump-sum payment from an insurance organization or a fund established by an Act, or
- in the event of the death of the employee, or
- voluntary termination of the contract by a woman employee within one year from the date of marriage.
The employer must pay seniority severance pay equal to 30 days' wages for each complete year of service or in proportion for any fraction thereof, effective from the date of employment and for the entire duration of the contract.
As stated above, the EA allows an employee to appeal against dismissal to a labor court. The primary remedy in the employment law is compensation, and rarely, reinstatement. The Act provides different types of indemnification in certain circumstances. An employer who infringes the provisions of EA is also liable for hefty fines that could be imposed by labor inspectors.
Employment contracts are taken very seriously in Turkey and provide a great deal of protection for the worker, in addition to statutory provisions. Employers in Turkey need to be careful when drawing up employment contracts to ensure that the provisions of the Turkish Labor Law have been properly taken into account and do not attempt to contravene it.
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.