Termination Of Employment Contracts Under Turkish Law - Employee Rights/ Labour Relations

1. TYPES OF EMPLOYMENT CONTRACTS

Under Turkish Labor Law numbered 4857 ("Labor Law"), there are two main categories of employment contracts, namely i) employment contracts concluded for indefinite period and ii) employment contracts concluded for definite period.

An employer can enter into an employment contract with the employee for a definite period only under special objective circumstances set forth in the Article 11 of Labor Law such as in case of a specific work to be performed (e.g. construction project) or a work which must be completed within a certain period (e.g. seasonal work). In other words, a defined objective for the temporary employment must exist in order to constitute basis for a definite-term employment contract.

Employment contracts entered into for a definite term cannot be re-concluded and extended more than once consecutively unless there is an essential reason. In this respect, the High Court of Appeals, in its decision dated 2012, ruled that even if the employment contract was initially concluded for a definite-term, the contract is deemed as a contract entered into an indefinite term from the beginning of the employment, due to the fact that the employer renewed the contract 3 consecutive times without any essential reason.

The mindset of the legislator for allowing executing employment contracts for a definite period only under special circumstances and the prohibition of extending such contracts consecutively without any essential reason is to protect the employees and to ensure that they benefit from the legal rights granted to employees who work under employment contracts concluded for indefinite term. The employee is not entitled to request any severance or notice payment when a definite-term contract terminates automatically at the end of the term according to the decisions of High Court of Appeals. Also, notice payment (as mentioned below) is not made on the termination of a definite-term contract since the duration of definite-term employment contracts are known by the parties since the beginning.

On the other hand, according to the Turkish Code of Obligations, a definite-term employment contract is automatically converted into an indefinite-term employment contract if parties implicitly continue the relationship after expiry of the contract term.

For the sake of not allowing employers to use definite-term contracts as an excuse not to pay any severance and notice to the employees; Turkish courts often interpret definite-term contracts very narrowly and only allow for such contracts in rare situations. Therefore, it is very common in Turkey that the employers usually enter into (as they are required to) contracts with an indefinite term with their employees (sales staff, engineers, accountants, IT staff, etc.).

In light of the foregoing, our below explanations will only focus on termination of indefinite-term contracts.

2. TERMINATION WITH NOTICE

2.1. Notice Periods

According to Article 17 of the Labor Law, the employer is entitled to terminate an employment contract concluded for an indefinite period by observing the following minimum notification periods:

2 weeks prior notice if duration of employment is less than 6 months,
4 weeks prior notice if duration of employment is between 6 – 18 months,
6 weeks prior notice if duration of employment is between 18 months – 3 years,
8 weeks prior notice if duration of employment is more than 3 years.

These periods are minimum and may be increased by mutual agreement. The employer may terminate the contract of the employee immediately without giving any prior notice provided that the employer pays in advance the salary of the employee which corresponds to relevant notice period.

During the period between the date the notification for termination and the actual termination date, the employer is required to grant the employee a sufficient time to seek new job opportunities during working hours, without making any reduction from his/her salary. However, the duration of this granted period cannot be less than 2 hours a day, which can be exercised as a whole (e.g. 1 day leave during a week rather than using 2 hours each day).

2.2. Compensation

Unless there is justified ground for termination (as mentioned in detail below); in case of termination, the employee will be entitled to the following payments:

Severance Payment: The severance payment will be calculated as 1 month-salary (gross monthly salary plus other regular benefits (if any) that can be monetized) of the employee multiplied by the number of his/her employment years (with the employer). However, the current ceiling for yearly severance payment is TRY 3.541,37.
Notice Payment: Only if the employee is not granted the necessary notification period as mentioned above.
Bad-faith Compensation: In case of a lawsuit, if the court decides that employer's termination constitutes an act of bad faith, the employee will be entitled to bad faith compensation, which is in the amount of 3 times the notice period payment even if all of the notice period requirements are fulfilled.

2.3. Termination Based on Valid Reason - Reinstatement of the Employee

In order to terminate the indefinite-period employment contract of an employee having at least 6 months service in a workplace operating with at least 30 employees; the employer must present a valid ground either i) stemming from the capacity or conduct of the employee or ii) stemming from the requirements of the establishment, workplace or the job. Economic crisis, underperformance or insufficiency of the employee (provided that such is proved with evidence) or liquidation of the company may be considered as valid reasons for terminating a contract.

If the employee whose contract is terminated is in the opinion that his/her termination was not based on valid grounds, such employee is granted with the right under the Labor Law to file a lawsuit against the employer for reinstatement within 1 month following the date of his/her receipt of the termination notification by the employer.

In case the court decides that the termination is not based on valid grounds, the employer is obliged to re-employ the employee within 1 month. In case the employer fails to re-employ the employee within 1 month after his/her application, the employer will be required to pay compensation to the employee in the amount of 4 to 8 months salary to be determined by the court. In addition to such compensation, the salary and all other rights of the employee covering the maximum of 4 months must also be paid to the employee for the period of unemployment until the final judgment of the court is received. This amount is paid to the employee regardless of whether the employer re-employs the employee. If both payments are made, there is no requirement to make any bad-faith compensation payment even if the court decides that there is an act of bad-faith.

3. TERMINATION BASED ON JUSTIFIED GROUNDS

The employer also has the right to terminate any type of employment contract (an indefinite or definite-period) under specific conditions indicated under Article 25 of the Labor Law. Such specific conditions are classified under reasons of health, actions of employee against moral values and goodwill and similar circumstances (e.g. theft, excessive damage to company property, persistence in disobedience, sexual harassment, use of drugs, assault, absence, etc.) and compelling circumstances (e.g. the employee is sentenced to imprisonment)

The following are the most common grounds for termination based on justified grounds in Turkish business life:

If the employee is absent from work: i) for 2 consecutive days or ii) for 3 working days in any month or iii) twice in 1 month on working days which follow a holiday, without the employer's permission or a valid reason (illness, death, court duty, etc.);
If the employee insists on not performing his/her duties despite being warned;
If, either willfully or with gross negligence, the employee risks or damages workplace properties or machinery, equipment or other materials that are entrusted to him/her, and the damage cannot be compensated with 30 days salary;
If the employee commits a dishonest act against the employer, such as a breach of trust, theft, or disclosure of trade secrets.

Employer's right to terminate a contract on the justified grounds stemming from the employee's actions against moral values or goodwill must be exercised within 6 working days following the date the employer becomes aware of the relevant action and in any case within 1 year following the occurrence of such action.

In case of termination by the employer based on actions of employee against moral values and goodwill, the employer has right to terminate the employment contract without a notice period and compensation for notice and/or severance. However, in other cases, (health reasons and compelling circumstances) the employer may be required to pay severance to the employee depending on the case (however even in such case termination can be exercised immediately).

If a conflict is brought before court, each termination is evaluated on a case-by-case basis. In case of any event which the employer thinks that could present justified grounds for termination, it is always advised to immediately prepare an official minute reporting such incident signed by two witnesses (preferably one to be the superior of the employee) and if possible by the employee him/herself. Immediately taking and preserving evidence (e.g. photographs in case of damage to property) is also very crucial since the burden is on the employer to prove that the termination is based on justified grounds.

Depending on the reason for termination, it is usually advised to give one or two prior warnings to the employee before proceeding with the termination process. In such case, employee's defense must be obtained in writing in each case.

4. TERMINATION BY THE EMPLOYEE DUE TO MILITARY SERVICE OR MARRIAGE

4.1 Military Service

The Labor Law does not govern any provision regarding termination due to military service. As per Article 120 of the Labor Law, all provisions of the previous labor legislation (Labor Law numbered 1475 – "Old Labor Law") has been abolished except for Article 14. Article 14 of the Old Labor Law states that if the employee terminates his employment contract for enlisting in active mandatory military service, the employer is required to make severance payment. According to this legislation, any employee who will terminate his employment contract to fulfil his mandatory military service will be entitled to receive severance payment from his employer. For an employee to gain the right to request severance payment due to military service, two conditions must be met.

The first condition is proof. In order to receive the severance payment, the employee must provide sufficient proof that the reason for his termination is to fulfil the military service. The employees must provide evidence in the form of a Military Draft Certificate. Without this form of proof, an employer could in theory refrain from giving any severance payment. However, it should be noted that the High Court of Appeals decisions indicate that if the employee truly enlists in military service and proves this fact after he completes his service, he has the right to request severance payment (with interest) from his former employer. Therefore it would be a risky move for an employer to not provide severance payment to the employees who fail to provide proof that they are terminating their employment due to military service, unless the employer is strongly certain that it is not the case. The employees have the right to request severance payment (through a lawsuit) even after they have finished their military service.

The second condition is the duration of time between the termination and actually enlisting in military service. It is generally accepted that sufficient time must be given to the employee to prepare for his service. Therefore, the date of the termination should be some time before the actual enlisting date. However, the duration of time between the termination and enlisting must not be more than what is generally needed. It is generally accepted by the High Court of Appeals that a long duration between termination and enlisting is a strong indication that the termination is not related to military service duty. In one decision, the court ruled that duration of 1 year and 1 month is too long of a time to accept that the reason for termination is actually military service. On the other hand, 3 months is considered as an appropriate duration by the court.

4.2 Marriage

Similar to the severance payment obligations for military service related terminations, as per Article 14 of Old Labour Law, the female employees have the right to terminate their employment contract due to marriage and request severance payment accordingly.

The employee's the right to terminate the employment contract due to marriage and request severance payment must be exercised within 1 year of the date of the marriage. If an employee terminates her contract after 1 year has passed from her marriage, she would not have the right to request any severance payment. Similarly, the right to request severance payment does not exist if the employee terminates her contract before the marriage.

5. TERMINATION BY MUTUAL AGREEMENT

Under the principle of freedom of contract, the employer and the employee may decide to mutually terminate any type of employment contract whenever and however they deem.

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.

Turkey: Termination Of Employment Contracts Under Turkish Law