For foreign investors who are planning to invest in Turkey, complying with Turkish Labor Code will be one of the most problematic issues. Especially termination of the labor contracts constitutes the greatest part of employer-employee disputes. Although it is a fact that termination of the labor contracts should be considered as an economic decision of the employees, Turkish Labor Law with taking “interpretation in favor of the employee” principle, considers employees as the weak part of the labor contracts and provides for important provisions that protects them in some respects. Besides it must be noted that, within the Turkish Labor Code, as a rule, period of labor contracts is accepted as indefinite and concluding a fixed-term labor contract may only be possible on several strict grounds. For these reasons, this informative note will deal with termination of indefinite period labor contracts with a valid cause in detail.
To commence with, termination of labor contracts with a valid reason is mainly provided under Article 18 of Turkish Labor Code as “The employer, who terminates the contract of an employee engaged for an indefinite period, who is employed in an establishment with thirty or more workers and who meets a minimum seniority of six months, must depend on a valid reason for such termination connected with the capacity or conduct of the employee or based on the operational requirements of the establishment or service”.
As it can be seen from the provision, the valid reason can be defined as the reasons regarding the employee or workplace which will affect the workplace negatively in case the labor contract continues. Within this concept, termination of the labor contract due to operational requirements can be economic difficulties, productivity and competitiveness requirements, technological changes in the workplace, the work of the employee in the workplace due to the elimination and change of quality as a result of the labor surplus.
According to Labor Code, employer having a valid reason to terminate the labor contract of an employee must satisfy the termination procedure. Otherwise, the termination will be deemed as invalid and employer may come up against re-engagement lawsuit with accompanying compensation demands. In this direction, Article 17 of Labor Code provides for the first phase as:
“Before terminating an labor contract executed for an indefinite period, a notice to the other party must be served by the terminating party. The contract shall then terminate:
- in the case of an employee whose employment has lasted less than six months, at the end of the second week following the serving of notice to the other party;
- in the case of an employee whose employment has lasted for six months or more but for less than one-and-a-half years, at the end of the fourth week following the serving of notice to the other party;
- in the case of an employee whose employment has lasted for one-and-a-half years or more but for less than three years, at the end of the sixth week following the serving of notice to the other party;
- in the case of an employee whose employment has lasted for more than three years, at the end of the eighth week following the serving of notice to the other party.”
However, the employer who wants to terminate the labor contract immediately may also terminate the labor contract by paying in advance the wages corresponding to the term of notice. It must be noted that during the term of notice the employer must grant the employee the permission to seek new employment within working hours without any deduction from his wage.
Within the framework of the Labor Code, the notice of termination is required to be made in written form and the valid reason that employer is depending on must be specified in clear and precise manner. Besides, employee must be provided with an opportunity to defend himself against the allegations. These issues are provided in Article 19 in detail as follows:
“The notice of termination shall be given by the employer in written form involving the reason for termination which must be specified in clear and precise terms. The employment of an employee engaged under a contract with an open-ended term shall not be terminated for reasons related to the worker’s conduct or performance before he is provided an opportunity to defend himself against the allegations made. The employer’s right to break the labor contract in accordance with Article 25/II of the Labor Act (for serious misconduct or malicious or immoral behavior of the employee) is, however, reserved”
To illustrate further, a valid reason may be connected with the capacity or conduct of the employee or based on the operational requirements of the establishment or service. As a result of this provision, if the Labor Court concludes that the termination is unjustified because no valid reason has been stated or the alleged reason is invalid, the employer must re-engage the employee in work within one month.
After the termination of the labor contract, the certificate of release indicating that the employee has fully received all of his/her rights due to termination can be executed after one month following the termination. However, as per the Article 420 of the Turkish Obligations Code, in order certificate of release to be valid it is required to be executed after one month following the termination of the contract and the type and amounts of the receivables to be stated clearly and the payment should be made via bank.
The Compensations that Employee is Entitled to in the event of Termination of Labor Contract with a Valid Reason
Under the Labor Code, employees will mainly be entitled to severance payment and may be entitled to overtime work payment, national holidays and public holidays payment and annual leave payment if the conditions are met. Within this concept:
- Severance Pay: The employee shall entitle to the severance pay in case of the dismissal for just and valid cause in the event that he/she has worked for the employer for minimum 1 year. However, in the event that employee is dismissed for the reasons counted in article 25/II under the heading “immoral, dishonorable or malicious conduct or other similar behavior”, severance pay shall not be paid. While calculating severance payment the additional benefits provided to the employee such as food, transportation etc. shall be taken into consideration as well. On the other hand, if the employee has receivable in terms of overtime pay, annual leave pay and national holidays and public holidays pay, these are also demandable:
- Overtime Work Pay: Overtime work is work which exceeds forty-five hours a week. Wages for each hour of overtime shall be remunerated at one and a half times the normal hourly rate. If these amounts are not paid by the employer, employee shall be entitled to gain over time work pay.
- Annual Leave Pay: The employer must pay the employee using his annual leave the remuneration corresponding to his leave period either as a lump sum or as an advance payment prior to the beginning of the leave. The length of the employee’s annual leave with pay shall not be less than;
- fourteen days if his length of service is between one and five years, (five included),
- twenty days if it is more than five and less than fifteen years,
- twenty-six days if it is fifteen years and more (fifteen included).
In the event that employee does not use annual leave right, he/she shall be entitled to gain annual leave pay.
- National holidays and public holidays pay: Employees in establishments covered by this Act shall be paid a full day’s wages for the national and public holidays on which they have not worked; if they work instead of observing the holiday, they shall be paid an additional full day’s wages for each day worked.
In conclusion, Turkish Labor Code provides for some strict conditions for termination of the labor contracts with valid cause and if the employers fail to comply with these conditions they may come up against with re-engagement lawsuits with accompanying compensation claims. To avoid these kinds of situations employers must comply with procedures that explained hereinabove.