Employment (Labour) Contracts in Turkey

Overview

As Turkey maintains economic stability and growth for almost five years, the confidence of the foreign investors raised and new direct investments are executed more often. In this context employee related issues are of consideration to foreign investors and significance of the Turkish Labor Code (‘TLC’) elevate accordingly. Therefore we would like to briefly inform foreign investors regarding the precautions that shall be thought over while hiring and firing employees in Turkey.

First of all contract types specified in TLC must be considered. There are mainly four types of employee contracts subject to their terms. The first determination is for work less and more than 30 days but for a short and designated term anyway (continuous, discontinuous) and the second determination is for limited and unlimited duration types of contracts which are based on the designation of work period specifically for projects etc. or no designation. Please note that regular employee arrangements in Turkey are generally considered to be contracts for unlimited duration (all types of office staff, directors, managers etc.).

Execution of Employee Contracts

Execution of an employee contract (which is referred as a ‘Service Contract’ in Turkish law) is a simple task. For contracts that are for one year or more TLC states that the contract shall be in writing. The employer shall not postpone such execution of a contract more than two months after the initial commencement of the employee to work. Please also note that TLC allows for a maximum of two months of probationary period (test period) where the employee and/or the employer could terminate the relation without being subject to TLC’s termination clauses below explained. Employment contracts are free of any documentary taxes and levies such as stamp duties. It should be noted that the terms and conditions of employee contracts are only applicable to the extent where they are in compatible with the irrevocable rights of the employees stated in TLC. Therefore employers are advised to obtain legal assistance before executing employment contracts in order to understand the actual effects ofsuch contacts to their organizations.

Termination of Labor Contract

Under the Labor Law, employers may terminate an employee’s labor contract immediately where certain justified grounds exist. Alternatively, the Labor Law says employers can terminate an employee’s labor contract with notice where other valid grounds are present. Where valid grounds for termination exist, the length of notice required will depend on the employee’s length of service. However, the employer may choose to pay the employee a notice payment instead of having the employee work the notice period. In some circumstances, the employer may have to pay the employee a severance payment.

1. Immediate Termination – No notice period required but termination must be based on certain justified grounds An employer may terminate a labor contract with immediate effect, provided that such termination is based on “justified grounds”. The employer is not obliged to pay a severance payment or give the employee notice of the termination. The employee can challenge the existence of justified grounds by initiating a lawsuit against the employer.

The circumstances outlined below constitute justified grounds for instant termination under Turkish law:

• The employee misses work for three straight days or a total of five days in a month due to contracting a disease or suffering an injury by their own deliberate act, loose lifestyle, or alcohol abuse.

• A hospital Health Committee determines that the employee’s sickness is incurable and incompatible with the performance of their employment duties.

• When the contract was entered, the employee misled the employer by:

Falsely claiming to possess qualifications or to satisfy requirements which constitute an essential feature of the contract, or giving false information or making false statements as to his/her resume.

• The employee does or says something which causes offence against the honor or dignity of the employer, or a member of their family.

• The employee makes groundless accusations against the employer regarding matters which affect the employer’s honor or dignity.

• The employee sexually harasses another employee.

• The employee assaults or threatens the employer, a member of the employer’s family, or a fellow employee.

• The employee arrives at the work place drunk/on drugs or drinks alcohol/uses drugs in the work place.

• The employee commits a dishonest act against the employer, such as a breach of trust, theft, or disclosure of trade secrets.

• The employee commits an offence in the work place which is punishable by seven days imprisonment (or more) without probation.

• Without the employer’s permission or a good reason, the employee is absent from work:

1. For two consecutive days,
2. For three working days in any month, or
3. Twice in one month on the working day following a rest day.

• The employee refuses to perform his or her duties after being warned.

• Either willfully or through gross negligence, the employee risks or damages machinery, equipment or other articles or materials in his or her care, whether this property belongs to the employer or not, and the damage cannot be offset by thirty days’ of pay.

• The employee is under arrest and his or her absence exceeds the notice periods in this article.

• Other compelling reasons which prevent the employee from performing his or her duties for more than one week.

Please note that if employer terminates the labor contract on this basis, it is not necessary for the employer to obtain a statement of defense from the employee.

2. Termination with valid reason – Must be based on valid grounds and a notice period given an employer may terminate a labor contract based on a valid ground, provided the employer gives the employee a notice period. If the employee wishes to challenge this ground, they may initiate a lawsuit against the employer. A valid ground can occur in respect to a condition arising from either the employer or the employee.

• Conditions related to the employee: The employee’s performance or behavior may become the basis of termination on valid grounds. If termination is based on the employee’s performance or behavior, the employee must be warned in writing and granted at least two chances to correct this prior to termination. The employer should obtain a written statement of defense from the employee.

• Conditions related to the employer: A valid ground for termination may arise due to the necessities of the business, the work place, or the role. If the reason arises from the employer in this way, terminating the employee’s labor contract must be the employer’s last option. Conditions relating to the employer include:

• Poor financial performance of the company
• Organizational changes, such as merger or restructure
• The work place is being closed

Conditions which are not valid grounds for terminating a labor contract include:

• Race, color, sex, marital status, family obligations, pregnancy, birth, religion, political opinion, or similar reasons
• The employee’s membership of a trade union or participation in union activities outside of work hours (or within work hours with the employer’s consent)
• The employee being the trade union representative for the business
• Absence from work during maternity leave4
• Temporary absence from work during the recovery period from illness or accident.

If an employer terminates a labor contract based on valid grounds, the employer must apply the following notice periods: Length of employment — Required notice period

Less than 6 months –>Two weeks

From 6 months to 1.5 years –> Four weeks

From 1.5 years to 3 years –> Six weeks

More than 3 years –> Eight weeks

During the notice period, the employer must grant the employee permission to seek new employment within working hours. The employee must be allowed at least two hours per day for this task and the employer may not deduct wages from the employee for this time. The employee may choose to accumulate these “job-seeking” hours and use them all at one time. However, if the employee wishes to do this, they must inform the employer in advance and the accumulated time must be taken on the days immediately preceding the day their employment ends.

If the employer wishes to terminate the labor contract on the basis of a valid ground but does not wish to continue to employ the employee for the duration of the notice period, the employer may choose to pay the employee a notice payment and end the employment earlier. The employee in not entitled to demand that the employer pay them a notice payment. Notice payment entitlements are based on the employee’s length of service. Notice payments are calculated using the same structure outlined above for determining the length of notice period the employee would have received.

The Labor Law does not state any specific time-limit for claims from employees regarding notice payment requests. However, in accordance with the Code of Obligations, terminated employees should raise these claims within ten years of the termination date.