Formation and Termination of Employment Contracts under Turkish Law

Formation and Termination of Employment Contracts under Turkish Law
Formation and Termination of Employment Contracts under Turkish Law

Formation and Termination of Employment Contracts under Turkish Law

Employment relations, particularly their formation and termination, are one of the most important aspects of business life. The aim of this article is to briefly inform foreign investors about this important aspect, namely Turkish employment law related to formation and termination of employment contracts.

As a general overview, Turkey is a member of International Labour Organization (“ILO”) since 1932 and has ratified most of the ILO Conventions. Turkish Labour Code No. 4857 (“Code”) is the main source of employment legislation in Turkey and was enacted in 2003 in order to align with the provisions of various ILO Conventions.

A. Formation of Employment Contracts

Unless otherwise stipulated in the Code, an employment contract does not have any special form. However, there is a legal requirement for contracts to be in writing if they are signed for a definite period. In case the parties have not executed a written contract, the employer is obliged to provide the employee with a written form setting out the general and special working conditions within two months as from the commencement of the employment.

In terms of duration, employment contracts may be with an indefinite term or fixed term. As some of the significant rights, such as “job security”, notice pay, are not applicable to contracts with fixed term, unless there is a business reason for executing fixed term contracts, contract with an indefinite term is the usual type of employment contract.

The maximum probation period that may be agreed in contracts may be two months. This period may be extended to four months in a collective bargaining agreement, if applicable.

The provisions of the Code sets out the minimum rights that are applicable particularly for the employees, which may not be contracted out in the individual employment contracts.

B. Termination of Employment Contracts

Turkey ratified Termination of Employment Convention, 1982, adopted by the ILO. Accordingly, the provisions of the Code are to a large extent in line with the provisions of the aforesaid ILO Convention.

In general, employment contracts may be terminated with or without a cause. The requirements and the consequence of each termination type may be outlined as follows:

1 – Termination of an employment contract without a just cause

1.1 – Notice requirements
In order to terminate an employment contract with an unlimited term, a terminating party has to notify the other party and give the applicable notice period unless there is a “just cause” for termination. The statutory notice period to be given depends on the length of service of the employee and is as follows:

Length of service

Length of notice period

0-6 months

2 weeks

6-18 months

4 weeks

18-36 months

6 weeks

36 months and above

8 weeks

In cases of employer’s terminations, the employer may terminate the employment contract with immediate effect by paying the salary in lieu of notice. In such cases, the salary to be paid as notice pay is the gross salary including all regular benefits for the applicable notice period.

1.2 – Job security provisions
In line with the principle set forth by the Termination of Employment Convention adopted by the ILO, the employment of an employee may not be terminated by the employer unless there is a valid reason for such termination connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service. This restriction, which is referred to as “job security provisions”, is applicable in workplaces with thirty and more employees and to employees working under an employment contract with indefinite term and having a service of at least six months. Employment contract of an employee who is entitled to benefit from job security provisions may not be terminated based on reasons connected to the employee’s capacity or conduct before having the employee’s defense. The Code sets forth formal requirements with respect to terminations by the employers where job security provisions are applicable. Accordingly, termination notices must be in writing and the grounds of termination must be stated clearly.
In the event of terminating an employment contract by the employer based on a valid reason, the employer must give the notice periods (or notice pay) and severance pay as explained in Sections (B) (1.1) and 3 of this Article.
An employee who is entitled to benefit from job security provisions may file a lawsuit against the employer within one month from the date of notification of the termination of the contract and claim invalidity of termination and ask for reinstatement of the employee’s job. If the court decides that the employer is in breach of the job security provisions and cancels termination, the employer has to re-instate the employee within one month or pay “re-instatement compensation” amounting to four to eight month salary of the employee as determined by the court. In addition, the employer has to pay up to four month salary (including other monthly rights) for the period the employee remained unemployed by the employer.

2 – Termination of an employment contract with a just cause
Each of an employer or an employee may terminate an employment contract with immediate effect without giving any notice period (or notice pay) to the other party if there is a just cause, which may be based on reasons of health or force majeure or immoral or wrongful conduct or other similar behavior of the other party, as provided in Articles 24 and 25 of the Code. Each of the just causes enumerated under the Code are more severe causes when compared with valid causes for termination discussed in Section (B) (1.2) hereabove.
In case of terminations based on a wrongful conduct of the other party, the terminating party has to terminate the contract within six business days as from the date of learning of such conduct and not later than within one year following the date of such conduct.

3 – Severance Pay
The conditions for payment of severance pay is set forth in Article 14 of the Labour Code numbered 1475. Accordingly, severance pay will be payable if the employment contract of an employee having a seniority of minimum one year is terminated.

● By the employer for reasons other than a just cause related to the employee’s conduct, or
● By an employee based on a just cause, or
● By a male employee due to compulsory military service, or
● By an employee for the purpose of qualifying for an old-age or disability insurance pension or a lump-sum payment from an insurance organization or a similar statutory fund, or
● By a female employee due to her marriage within one year from the date of marriage, or
● Due the death of an employee.

The severance pay shall be calculated as one month-salary (Salary to be taken into calculation shall be gross monthly salary plus other regular benefits, which can be measured monetarily) of the employee for each year of service and is subject to a statutory ceiling.

4 – Concluding remarksy
The labour courts in Turkey tend to act highly in favor of the employees. Therefore the employers are recommended to take legal advice in every employment issue and measure their risks before taking any employment related decision.

This Article aims to provide a brief and general overview of formation and termination of employment contracts under Turkish law, but does not intended to serve as a legal advice. Before taking any action or relying on the information given, addressees of this Article should seek specific advice on the matters which concern them.