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Employment Termination Based on Economic Reasons in Turkey

October 2013 - Employment. Legal Developments by ADMD Law Office .

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The Turkish Labor Law No. 4857 ('the Law') sets forth the procedures and the circumstances for termination of employment contracts of employees by employers. With the confines of the Law, two separate termination mechanisms, namely rightful (just) termination and termination based on justifiable cause are available.

 

According to the Law, the termination of the employment contract of an employee that is working with contract of undefined term for at least six (6) months at a workplace that employs more than thirty (30) employees, must be based on a justifiable cause.

 

In this context, pursuant to Article 18 subparagraph 1 of the Law, the employer has the right to terminate the employment contracts without a designated term based on the necessities of the business, work or the workplace.

 

Termination based on the necessities of the business, the work or the workplace is essentially the termination of employment contract that is not concerned with the employee as an individual, but rather the termination that is related to the excess work force arising from the job/work of a specific employee, employed in the relevant company, being abolished due to economic, competitiveness and efficiency needs of the employer and/or reasons based on technological advances.

 

It should be noted that, although Article 18 of the Law sets forth that an employment contract can be terminated based on the necessities of the business, the work or the workplace but it does not state which circumstances will constitute grounds for such justifiable termination. However, the justification of the Law adopted by the Parliament provides some non-exhaustive examples.

 

According to justification texts of the law, the necessities of the business, the work or the workplace can be grounded to two main categories: external causes and internal causes. Application of new methodologies and downsizing at the workplace, elimination  of departments and positions are stated as internal causes. External causes are listed as general decrease of sales opportunities, supply and demand, energy shortage, loss of foreign (external) markets, raw material shortage or general economic crises.

Requirements for Termination

 

According to Article 20 of the Law, in case of termination of the employment contract of an employee by the employer based on a justifiable cause due to the necessities of the business, the work or the workplace, the burden of proof will rest on the employer to prove that the termination is in fact based on a justifiable cause. Hence, the employer must prove that the procedures for termination notification have been fulfilled and that the causes for termination are in fact valid.

 

Accordingly, the employer shall prove that  an operational resolution is drafted due to necessities of the business, the work or the workplace and such resolution created excessive employment where consequently the termination was executed objectively, consistently and as a last resort.

 

It is important to note that, this operational resolution shall be based on the necessities of the business, the work or the workplace, and that there is a link between the excessive employment resulting from the resolution and the employee termination.

 

Therefore, in cases where such resolution does not create excessive employment or where there is no actual link between the excessive employment and the termination, such termination cannot be deemed as a valid termination.

 

Excessive employment means that the job/work of the employee is abolished as a result of the mentioned operational resolution and that there is no other way for that employee to continue working in the company. This requirement is also closely related to the principle of 'last resort', since the employment contract can only be terminated if it is not possible to achieve the same desired result by other means than termination and when the termination is inevitable.

 

Accordingly, it should be examined whether the employer has any other option to avoid the relevant termination. It should also be noted that employer may only be required to avoid termination, if there is an efficient and suitable option available. Hence, the employer cannot be expected to take other measures that will be too costly or that may damage the operational structure of the company in order to avoid such termination.

 

The Court of Appeals precedent also emphasizes on this principle of last resort. At such precedent, first and foremost, the overtime works in the company, if any, is noted to be discontinued and the employee must be allowed to continue working instead of such overtime load. However, this also may not apply to every case. For example, in cases where the employee to be terminated works in a different department than of the department which has to work overtime (i.e. employee working in production and administrative personnel working overtime), the termination of such employee can still be deemed valid. Moreover, if it is not possible to place such employee to another position than the current one, it also not required to discontinue the overtime work at the employer's workplace. The Court also states that if the employer has more than one workplaces, and if it is possible to employ the worker to be terminated in another workplace, the employer should first offer the employee such other workplace and only if the employee rejects such offer then, the employer is allowed to terminate the contract on such grounds.

 

Procedure for Termination

 

The employer must first fulfill the notification requirements set forth at article 17 of the Law, before terminating an indefinite employment contract. Accordingly, employer may only terminate the contract at the end of the notification period designated by the Law.

 

Such notification periods are set forth at Article 17 as; two (2) weeks for employees worked less than six (6) months; four (4) weeks for employees worked between six (6) months and one and a half (1.5) years; six (6) weeks for employees worked between one and a half (1.5) years and three (3) years; and eight (8) weeks for employees worked for more than three (3) years.

 

It is important to note that, such notification periods are set as minimum requirements by the Law and can be extended if agreed upon by both parties. However, it is not possible to set lower notification periods and any provisions to the contrary are deemed invalid.

 

According to Article 19 of the Law, the employer shall submit the notification for termination in writing in order to terminate the employment contract. Any verbal notification of termination are deemed invalid.

 

The grounds for termination shall also be clearly stated at such written notification. In this context, such reason should not be stated with general expressions but rather, the economic or technological justifications shall be clearly stated. Any notification of termination that does not state the termination reasons will also be deemed invalid.

 

As a result of such requirement, the employer will also be bound by the reasoning stated at the notification of termination. Accordingly, the employer will not be able to amend the reasons for termination or rely on other reasons following the submission of the notification

 

This issue is quite important since, in case the employee sues the employer for wrongful termination, the employer will be bound by the reasons of termination stated at such notification.

 

Consequences of Termination

 

As stated above, following the submission of a written notification of termination and the end of the notification periods set forth by the Law, the employment contract of the employee will be terminated.

 

Accordingly, there is no change in the legal status of both parties within the designated notification periods and therefore, the contractual agreement between the employee and the employer will continue to be in effect with all the rights and obligations at the date when employee is served with the notification until the employment contract is terminated.

 

Within the designated notification period, the employee shall be allowed a reasonable time to search for new work without any deduction from his/her salary. If the employee is not allowed time-off to look for new work, the employer will be forced to pay the employee two (2) times the amount of his/her regular salary for such time.

 

In case the above-mentioned notification period is not fulfilled, the employee will be entitled to a notification compensation for the amount of his/her salary that corresponds to the notification period designated by the Law. Accordingly, if the parties have previously agreed that the notification period will be higher, the notification compensation amount shall also be higher.

 

It is important to note that such notification compensation that corresponds to the notification period can be paid to the employee in advance and the employment contract can be terminated immediately without having to wait until the end of the notification period.

 

In case of failure to abide by the procedures outlined above, the employee will also be entitled to severance pay, provided that he/she has worked at that company for more than one (1) year due to Article 25 of the Law even if the termination was duly made by fulfilling the notification period requirement and based upon a justifiable cause. Therefore, severance pay will have to be paid to the employee even if the termination of employment contract is valid.