Impact Of Spin-Off Transactions On Employment Relations

Spin-off is a type of transaction, at the end of which the corporation splits off and new independent companies or entities are incorporated. The parent company (the "Company") and its "new born" company (the "Spinco"), become two independent commercial entities having separate managements, places of business, assets, and separate labor forces. This bulletin focuses on a spin-off's impact on employment relations between the Company and its employees.

There are three major laws that regulate employment contracts in the event of spin-off transactions: (i) the Turkish Code of Obligations (the "TCO"); (ii) the Labor Law (the "Labor Law"); and (iii) the Turkish Commercial Code (the "TCC"). The Labor Law and the TCC specifically set out the status of employment contracts in spin-off transactions, whereas the TCO prescribes the general rules of transfer of "service agreements" in a broader sense.