Amendments to Turkish Law Governing Subcontractors

Introduction

Under Turkish law, subcontractors are regulated in Labour Code No.4857, which was enacted in 22.05.2003 and published in the Official Gazette in 10.06.2003, and Subcontractor Regulation, which was published in the Official Gazette in 27.09.2008. It is a notion which ensued as a result of the effects of technological developments in the division of labour. Since it has become a widespread practice in recent years, it constitutes the resource of many disputes which have been submitted to the courts. Therefore, subcontractors have an increasing significance in Turkish law.

Subcontractor Relationship and Liability

There is no definition of subcontractor in the Labour Code, since there is no difference between main employer and subcontractor with regard to their legal characteristics. In fact, a subcontractor also employs workers within the scope of employment contracts and yet he is not a vice principal, because he acts on his own behalf. Thus, the difference between main employer and subcontractor derives from the status in their relationship, which is defined in the Labour Code.

According to Labour Code article 2/7; “the connection between the subcontractor who undertakes to carry out work in auxiliary tasks related to the production of goods and services or in a certain section of the main activity due to operational requirements or for reasons of technological expertise in the workplace of the main employer and who engages workers recruited exclusively for this purpose in the workplace of the main employer is called the main employer-subcontractor relationship”. Said relationship between the main employer and subcontractor can derive from construction, rent or mandate contracts.

In addition, the main employer shall be jointly liable with the subcontractor from the obligations ensuing from the Labour Code, from employment contracts of the subcontractor’s workers, or from the collective labour agreement to which the subcontractor has been a signatory.

Therefore, these requirements must be fulfilled in order to establish a subcontractor relationship under the Labour Code:

a main employer who recruits workers in his own workplace,
work which is carried out in the workplace of the main employer,
work which is related to the production of goods and services or in a certain section of the main activity due to operational and work-related requirements or for reasons of technological expertise in that workplace,
workers recruited exclusively for the work assigned to the subcontractor.

Also, according to the Subcontractor Regulation which embodies issues about the main employer-subcontractor relationship in detail;

workers of the main employer, whose work is related to the production of goods and services, must also be present in the workplace of the main employer.
work assigned to the subcontractor must be auxiliary-related to the production of goods and services.
- auxiliary tasks are generally accepted as nutrition, cleaning, transportation, landing, technical maintenance and security works which are not involved in the direct production organization. It must be dependent on the main activity and continue as long as the main activity proceeds. In case the main activity, which is carried out by the subcontractor, is divided, it must be due to operational and work-related requirements or for reasons of technological expertise. Nevertheless, a subcontractor cannot divide the work which he undertook in a section of the main activity and assign it to another employer.
a subcontractor must recruit his workers exclusively for the work, which he was charged by the main employer to do, in the workplace of the main employer.
a subcontractor must not be a person who has been recruited in that workplace before. However, an ex-worker of the main employer may establish a subcontractor relationship with the main employer if he later on becomes a shareholder of a company or through an ordinary partnership.

Moreover, it is prescribed in article 9 of the Regulation that the agreement between the main employer and the subcontractor must be written. Also, it must include these elements:

business name and address of the main employer and subcontractor,
legal personality of the main employer and subcontractor or in case of an institution or corporation without a legal personality – name, surname and address of their vice principals,
main activity carried out in the workplace,
work assigned to the subcontractor,
if the main activity is divided, technical explanation about the condition of operational and work-related requirements or reasons of technological expertise related to the work,
commencement and termination dates of the work if agreed upon by the parties,
section of the workplace in which the subcontractor will perform his activities,
joint liability of the main employer and subcontractor in accordance with article 2/7 of Labour Code,
in case of the recruitment of workers by a subcontractor who were hired by the main employer before the conclusion of the subcontractor contract, unrestrictability of the rights of those workers in compliance with article 2/8 of Labour Code,
execution rules of the work which the subcontractor undertakes,
signatures of main employer or his attorney and the subcontractor or his attorney.

Simulation in Subcontractor Relationship

Simulation is set forth in the Labour Code with the most common types in practice, by means of considering the judicial decisions as well. Moreover, it is not prescribed as numerous clauses, but instead is mentioned “generally” so there can be other circumstances which constitute simulation in subcontractor relationships. Besides the said Code, it is also embodied in Regulation in order to protect the workers while preventing the unfair competition between the employers taking a simulated act and those that do not.

In compliance with Regulation, simulation occurs when;

there is no auxiliary task of the main activity related to the production of goods or services in the workplace which is assigned to the subcontractor,
works, without requirements of operational, work-related and technological expertise, are undertaken by the subcontractor,
the subcontractor is an ex-worker of the main employer in the same workplace as before,
the subcontractor does not have the sufficient equipment and experience convenient to work,
the subcontractor does not recruit workers with qualifications convenient to work,
a worker of the main employer is hired for the work undertaken by the subcontractor, except the ones who are assigned to coordination and supervision on behalf of the main employer,
the subcontractor agreement aims to evade the public obligations which are prescribed by labour law,
the subcontractor agreement is concluded in order to restrict or eliminate the individual or collective rights of workers ensued from an employment contract, collective labour agreement or legislation.

Under Labour Code article 2/8: “The rights of the main employer’s workers shall not be restricted by the way of their engagement by the subcontractor, and no main employer–subcontractor relationship may be established between an employer and his ex-worker. Otherwise and generally the main employer-subcontractor relationship shall be accepted as simulation that the workers of the subcontractor shall be treated as workers of the main employer”.

As a result of simulation: a subcontractor’s workers shall be treated as the workers of the main employer from the beginning of the subcontractor relationship. Thus, it will affect the collective labour law besides the individual labour law, since it is a general illegality. Most importantly, those workers who incurred simulation shall demand all of their labour rights from the devoided main employer.

Subcontractors Under Latest Amendments

New provisions were inserted into the Labour Code with Code No.6552, which was published in the Official Gazette on 11.09.2014. Accordingly, liabilities of the main employer were expanded regarding the performance of the rights of a subcontractor’s workers such as unpaid wages, paid annual leave and severance pay. Within the scope of the amendments of Code No.6552:

In case there is a subcontractor agreement, workers of the subcontractor shall demand their unpaid wages from both the subcontractor and the main employer. Also, the main employer is obliged to control whether the wages of a subcontractor’s workers have been paid upon the request of the workers or monthly ex officio and, if any, he is obliged to deposit the unpaid wages into the workers’ bank accounts by deducting the allowances of subcontractors.
While calculating the paid annual leave of workers who continue to work in the same workplace although their subcontractor has been changed, their total work period in the same workplace shall be taken into consideration. In addition, while the main employer is under the obligation to control whether the workers of a subcontractor have taken the paid annual leave that they are entitled to and ensure its enjoyment in the relevant year, a subcontractor is liable to provide a copy of the certificate of leave enrollment to the main employer.
Lastly, thereunder the sub-clauses which were added to Labour Code article 112 regarding the workers employed in public institutions or corporations under Public Procurement Code No.4734;
- In calculation of severance pay of workers who worked continuously, regardless of the
  change of subcontractors, in the workplace of the same public institution or corporation within the scope of Public Procurement Code, the total work period passed in the same public institution or corporation shall be taken into consideration. Severance pay of workers, whose employment contracts concluded with their last subcontractors were terminated as requiring the payment of severance pay, shall be paid into the worker’s bank account by the relevant public institution or corporation.
- On the other hand, in calculation of severance pay of workers who were recruited by the same subcontractor within the framework of the same employment contract, but in different public institutions or corporations in compliance with the Public Procurement Code, the total work period passed in the workplace of different public institutions or corporations shall be taken into account. Severance pay of workers, whose employment contracts were terminated as requiring the payment of severance pay, shall be paid into the worker’s bank account by the last public institution or corporation in which he was employed.
- In case the aforesaid payment is made, the last public institution or corporation which paid the severance pay shall collect the amount related to the work period in other public institutions or corporations of paid severance pay, from the relevant public institution or corporation.
- Moreover, while his employment contract with a subcontractor has not been terminated, severance pay of the worker – who continues to be employed by a subcontractor in a workplace apart from the workplace of the administrations within the scope of Public Procurement Code and meanwhile whose employment contract was terminated as requiring the payment of severance pay – upon the written request of the worker, shall be deposited into the worker’s bank account by the last public institution or corporation by means of calculating the amount of severance pay related to the work period passed in the workplace of said public institution or corporation, via the updated amount of the wage paid in the last workplace of the public institution or corporation, considering the annual increase rates of subsistence wage. In case the amount of severance pay paid in this manner is less than the severance pay calculated by considering the same periods over the wage at the date of the termination of the employment contract, a worker has the right to demand the difference from the subcontractor.
- In case the aforesaid payment is made, the last public institution or corporation which paid the severance pay shall have the right to collect the amount of paid severance pay related to the work period in other public institutions or corporations from the relevant public institution or corporation.

Conclusion

Considering this is a crucial topic in Turkish labour law due to a massive increase especially in the construction sector, service procurements and work accidents, new amendments entered into force regarding the subcontractor relationship within private and public corporations.

In terms of wages, the main employer was again jointly liable as before. However, a subcontractor’s workers often have to file a lawsuit due to the violations in practice. Hence, said amendment aims to guarantee the payment of wages of a subcontractor’s workers, which is compulsory for employers both in private and public sectors at the moment. Besides, by controlling the wage payments while paying the allowances, the main employer shall not deal with an unexpected wage demand within the scope of his joint liability and shall not undertake an extra cost since he will deduct the allowances of subcontractors. So, the main employer is under the obligation to pursue the payment of workers’ wages.

On the other hand, sometimes, even though the subcontractor changes, workers work continuously. For instance, when a cleaning company leaves a hospital as a result of the termination of a contract, a new company begins to work with the former workers. However, a worker may not be entitled to the paid annual leave since the subcontractor often changes in spite of being the worker of a subcontractor in the same workplace for years.

After the amendment, paid annual leave of a worker will be calculated based on the starting date of employment in that workplace. In this context, if the new subcontractor employs the workers of the ex-subcontractor, he will calculate the paid annual leave considering the former works of the workers and is obliged to provide the workers to take their paid annual leave.

Also, an extra cost ensues under paid annual leave to the subcontractors who employ the workers of ex-subcontractors after they begin to work in a workplace. So, the amendment aims to protect the rights of a subcontractor’s workers who are recruited continuously in the same workplace at one-year service procurements. Nevertheless, the main employer is also protected against the demands regarding the payment of paid annual leave in the future, due to the leave which the worker did not take.

In terms of the works under Public Procurement Code No.4734, workers of the subcontractor employed in the other kinds of procurements are not involved, since the amendment includes merely the works related to the service procurements within the scope of the Public Procurement Code. Also, within the scope of the administrations’ service procurements, public institutions or corporations shall be liable from the payment of severance pay of the subcontractors’ workers. Thus, severance pay of the subcontractors’’ workers in the public sector are aimed to be secured.

Consequently and most importantly: there is no sanction against the violation of aforesaid obligations. Therefore, although there are many violations in spite of sanctions, these amendments without a sanction may be less favourable to the worker in practice. While more amendments which ensure the protection of workers and equity must be entered into force, favourable developments for subcontractors can only be shaped through prudence and awareness in practice as well as fair judicial decisions.