Since the wake of COVID-19 in Turkey, Turkish governmental bodies brought progressive measures and restrictions into force to minimize the pandemic’s negative impacts on employment and sustain employment relationships. One of the most significant arrangements has been the termination ban brought into effect. Mutual termination agreements have a controversial nature in face of this ban.
On 17 April 2020, the Law on Minimizing the Impacts of the New Coronavirus (COVID-19) Outbreak on Economic and Social Life and the Amendment of Certain Laws (7244) (“Amendment Law”) was published in the Official Gazette (31102) and entered into force. With the Amendment Law, termination of employment contracts – including those subject to the Code of Obligations and other employment-related acts such as the Press Labour Act and the Maritime Labour Act – was prohibited for three months as of the effective date of the Amendment Law.
Since then, the termination ban has been extended for several times and it is in effect until 17 March 2021 for the moment. The President is entitled to extend the termination ban until 30 June 2021 for a maximum of three months each time. As such, it will likely be extended again beyond March 2021.
The termination ban applies only to the terminations by employers, with the following exemptions:
- terminations on just causes arising from the cases that are incompatible with moral, good will and similar circumstances,
- expiry of fixed-term employment contracts,
- closure of workplace for any reason and termination of employer’s activities, and
- termination of the works performed in relation to service procurements and constructions conducted under the relevant legislation.
Employers breaching the ban are subject to an administrative fine at the amount of monthly gross minimum wage (TRY 3,577.50 for 2021) for each employee terminated. Yet the Amendment Law is silent as to the other legal consequences of breaching the termination ban. A majority of the scholars opine that as well as filing re-instatement actions, the employees whose contracts are terminated in breach of the ban may also claim compensation at the amount of their salaries for the remaining period of the termination ban.
Mutual Termination Agreements
Employers often prefer to sign mutual termination agreements with their employees to avoid the risk of the re-instatement action. Mutual termination agreements are not regulated under law, and the concept has been introduced to Turkish law through case-law.
The Court of Cassation takes the view that mutual termination agreements are only valid if the employer provides a reasonable benefit to the employee alongside the legal termination entitlements (e.g. notice and severance indemnities). Reasonable benefit is determined by the court in each case. In several decisions, the Court of Cassation considers 4 to 6 months’ salary of the employee as a reasonable benefit depending on the seniority of the employee.
Mutual Termination Agreements Against Termination Ban
As the current legislative framework does not stipulate mutual termination agreements and their status against the termination ban, it has been a controversial issue whether mutual termination agreements would fall under the termination ban or not.
The general approach of Turkish academicians and practitioners is to deem mutual termination agreements exempt from the termination ban. Considering that the termination ban aims to provide an income assurance to the employees during the pandemic, it is opined that the reasonable benefit to be granted to employees in scope of mutual termination agreements complies with the rationale of the ban.
That being a widely accepted approach, there might be a practical issue at the notification step to the Social Security Institution. As mutual agreement is not regulated under law, there is no specific code provided for notification of such terminations to the Social Security Institution. In practice, “Code 22: Other reasons” is used for reporting the mutual termination agreements. Currently, Code 22 is placed amongst the prohibited codes for termination. Therefore, in practice, employers who execute mutual termination agreements with their employees face with the risk of an administrative fine; yet the fine is subject to appeal.
As a legal arrangement introduced during the pandemic, termination ban is not a familiar concept to Turkish law. It has only been in force since the last couple of months. Therefore, it is not yet possible to foresee how courts would react to the disputes arising from the practises of the employers that may breach the termination ban. Yet we already know that certain members of the Court of Cassation take the view that mutual terminations are not technically qualified as unilateral terminations performed by employers, and therefore, they should be exempt from the ban, which might be a foreshow of the courts’ expected approach.
For further information on this topic please contact Beril Yayla Sapan or Asena Aytuğ Keser at Gün + Partners by telephone (+90 212 354 00 00) or email (email@example.com or firstname.lastname@example.org). The Gün + Partners website can be accessed at www.gun.av.tr.
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