Termination of Employment Contract on Turkish Legal System

The general means of termination of an employment contract are the death of the employee, mutual consent of the parties and the expiration of the specified duration of an employment contract concluded for a definite period.

An employment contract may also be unilaterally terminated when employees are dismissed or when they resign. There are two types of unilateral termination, termination with a term of notice when the employment contract is for an indefinite period or termination for a just cause when the employment contract is for a definite or indefinite period. In any case, under the Labour Law, a notification of termination is required. All notifications must be made in written form and a receipt must be signed by the one to whom it is addressed.

2) Reasons for termination

Formerly, both the employer and the employee could terminate at any time the employment contract concluded on an unlimited term basis by serving to the other party a termination notice which observes the time periods provided by law. In other words, the indefinite term employment contract could be terminated at either party’s discretion without any justification provided the other party has been informed thereof within the legal time period.

On the other hand, in the event of the existence of a just cause as specified by the law, the contract concluded be it for a definite or indefinite period could be immediately terminated by either party without observing any time period on the service of the notice.

The New Law has introduced an obligation for the employer to justify to the employee his decision of dismissal. This obligation only concerns indefinite term employment contracts and does not apply to definite term contracts.

Pursuant to the New Law, in addition to the time periods to be observed under Art 17 of the Labour Law (see below), the employer will now be required to provide for a “valid reason” in his termination notice .

According to the new amendment, the employer, who employs more than 30 employees with indefinite employment contract and with a minimum work seniority of 6 months, needs to find a valid reason to terminate the contract (Article 18). It should be noted that even if the employer states a valid reason he should respect the provisions for severance and notice pays. Accordingly, the law makes a difference between termination with just cause and termination with valid reason(cause).

Under Article 18 of the Law a valid reason may originate from proficiency or behaviours of the employee, or from necessities of enterprise, work place or the work. The behaviours of the employee that may run counter against the employment contract but not constitute a just cause under Article 25 may be considered as valid reason. For example, if the employer does not do the work he is required to this is a just cause under Article 25/II-h. However, when the employer does the work but insufficient, incomplete or defected then there is valid reason under Article 18. The examples vary.

In conclusion, a valid reason or cause may be defined as follows: faulty behaviours of the employee which are not in the degree of seriousness that could be considered as just cause but may prevent the relationtionship of employment and which may be justified on social grounds for termination of the contract.

3) Compensations

3.1 Notice compensation

According to Article 17 of the Labour Law, an employment contract concluded for an indefinite period may be terminated either by the employer or the employee by giving prior notice to the other party. In a termination with a term of notice, the employment relationship does not cease to exist at the time of notification, but rather at the end of the notice period which varies according to the length of the employment.

Article 17 of the Labour Law sets out the notice periods as follows :

- 2 weeks for an employment of less than 6 months,

- 4 weeks for an employment between 6 months and 1,5 years,

- 6 weeks for an employment between 1,5 years and 3 years and

- 8 weeks for an employment of more than 3 years.

The above periods are minimums and may be increased by mutual agreement.

The beginning of the notice period starts upon the receipt by the employee of the notice of termination

In the event of non-compliance with the notice periods by the party terminating the contract, a “notice compensation” equalling to the amount of wages corresponding to the notice period may be demanded.

3.2 Severance Compensation

Under Turkish Labour Law, an employee whose employment has been terminated for a reason other than misconduct or improper behaviour and the like is entitled to a severance compensation.

This compensation is a lump-sum payment made to the employee and is equal to one month gross salary for each employment year. If the term of employment exceeds a full year, the remaining portion is calculated on a prorata basis. Benefits arising from the contract and which can be measured in monetary terms that are provided to the employee shall also be taken into consideration in addition to the wages.

The amount of the monthly salary may, however, not exceed a certain amount determined by the government from time to time.

3.3 Compensation for unjust termination

In order to avoid arbitrary dismissals, recent amendments made to the labour legislation introduced an obligation for the employers to justify in the notice of termination the grounds of dismissal. This obligation applies to terminations by the employer of indefinite term employment contracts of employees having at least 6 months seniority and in work sites where more than 30 workers are employed.

Pursuant to Article 20 of the Labour Law, the dismissed employee may file a lawsuit before the labour courts within one month following the receipt of the notice of termination on the ground that the latter did not indicate a justified ground for dismissal. The employee who wins the case is entitled to demand a reinstatement and the employer shall then be obliged to re-employ the employee within one month following the decision of the court . The employer who fails to do so is to pay a compensation between four and eight months salary as per the decision of the court.

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