Termination of an Employment Contract and Employee Reinstatement Mechanism

By Ayça Bayburan
ADMD Law Office, Istanbul TURKEY

Termination of employees, employee reinstatement claims and procedure under Turkish Labor Law will be summarized in this brief information note.

In accordance with the Labor Code No.4857, the employment contracts can be terminated by employers with two methods:

Rightful (Just) Termination:

Rightful (or just) termination is defined at Article 25 of the Labor Code and in this type of termination; employer may terminate the employment contract without any necessity for prior notification and without making any notification compensation payments.

The following events and issues are stated as rightful grounds for termination: health reasons, sexual harassment by an employee to another one, abuse of the employer's trust, theft, causing the disclosure of confidential and professional secrets of the employer, acts that are inconsistent with truthfulness and loyalty, acts that are immoral or inconformity with good will or similar contesting reasons, to be taken into police custody or being arrested for a period of time causing absence that is higher than the notification period stated in the relevant article of the Labor Code.

The most important issue for the rightful termination by the employer is the existence of the factual ground for such termination. Unless such ground is solid and easily provable, it may be inevitable that the termination will be deemed invalid by the Courts following the applications of terminated employees.

Termination Based on Justifiable Cause:

According to Article 18 of Labor Code, termination based on justifiable grounds is immediate termination of employee's contract by the employer by payment of severance and notification compensation or by providing timely notification.

A justifiable cause is deemed necessary for terminating an employee that is working with an undefined term of contract for at least 6 months at such workplace that employs more than 30 employees. According to Article 18 of the Code, the employer shall ground the termination of an employee to a justifiable cause incurring either of the sufficiency of the employee or his/her acts or the necessities of the work or the workplace.

The justifiable causes could be sampled as; lack of performance level compared to other employees, lack of efficiency, low performance, non-conformity with skills required, frequent sickness, lack of professional development, general acts that cause losses to the employer or risk of such losses that may be caused, incompatibility with other employees, having personal relations with other employees having negative effect to the work environment, loss of business or sales, decrease in demand or orders, lack of energy sources, loss of foreign markets, economic crisis experienced in the country, application of new methodologies in the workplace, downsizing at the workplace, termination of departments and/or elimination of positions.

If termination based on justifiable cause is executed, the grounding reasons shall be notified to the employee expressly. Even in such case, the terminated employee may still file for a reinstatement case against the company. Burdens of proof for the justifiable causes are on the employer.

Reinstatement Mechanism:

In accordance with the provisions of the employment security in the Labor Code, an employee could file for a reinstatement litigation in order to be re-appointed following his/her termination by the employer only if the employee is working for that employer for at least six months, if the employment contract is for an undesignated period (term), if the workplace employs more than thirty employees, and if the employee is not an employer representative (meaning that the employee shall not be in a high level position where he/she has authority to represent the employer especially in hiring and firing employees).

According to Article 20 of Labor Code, the employee whose employment contract is terminated may file for a reinstatement case at labor courts within one month starting from the notice of termination claiming that he/she is terminated without cause or the cause provided is unjustifiable.

The payment of compensation to the employee at the time of termination is irrelevant for filing such case. Generally the reinstatement cases are resolved in favor of the employees in courts since the burden of proof for the justifiable or rightful cause for termination is on employers.

As an outcome of a reinstatement decision resolved by the Courts, the employer shall re-hire the employee back to his/her position within thirty days, in addition the employer is liable to pay to the employee four (4) months of gross salary that is for being out of work during litigation. Please note the below compensations that are applicable in cases where the employer does not reinstate the employee following the Court decision.

Compensations in Cases of Termination:

Notification Compensation: As noted in Article 17 of Labor Code, the party who fails to abide by the prior notification periods designated by the law for termination is liable to pay compensation in the amount of the gross salary for that period of time as noted below:

If the employment is;

• for less than six (6) months, compensation for two (2) weeks;
• between six (6) and eighteen (18) months, compensation for four (4) weeks;
• between eighteen (18) months and three (3) years, compensation for six (6) weeks;
• for over three (3) years, compensation for eight weeks.

Severance Compensation: An employee who worked for more than one year for the employer becomes eligible for compensation of severance in case of termination. The severance compensation is calculated as thirty (30) days of salary payment per each year of work however there is a legal ceiling (cap) that applies as a highest limit which is TRY 2.427,04. (Such amount of legal ceiling is applicable until June 30, 2010 and renewed every year).

Annual Paid Leave: The employees become eligible for annual paid leave days as listed below. In case of termination the annual paid leave days that are not consumed by the employee during his/her work needs to be compensated based on gross salary.

The annual paid leave is;

• fourteen (14) days for work between one (1) to five (5) years;
• twenty (20) days for work between five (5) to fifteen (15) years;
• twenty six (26) days for work more than fifteen (15) years.

Compensation for Bad Faith: If proven by the employee that the employer executed termination in bad faith, the employee may be awarded additional bad faith compensation by Labor Courts. Bad faith compensation is triple (3) the amount of notification compensations to be applied to such employee and are enforced in most cases of reinstatement claims.

Other Rights of the Employee: At termination, the employee shall also be paid the unpaid salaries, overtime payments, bonuses or any other accrued payments relevant for the employment period.