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13 January 2021
Government bodies have introduced progressive measures and restrictions to minimise the COVID-19 pandemic's negative impact on employment and sustain employment relationships. One of the most significant arrangements in this respect is the termination prohibition. However, mutual termination agreements have become a point of contention in light of this prohibition as they are unregulated under Turkish law.
On 17 April 2020 the Law on Minimising the Impacts of the New Coronavirus (COVID-19) Outbreak on Economic and Social Life and the Amendment of Certain Laws (7244) (the Amendment Law) entered into force on its publication in the Official Gazette (31102) (for further details please see "Prohibition on termination and unilateral unpaid leave enters into force"). With the Amendment Law, employers' 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 Amendment Law's effective date.
Since then, the termination prohibition has been extended several times; it is currently in effect until 17 March 2021 (for further details please see "Termination prohibition, unilateral unpaid leave and short-time working allowance extended once again"). The president can extend the termination prohibition until 30 June 2021 for a maximum of three months per extension. As such, it will likely be extended again beyond March 2021.
The termination prohibition applies to terminations made by employers, with the following exemptions:
Employers which breach the prohibition are subject to an administrative fine equal to the monthly gross minimum wage (TL3,577.50 for 2021) for each employee terminated. However, the Amendment Law is silent as to the other legal consequences of breaching the termination prohibition. Most scholars opine that as well as filing reinstatement actions, employees whose contracts are terminated in breach of the prohibition may claim compensation at the amount of their salary for the remaining period of the termination prohibition.
Employers often prefer to sign mutual termination agreements with their employees to avoid the risk of reinstatement action. Mutual termination agreements are unregulated under Turkish law and the concept has thus been introduced through case law.
The Court of Cassation takes the view that mutual termination agreements are valid only if employers provide a reasonable benefit to employees alongside the legal termination entitlements (eg, notice and severance indemnities). Reasonable benefit is determined by the court in each case. In several decisions, the Court of Cassation has considered four to six months of the employee's salary a reasonable benefit, depending on the employee's seniority.
As the current legislative framework does not regulate mutual termination agreements and their status with respect to the termination prohibition, whether they fall under the termination prohibition is a controversial issue.
The general approach of Turkish academics and practitioners is to deem mutual termination agreements exempt from the termination prohibition. As the termination prohibition aims to provide an income assurance to 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 prohibition's rationale.
However, despite that being a widely accepted approach, there might be a practical issue when notifying the Social Security Institution. As mutual agreements are unregulated under Turkish law, there is no specific code provided for notifying such terminations to the Social Security Institution. In practice, "Code 22: Other reasons" is used for reporting mutual termination agreements. At present, Code 22 is placed among the prohibited codes for termination. Therefore, employers which execute mutual termination agreements with their employees face the risk of an administrative fine; however, fines are subject to appeal.
As a legal arrangement introduced during the pandemic, the termination prohibition is an unfamiliar concept under Turkish law. Therefore, it is impossible to foresee how the courts would react to disputes arising from employers' practices that may breach the termination prohibition. However, certain members of the Court of Cassation take the view that mutual terminations do not technically qualify as unilateral terminations performed by employers and, therefore, should be exempt from the prohibition, which might foreshadow the courts' approach.
For further information on this topic please contact Beril Yayla Sapan, Asena Aytuğ Keser or Kardelen Özden at Gün + Partners by telephone (+90 212 354 00 00) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Gün + Partners website can be accessed at www.gun.av.tr.
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