Termination of Labor Contract Before Bankruptcy
According to Turkish Labor Law numbered 4857 (“Labor Law”), termination of employees’ labor contracts due to liquidation of workplace, before the bankruptcy, is possible but there is a procedure, that we will be given details, should be followed. However, bankruptcy or liquidation of the workplace is not a justified reason for the employer to terminate the labor contract according to Labor Law. Nevertheless It is a valid ground to terminate. The difference between valid ground and justified reason to terminate a labor contract focuses on severance and notice pays. Therefore, it will be possible but the employer has to pay severance pay and payment in liue of notice to the employees.
The Employees will be eligible for the monthly unemployment compensation from the Turkish State after the termination of their contracts in that case.
Mass Layoff Procedure in Turkish Law
According to the Turkish Labor Law, if an employer is going to terminate the labor contract of;
1. at least 10 employees (where the employer has 20 to 100 employees)
2. at least 10 percent of employees (where the employer has 101 to 300 employees)
3. at least 30 employees (where the employer has over 300 employees)
It is called mass layoff.
If an employer plans to terminate the contracts of its employees before the bankruptcy, it will be a mass layoff. There is a different procedure for mass layoff.
First of all, Labor Law orders the employer to send notification letters to the District Labor Office and Turkish Employment Agency 30 days before the termination of the contracts. These notification letters have to contain:
1. Valid (economic) reasons for terminating Labor Contracts.
2. The number of employees affected by this and the information of the employees.
3. When the terminations will take place.
If these notifications are not made, it will not affect the validity of termination but the Employer will face an administrative fine.
30 days after the notification to related institutions, detailed termination notifications can be sent to employees. Then the ordinary procedure of termination of a labor contract can take place.
The employer is obliged to make the notice of termination to the employees in writing and state the reason for termination clearly and precisely. In termination notifications; It should be noted that layoffs are due to economic reasons and these reasons make it necessary to terminate the contracts. The date of termination and the reason for the liquidation of the company, should be explained precisely with objective criteria, and relevant documents should be attached to the termination notice.
Severance and Notice Payments of Employees.
As it is mentioned above, liquidation of the workplace is not a justified reason to terminate a Labor Contract in Turkish Law so the employer has to pay severance and notice payments to employees. If the Employer is available for those payments, two alternatives can be suggested:
1. After the termination of contracts, The Employer might not choose to have agreements with employees regarding their payments and expects them to file a lawsuit against itself. If The Employer goes bankrupt before being sued by employees, those employees have to sue the trustee in bankruptcy which is ruling the Employer’s bankrupt’s assets. If the employees sue Employer before the bankruptcy, The Employer will be the defendant during the case period. if Employer goes bankrupt, the defendant will be trustee in bankruptcy in the ongoing case.
2. The Employer may have agreements with all employees and accept the payments. In this scenario, employees do not have to sue The Employer or the trustee, they can take their payments from bankrupt’s assets. However, this option is not realistic because it is not likely to settle with employees about their rights such as overtime payment, annual leave payment and so on. If The Employer informs its employees in advance that The employer will go bankrupt so it might be impossible for the employees to get their payments through the long litigation process, this alternative may work.
