THE PROCEDURE OF TERMINATION OF EMPLOYEES’ LABOR CONTRACTS DUE TO THE LIQUIDATION OF THE WORKPLACE

         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.

Termination Types Under Turkish Labor Law

Under Turkish Labor Law (Law No. 4857), termination of employment contracts follows two main categories: termination with notice (Article 17) and termination for just cause (Articles 24-25). Each category has specific requirements and consequences for both parties.

Termination with notice allows either party to end the contract by observing statutory notice periods. These periods vary based on the length of service: 2 weeks for contracts less than 6 months, 4 weeks for 6-18 months, 6 weeks for 18-36 months, and 8 weeks for over 36 months of service. Payment in lieu of notice is permissible.

Termination for just cause is available when specific grounds exist as enumerated in Articles 24-25. For employees, these include employer’s failure to pay wages, forced overtime, or health hazards. For employers, grounds include employee’s serious misconduct, dishonesty, or extended illness beyond statutory limits.

Severance Pay and Compensation Rights

Employees dismissed after at least one year of service are entitled to severance pay under the transitional Article 14 of the former Labor Law No. 1475. The calculation formula is: last gross salary × years of service, subject to a statutory ceiling reviewed annually.

Employees unfairly dismissed have the right to file reinstatement lawsuit within one month, as regulated in Articles 18-21 of Law 4857. This applies to workplaces with 30 or more employees where the employee has completed at least 6 months of service. The court examines whether the termination was based on valid reasons.

If reinstatement is granted but the employer refuses to reinstate, the employee is entitled to compensation equal to 4-8 months of wages, plus wages for up to 4 months of the trial period, plus severance and notice pay if applicable. This ensures effective protection against wrongful termination.

Practical Procedures and Documentation

The termination procedure requires written notice stating the specific grounds for termination. Vague or general reasons may render the termination invalid. The employer must clearly document the grounds and provide the employee with a copy of the termination notice.

Before terminating for just cause based on employee misconduct, the employer must generally provide the employee with defense opportunity. This means allowing the employee to explain their conduct before the decision is finalized. Failure to observe this procedure may render the termination unfair.

For collective terminations affecting 10 or more employees (or specific percentages based on total workforce), employers must notify the Turkish Employment Agency (İŞKUR) 30 days in advance under Article 29. Failure to comply results in invalidation of the terminations and potential administrative penalties.

Sıkça Sorulan Sorular

Termination Types Under Turkish Labor Law

Under Turkish Labor Law (Law No. 4857), termination of employment contracts follows two main categories: termination with notice (Article 17) and termination for just cause (Articles 24-25). Each category has specific requirements and consequences for both parties.

Termination with notice allows either party to end the contract by observing statutory notice periods. These periods vary based on the length of service: 2 weeks for contracts less than 6 months, 4 weeks for 6-18 months, 6 weeks for 18-36 months, and 8 weeks for over 36 months of service. Payment in lieu of notice is permissible.

Termination for just cause is available when specific grounds exist as enumerated in Articles 24-25. For employees, these include employer’s failure to pay wages, forced overtime, or health hazards. For employers, grounds include employee’s serious misconduct, dishonesty, or extended illness beyond statutory limits.

Severance Pay and Compensation Rights

Employees dismissed after at least one year of service are entitled to severance pay under the transitional Article 14 of the former Labor Law No. 1475. The calculation formula is: last gross salary × years of service, subject to a statutory ceiling reviewed annually.

Employees unfairly dismissed have the right to file reinstatement lawsuit within one month, as regulated in Articles 18-21 of Law 4857. This applies to workplaces with 30 or more employees where the employee has completed at least 6 months of service. The court examines whether the termination was based on valid reasons.

If reinstatement is granted but the employer refuses to reinstate, the employee is entitled to compensation equal to 4-8 months of wages, plus wages for up to 4 months of the trial period, plus severance and notice pay if applicable. This ensures effective protection against wrongful termination.

Practical Procedures and Documentation

The termination procedure requires written notice stating the specific grounds for termination. Vague or general reasons may render the termination invalid. The employer must clearly document the grounds and provide the employee with a copy of the termination notice.

Before terminating for just cause based on employee misconduct, the employer must generally provide the employee with defense opportunity. This means allowing the employee to explain their conduct before the decision is finalized. Failure to observe this procedure may render the termination unfair.

For collective terminations affecting 10 or more employees (or specific percentages based on total workforce), employers must notify the Turkish Employment Agency (İŞKUR) 30 days in advance under Article 29. Failure to comply results in invalidation of the terminations and potential administrative penalties.

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