New restrictions for employers related to termination of employment: a note for employers

Correct as of 12:00, 20 April 2020

Due to the continuing coronavirus (COVID-19) pandemic, the Turkish government continues to take various new measures to ease the economic impact of the pandemic. To this effect, a new law, namely the "Law Relating to the Reduction of the Effects of New Coronavirus on Economic and Social Life and Amendments to Certain Laws" ("Law") has been enacted, which contains relief measures for, among others, employees and employers. These concern the termination of employment as well as the application procedures for short-term work allowance.

The Law came into force on 17 April (except for certain provisions that have retroactive effect, as detailed below).

In this regard, this note aims to be a guideline for employers concerning the amendments made regarding the termination of employment under Turkish law as well as the procedures that will be applicable to apply for the short-term work allowance by providing an overview of significant changes brought by the Law as follows:

1. According to the Law, employers are prohibited from terminating employment contracts in the next three (3) months, except in cases of non-compliance with moral and goodwill principles (e.g. grave breaches of company policies, harassment). At the same time, however, employers are allowed to send employees unilaterally on unpaid leave for no longer than three (3) months During such unpaid leave, employees will not be entitled to terminate their employment contracts with due cause or to seek their receivables (e.g. severance and notice pay) from the employer. If an employer or a representative of an employer acts contrary to this provision and terminates an employee, it will face an administrative fine in the amount of the monthly gross minimum wage applicable on the date of termination (currently, TRY 2,943). This fine will apply cumulatively for every employee who has been terminated. The said three- month (3) period may be extended by another three (3) months by presidential decree.
2. The Law has also amended the Law on Unemployment Insurance. Due to such amendment during the time of unpaid leave or unemployment, a daily wage support amount of TRY 39.24 will be paid from unemployment insurance funds to the employees who
   1. have an employment contract as at the effective date of this Law and who are ineligible to receive an old age pension from any social security institution; and
   2. are sent on unpaid leave by their employers; or
   3. are ineligible to benefit from the short-term work allowance even though short-term work has started in the workplace; or
   4. employees whose employment contracts have been terminated after March 15, 2020 and who cannot benefit from unemployment pay.
   The period for the payment of the wage support cannot exceed the period during which the termination rights of the employers are restricted (i.e. currently, three (3) months). Monetary fines shall be imposed on employers who let employees take unpaid leave where the employees benefit from wage support, but the employer continues to have such employees perform work for the said employer. The said fine will be in the amount of the monthly gross minimum wage (currently, TRY 2,943) applicable on the day such work is performed and separately for every employee and every month that those employees have worked.
3. Procedures related to the authorization of labor unions, execution of collective labor agreements, resolution of collective labor disputes, strikes and lock-outs have been stopped for three (3) months and the said three-month (3) period will not count towards any statutory periods under the relevant legislation. This three-month (3) period may be extended by another three (3) months by presidential decree.
4. For the short-term work allowance applications made due to force majeure (zorlayıcı sebep) (i.e. applications made due to the effects of the COVID-19 pandemic), an evaluation of the employer's eligibility (which could take up to sixty (60) days) will no longer be necessary and the short-term allowance will be granted based on the declarations of the employers. However, any excessive and improper payments made to employers' providing incorrect information or documents will be collected from the employers along with legal interest. This provision shall enter into force retroactively from 29 February 2020. As such, any previous applications will also benefit from this provision and should be finalized in a relatively quick fashion.

To conclude, the Law brings various changes to the termination regime applicable under Turkish Labor Law as well as to the implementation of the short-term work allowance.

These measures should have a positive impact on high unemployment from COVID-19 and ease short-term working allowance application procedures, which should help businesses continue their operations.

For more information about the new employee termination measures contact your regular CMS advisor or local CMS experts: Dr. Döne Yalçın or Sinan Abra.