Employment agreement creates a constant relation between the employer and the employee and imposes contractual duty on employee to serve to a satisfactory level. Since the employment agreements create constant relations between the parties, the agreements are concluded, in principle, for an undetermined term. The agreement for a determined term may be concluded only in some exceptional cases. Art. 11 of the Labor Act numbered 4857 (“LA”) stipulates that the agreements in which the term is not stated shall be deemed as is concluded for an undetermined term. The same article states also the cases in which the employment agreement can be concluded for a determined -or fixed- term. Pursuant to said article, an employment agreement for a determined term can be concluded only if the agreement is concluded for a work which has a specified term or for a specific work or the work is based on the emergence of objective conditions; otherwise, the agreements for determined period cannot be concluded.
The fixed-term agreements, which are duly concluded, expire automatically once the term agreed for the agreement is reached. The fact whether the agreements are “duly” concluded for a determined term presents its importance in Article 11(2) of LA. Pursuant to said article, an employment agreement for a definite term must not be concluded more than once, except when there is an essential reason which may necessitate repeated (chain) contracts. Otherwise, the employment contract is deemed to have been made for an undetermined term from the very beginning.
However, since there is not a fixed term for the agreements for an undetermined term, it is not possible to accept that the parties are bound by the agreement forever. As a solution, it is accepted that the agreements for an undetermined term may be terminated in some cases being subject to some procedural requirements.
Valid Reason for Termination of the Agreement
The termination of the employment agreement for an undetermined term by the employer is subject to existence of valid or just reason. However, the employee may terminate the agreement without any just or valid reason provided that the employee fulfills the legal procedural requirements. The agreement may be terminated immediately in case of a just reason whereas the termination for valid reason must be notified to other party granting the time periods stipulated in LA. In this concept, the termination for just reason is defined as “abrupt termination” and the termination for valid reason is defined as “termination by notice”. Hence, the party who wishes to terminate the agreement shall notify the other party regarding the termination of the agreement with reasonable period of notice.
The concept having effect on the legislation regarding the proper process of termination of the employment agreement by the employer for valid reason is the concept of “job security”, which is accepted in Turkish Labor Act, with Act numbered 4773 and effected the LA. The aim of the job security is to uphold the rights of employees and set legal boundaries to how and in what circumstances an employer can terminate the contract by giving notice. As an effect of the job security concept, the employer shall respect the time periods and have a valid reason for termination.
The LA does not determine what the valid reasons may be; however, it is stated in Article 18 of LA that the valid reasons shall arise from the behaviors or the capacity of the employee or from operational requirements of the enterprise, work place or work.
Even though the valid reason is not defined within the article, the valid reason may be explained as the reasons, which have negative effects on conduct of the work and work place and which are not as serious as the reasons stated in Article 25 of LA.
Underperforming as a Valid Reason for Termination
One of the most prominent valid reasons for termination of the employment agreement is incapacity of the employee. The incapacity of the employee may be due to professional incompetence or physical incapacity. For instance, the continued ill health may be accepted as physical incapacity whereas continued unsatisfactory performance or inability of the employee to work according to requirements of job may be accepted as a professional incapacity. The valid reasons and especially underperforming is not clearly regulated under the legislation and the details of its implementation are constructed by the court decisions.
As stated by the 9th Civil Chamber of High Court of Cassation in several decisions, the criteria for underperforming must be based on objective principles for a just termination of the agreement on valid reasons. Pursuant to the judicial precedents, the criteria must be determined being particular to that work place and the underperforming shall be evaluated considering also other employees at the same work place. The criteria must be, indeed, realistic and reasonable for a duly termination of the agreement. As a main requirement by the courts, it should be stated that the criteria must be determined before the termination and the employee must be notified by these criteria. Yet, is not possible to terminate the agreement on the basis of incapacity of the employee of which the employee is not aware of.
It should be also added that, sole existence of a valid criteria and of the fact that the employee is underperforming, shall not be sufficient for termination of the employment agreement. Hence, the underperforming of the employee should cause negative effect for conduct of the work in the work place. This requirement arises from the justification of the Art. 18 of LA which defines valid reason as “the reasons which have negative effects on conduct of the work and work place and which are not as serious as the reasons stated in Art. 25 of LA.” Also the precedents of the High Court of Cassation require existence of negative effect for a just termination of the agreement on valid reasons.
The incapacity of the employee and their underperformances as a valid reason for termination of the agreement is not explained in detail within the legislative texts. Therefore, existence of valid performance criteria and subsequently existence of a just termination of the agreement shall be evaluated separately for each case considering the precedents of the courts.