Article 18 of the Turkish Labor Law No. 4857 ("Labor Law") provides that an employer who terminates the employment agreement of an employee who (i) is engaged for an indefinite term, (ii) is employed in a workplace with thirty (30) or more employees, and (iii) meets a minimum seniority requirement of six (6) months, must rely on a valid reason (i.e., provide "just cause") for such termination. A valid reason for termination can be based on the underperformance or inappropriate conduct of the employee in question, or it may relate to the operational requirements of the workplace or the work itself. This provision offers a certain amount of job security to designated employees by requiring a valid reason for the termination of an employment agreement, as long as the other conditions specified by the relevant provision are satisfied.
One of the conditions enumerated under Article 18 of the Labor Law is that there must be at least thirty (30) employees in the workplace for the job security provision to be applicable to a particular company. Moreover, employees working in the same field of activity who are employed at other workplaces belonging to the same employer are also taken into account in terms of the number of employees of the relevant company within the scope of Article 18 of the Labor Law. In this context, the determination of whether the threshold of thirty (30) employees is exceeded may not be straightforward if the relevant employer is an affiliate company with few employees in Turkey whose main/parent company is established abroad and comprises more employees.
A strict interpretation of Article 18 of the Labor Law requires that only the employees who are working at the relevant workplace must be taken into consideration in terms of the applicability of the job security provisions. In this case, adopting a strict interpretation of Article 18, only the employees of the affiliate company established in Turkey would have to be counted to determine whether the thirty (30) employee threshold has been met. That being said, the High Court of Appeals has concluded that, in this scenario, the employees of the foreign main company must also be included in terms of the number of employees of the affiliate company established in Turkey, with respect to the application of the job security provisions.
In the dispute subject to the decision of the 9th Civil Chamber of the High Court of Appeals (dated March 14, 2018, and numbered 2018/1959 E., 2018/5292 K.), the employee claimed that the employees of the main company established in Germany should have been taken into account for the calculation of the number of employees of the employer, regarding the applicability of the job security provisions with respect to the Turkish affiliate company. The local court had denied the employee's claims, as there were fewer than thirty (30) employees working at the affiliate employer company at the time of the employee's termination. The local court had justified its dismissal of the plaintiff's claim that the employees of the main company (established in Germany) must also be taken into account by stating that the employer {i.e., affiliate) company was an independent company established in Turkey, and that it was separate from the main company established abroad. In this regard, it is evident that the reasoning of the local court was based on the legal principle of "corporate separateness".
However, the 9th Civil Chamber of the High Court of Appeals quashed the local court's decision, by declaring that the "organic link" between the main company and its affiliate company necessitated the consideration of the employees of the main company in terms of calculating the number of employees of the affiliate company for the application of the job security provisions. Having said that, the Court did not elaborate or provide any further explanations as to what exactly constitutes an "organic link" between the affiliate company and the main company.
The decision of the 9th Civil Chamber of the High Court of Appeals can be said to represent a departure from the "corporate separateness" principle, as the Court concluded that the employees of the foreign (main) company must also be counted in terms of the application of the job security provisions to the affiliate company, despite the fact that the main and affiliate companies had independent and separate corporate identities. This result cannot be considered as a surprise; however, as the High Court of Appeals had already adopted a similar approach with respect to company groups (holdings) in its previous decisions. Indeed, the 9th Civil Chamber of the High Court of Appeals had concluded (in its decision dated January 23, 2007, and numbered 2007/29128 E. 2007/441 K.) that, even though only the employees of an employer company are taken into account for the application of the job security provisions (despite the fact that the employer company belongs to a company group), as all companies are independent and separate from each other in terms of their corporate identity, if there is co-employment, (i.e., if the employee performs work for more than one company belonging to the same company group), all employees of the relevant companies in the company group/holding must be taken into account in terms of the application of the job security provisions. Therefore, it can be observed that the High Court of Appeals has now adopted a similar approach with respect to the Turkish affiliate companies of foreign main companies.
Nevertheless, the decision of the 9th Civil Chamber of the High Court of Appeals can be criticized for failing to provide any detailed explanation or guidance in terms of what constitutes an "organic link" between main companies and their affiliates. The Court's decision indicates that, in this particular case, the trade registry records were taken into consideration when assessing whether there was an organic link between the main company established in Germany and the affiliate company in Turkey. This implies that the High Court of Appeals has taken the partnership status of a company into account while assessing the "organic link" between the two companies. Therefore, it could be concluded that, if a sole shareholder of an affiliate company is a main company established abroad, or if all the shareholders of an affiliate company are companies established abroad belonging to the same company group (holding), then the High Court of Appeals may possibly conclude that an "organic link" exists between these companies in terms of the applicability of the job security provisions.
Consequently, further to the 9th Civil Chamber of the High Court of Appeals' recent decision, the employees of the main company established abroad can also be taken into account when calculating the number of employees of the affiliate company established in Turkey in terms of the applicability of the job security provisions, provided that there is an "organic link" between these companies, even if such companies have separate and independent corporate identities.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in March 2019. A link to the full Legal Insight Quarterly may be found here.
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