Turkey: The Effect Of Transfer Of Commercial Businesses And Workplace On Employment Contracts

With the transfer of commercial enterprises, it is possible to transfer assets and debts. The main principle of transfer of operation is that a business enterprise should be able to continue operating as it was transferred. To achieve this, the commercial relations of the commercial enterprise and the contracts made to maintain the business relations must be kept alive. In this article, we will touch upon the most frequently asked questions about how the employment contracts will be affected by the transfer of the business or workplace, the responsibility of the transferor and the transferee employer, the calculation of the service period of the workers, the rights of the workers.

1-) Status Of Contracts In General In The Transfer Of Commercial Enterprises

The transfer of a commercial enterprise is a contract that aims to transfer the business together with all its assets and liabilities. Unless otherwise agreed, the transfer agreement covers the fixed assets of the business, the business value, the right of tenancy, the trade name, the intellectual property rights, and other assets that are permanently assigned to the business.

When a commercial enterprise is transferred, all elements of the commercial enterprise will pass into the legal domain of the other party, as required by law, unless otherwise agreed. The transfer will be realized with the conclusion of a commercial enterprise transfer agreement in written form and the registration and announcement of this agreement in the trade registry. For more detailed information on this subject; (https://www.solmazlaw.com/en/transfer-of-commercial-business-and-legal-consequences-of-the-transfer

While it is clearly regulated that the enterprises will be transferred together with their assets and liabilities, how to transfer "contracts" belonging to the enterprise is not regulated in the law. However, there are provisions in the Turkish Commercial Code (TCC) and Labor Law regarding the transfer of "employment contracts". Both arrangements have common points as well as differences from each other.

2-) Execution Areas Of Tcc Article 178 And Labour Law Article 6

As described above, Article 6 of the Labour Law is a general provision in our law, on the status of employment contracts in the transfer of the workplace. Therefore, no matter what contract the workplace is transferred, such as sale or lease, Article 6 of the Labor Law applies to the event.

Article 178 of the TCC is a special provision as regards to Article 6 of the Labor Law. Because it does not apply to all types of workplace transfers, but only to workplace transfers made through mergers, divisions, and type changes of companies. On the other hand, in the report of the Parliamentary Justice Committee on TCC Article 178, it was pointed out that Article 178 is a better regulation and has a stronger social aspect compared to Article 6 of the Labor Law. It is regulated as a special provision compared to Article 6 of the Labor Law and that it is necessary to enforce when necessary to fill in the gaps in Article 6 of the Labor Law.

3-) Transfer Of Employment Contracts According To Turkish Commercial Code

The regulation made in Article 178 of the Turkish Commercial Code essentially regulates how the employment contracts will be continued in case of "demergers". However, due to the references in Article 158/4 and 190/1 of the TCC to the Article, Article 178 will also be applied in case of merger or change of type of companies. In summary, if the transfer of a workplace or business is through the division of a company, change of the type or merger of companies, in these cases the employment contracts will be deemed to have been transferred according to Article 178 of the TCC.

In the event of a merger, division or change of type pursuant to Article 178/1 of the TCC, unless the worker objects to this, the employment contracts made with the workers pass to the transferee with all the rights and debts arising from this contract until the transfer day. But the employee may object to the transfer of the employment contract. If the employee objects, the employment contract is deemed to have expired at the end of the statutory dismissal period. Before this date, the employer and employee who take over the employment contract are obliged to fulfill the contract.

The former employer and the transferee employer are jointly (consecutive) responsible for the receivables due while the worker was at the previous workplace and the receivables due until the end of the employment contract (TCC Article 178/3). The partners of the transferor company who are responsible for the company's debts continue to be responsible for such debts of the workers. (For more infrmation; https://www.solmazlaw.com/en/transfer-of-debts-and-liability-for-debts-in-commercial-business-transfer-1/ ). In other words, the employee will be able to claim and collect their receivables from both employers and from one alone.

Workers may request a guarantee for their receivables which are due or will be due until the expiry of the employment contract (TCC article 178/5).

4-) Transfer Of Employment Contracts According To Labor Law

The workplace is defined in the Labor Law as "Places that are connected with the goods or services produced by the employer in terms of quality and are organized under the same management." Article 6 of the Labor Law regulates what will happen to existing employment contracts if the workplace or a part of it, is transferred based on a legal transaction. When the workplace is transferred in whole or in part, the employment contracts existing on the date of transfer in the workplace pass to the transferee with all its rights and debts.

Liability of Transferor and Transferor Employer for Workers' Receivables

The transferor and the transferee employer are jointly liable to the worker for debts that were born before the transfer and must be paid on the date of transfer. The worker can claim their receivables from both, and both are obliged to pay the entire debt. However, the responsibility of the transferor employer from these debts is limited to two years from the date of transfer (Labor Law Article 6/3).

"The provisions of joint liability do not apply in case of termination of the legal entity by merger or participation or a change in its type." In this case, employers mostly do not change.

Liability for Severance Pay, Notice Pay and Leave Fees

While calculating the severance pay, the periods worked by both the previous employer and the new employer are considered. In terms of the transferor employer, the calculation is made over his/her own period and the last wage on the date of transfer. Since the canceled Law No. 1475 does not envisage a period for the responsibility of the transferor employer, the two-year time limit for the transferring employer in the Law No. 4857 is not in question in terms of severance pay.

Notice indemnity and unused leave fees must be requested from the transferee employer. The transferring employer shall not be held responsible for these labor claims. However, transferor and transferee employers may decide otherwise.

How is Employee's Service Period Calculated?

"The transferee employer is obliged to take action according to the date on which the employee started to work with the transferring employer in the rights based on the employee's service period." In other words, the total time that the employee worked alongside the old and new employer is calculated. Calculation is made according to the total time worked for the old and new employer in the 6-month severance calculation for job security and in the severance pay calculations.

Can the Transfer of the Workplace Be Shown as a Ground for Termination?

The transfer of the workplace is not a reason for termination for both the workers and the transferor or transferee employers and does not constitute a justified termination. The transferor or the transferee employer has the right to terminate due to economic and technological reasons or a change in the work organization. At the same time, there is no obstacle for the employee and the employer to exercise their right of immediate termination for just cause.

Transfer of Workplace of Subcontractor

The transfer of the workplace, in which the subcontractor carries out its activities within the scope of the work received from the main employer to another employer is a workplace transfer within the scope of Article 6 of the Labor Law.

"The most common change in subcontractors occurs when the expired subcontractor leaves the workplace, and the workers continue to work for the new subcontractor. It is important to determine whether this action is in the nature of a workplace transfer and its legal consequences. In case of a change of subcontractors, the expired subcontractor must take its workers with him/her to other workplaces at the time of leaving the workplace or the employment contracts must be terminated. On the contrary, the fact that the subcontractor workers continue to work with the new subcontractor in the same way despite leaving the workplace of the subcontractor requires the acceptance of a workplace transfer between the subcontractors within the meaning of Article 6 of the Law No. 4857." It is accepted that the transferee employer has also taken over the ongoing employment contracts and the results related to Article 6 of the Labor Law arise.

Conclusions And Recommendations

Workplace and business transfers are transactions that risk the job safety of workers. Concern about termination of employment contracts of workers in case of transfer, and concerns of workers about the wages and compensation they have been entitled to until that day deserve to be taken seriously. Knowing what rights, the worker has in case of transfer and from whom he/she can claim his/her receivables will help to reduce these concerns. We are here to answer your questions and help you if you encounter legal problems such as the ones described above or various other issues due to the transfer of workplace.

Sincerely.

Footnotes

¹ Article 11/3 of the TCC.
² Article 11 of the TCC.
³ AYHAN, Riza/ÖZDAMAR, Mehmet/ÇAGLAR, Hayrettin, Ticari Isletme Hukuku, Yetkin Yayincilik, Ankara, 2014, p.137.
⁴ ALBAYRAK ZINCIRLIOGLU, Candan, "Is Yerinin Devrinde Türk Ticaret Kanunu Hükümleri ile Is Kanunu Hükümlerinin Is Iliskilerine Etkisi", TBB Dergisi, 2014, issue:114, p.45.
⁵ Civil Chamber of the Court of Cassation (Court Merits No. 2017/24649, Decision No. 2020/19067 of 17.12.2020).
⁶ Civil Chamber of the Court of Cassation (Court Merits No. 2016/33760, Decision No. 2020/17752 of 08.12.2020).
⁷ ZEYTINCI, Merve, Ticari Isletmenin Devredilmesi ve Bundan Dogan Sorumluluk, 2016, Yüksek Lisans Tezi, Süleyman Demirel Üniversitesi Sosyal Bilimler Enstitüsü, Özel Hukuk Anabilim Dali, Isparta, p.95.
⁸ AYDIN, Sema/KAPLAN, Hasan Ali/SEN KALYON, Arzu, "Ticari Isletme Devri ve Devrin Hukuki Sonuçlari", Gazi Üniversitesi Hukuk Fakültesi Dergisi, volume: XVII, year: 2013, issue: 1-2, p.253.
⁹ Civil Chamber of the Court of Cassation (Court Merits No. 2017/3607, Decision No. 2020/13473 of 27.10.2020).
¹⁰ KENDIGELEN, Abuzer, Türk Ticaret Kanunu, 2013, XII Levha Yayinlari, Istanbul.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.