Turkey: How The Labour Contracts Terminate With Mutual Rescission Agreements Through The Eyes Of The Awards Of Court Of Appeal

Last Updated: 18 July 2019
Article by Rabia Şeniz Erdoğan

SUMMARY

An employer and an employee can end their business relationship besides termination or an expiry of a contract. If both the parties' intentions meet, they can end their affair through mutual rescission agreement. Employer has the upper hand in the rescission agreement therefore the agreement should be interpreted in employee's favour. If the employee waives his/her rights such as employment security, lieu of notice and severance pay; a reasonable payment should be made to the employee to seek a fair interest.

The main principle of the mutual rescission agreement is to protect the fair interest of the employee. While forming the agreement both parties should act upon their free will. Neither party's intention should be damaged by fraud, duress and neither party should be under a fundamental error. If the employee claims his/her intention has been corrupted by one of these ways the employee is under the burden to prove it. The questions regarding, the importance of intention of the employee in mutual rescission agreement, how the employement agreement is concluded and terminated via mutual rescission agreement are all answered in the award that was given in 2017 by the Court of Appeal's the ninth and twenty second civil chambers.

Key words: mutual rescission agreement, labour contract, employer, employee, labour receivables, fair interest, validity of rescission agreement, invalidity of will

INTRODUCTION

Parties can easily end their business relationship under the scope of freedom of contract

-bearing in mind they are bound by some restrictions of the Turkish Code of Obligations- with the mutual rescission agreement. This situation does not differ whether it is a long or short term contract.

A detailed examination of rescission agreement's validity should be done by paying attention to the intentions of the parties. Interpretation should be in favor of the employee. In recent years, Court of Appeal started to render awards regarding the fair interest criteria. By paying a reasonable amount to the employee, employer shows his/her intention is not to escape from the rights arising of the labour contract and employement security provisions.

Thus the parties will procure the balance of interest.

TERMINATİON OF THE LABOR CONTRACT BY MUTUAL RECISSION AGREEMENT

By concluding the mutual rescission agreement, parties have shown their interest to end the contract. All types of contracts such as fixed term, part time and temporary contracts can mutually be terminated. Mutual rescission agreements are not considered as termination of employment agreement because termination is conducted with unilateral will, however in mutual rescission agreements bilateral will is required.

In case an employer aims to escape from employment security provisions and prevent a reemployment suit to be filed, the mutual rescission agreement will be taken into account as an unilateral termination of the employer. According to the Court of Appeal, in case of an uncertainty regarding the validity of the mutual rescission agreement is questioned, interpretation will be on behalf of the employee.

An employee demanding a mutual rescission agreement and waiving his/her rights on severance pay and payment of lieu of notice are against the natural flow of life. Employer has obligations towards the employee. Employer has to inform him/her on the mutual rescission agreement and has to favour his/her fair interest in the agreement as well. To seek the balance of interest, employee has to accept the fact that he/she cannot demand any of his/her termination rights of the contract once he/she accepts a reasonable payment from the employee.

In the recent years Court of Appeal mainly concentrated on the validity of the mutual rescission agreement and how it should be determined. The main principle is to regard the fair interest of the employee. Court of Appeal evaluates fair interest, case by case base. However Court of Appeals' ninth civil chamber stated that, fair interest should at least amount to 4 months of wage.

However the same civil chamber overruled a first instance court which gave an award regarding invalidity of a rescission agreement due to the payment with the amount of 2 months of wage is not enough. The reason behind this was, the actor of this subjected case was a manager and had served for 15 years. He should have been under the knowledge to understand the consequences of his actions.

Another award that was given in 2017, by the Court of Appeals for's civil chamber rendered that 3 months of wage was not enough to be considered as a fair interest, it could only be acknowledged as a premium.

There is no regulation regarding mutual rescission agreements in Turkish Law, but that does not mean it has limitless privileges under the freedom of contract. Therefore it is essential to examine the intentions of the employee. Mutual rescission agreements are examined under the scope of defective intentions in Turkish Code of Obligations. As a result if one's intention is defected during the constitution phase of the agreement or his/her intentions and declarations do not meet it will be inspected under Turkish Code of Obligations.

Facts such as, the party who offered the mutual rescission agreement or the position, education and wage of the employee are all crucial to understand whether the employee could have been able to understand the consequences of the agreement.

In the scholars it is accepted that people who earn subsistence wage or a wage close to this, should at least get a payment of five-six months of wage in a mutual rescission agreement. Because the employee cannot get unemployment benefit; the 4 months of wage which is paid in addition to the payment of lieu of notice and severance pay, will only cover up the unemployment benefits. In that case, lost of the unemployment benefit is compensated with the payment of fair interest as fringe benefits.

Rescission agreement is considered valid if it provides additional profit to the employee compared to the payments to be made to employee in situation that employment agreement is terminated unilaterally by employer.

Court of Appeal stated that if the mutual rescission agreement proposal comes from the employee and if that proposal does not carry defective intention then there is no need to provide fringe benefits.

There were 2 awards given in 2017, first of them rendered that a petition was required for an employee to propose the mutual rescission agreement. The second award rendered sufficient to have a clause in the mutual rescission agreement. That states the proposal had been offered by the employee.

Court of Appeals' ninth civil chamber overruled the award of the first instance court that rendered behalf of the employee. Reasoning behind this award was, the third bullet point of the mutual rescission agreement had stated that, the proposal of the agreement had been done by the employee. Therefore it was under the burden of the employee to prove his/her intentions were defected. The award of the Court of Appeal shows us that, the court acknowledged the employee proposed for the mutual rescission agreement.

In another award, employee stated in his/her petition due to private reasons, he/ she is, in need of a payment. Therefore seeks to get his/her payment of lieu and severance pay. Only on these conditions he/she was willing to sign a mutual rescission agreement. However the employer did not perform the payments afterward. As a result the employee filed a suit stating, he/she signed the agreement because the employer defrauded him/her. Thus his/her intentions were defected. However, Court of Appeals' ninth civil chamber overruled the award of the first instance court which rendered behalf of the employee.

Moreover, mutual rescission agreements that provide phrases such as "all rights reserved" are regarded invalid.

In another case the employee accepted to leave his/her job, on the condition of a payment of 6 months of wage. He/she added the phrase, "all legal rights reserved" in his/her petition. The Court of Appeal rendered the mutual rescission agreement was invalid and stated that employment agreement is terminated by employee without termination notice, therefore the termination is invalid. Twenty second civil chamber also have a similar jurisprudence.

However the Court of Appeal can be criticized on one point, including a paraphrase does not necessarily have to refer that an employee wishes make a reinstatement claim. If the phrase "all legal rights reserved" in a petition may clearly be understood as a reinstatement claim, the mutual rescission agreement should be considered invalid.

If the employee reserve his/her rights to suit a reinstatement claim in petition, it should be understood that the employee considers rescission agreement as termination and employment agreement is not terminated with the common will of parties.

If the employee adds the phrase "all legal rights reserved" and does not clarify what he/she intents by that phrase, it should be understood that the employee only wishes to reserve his/her labour rights.

The award of the Court of Appeals twenty second circuit also rendered that the phrase itself was not enough to hold a mutual rescission contract invalid by itself.

EXAMINATION OF MUTUAL RESCISSION AGREEMENTS IN THE POINT OF DEFECTIVE INTENTIONS

Invalidity of recission agreement is related to defects at the stage of formation of parties' intentions –especially employees- and declaration not the establishment of contract. Even if the employee's intentions are defected, the agreement would still be concluded unless the defective intention is proven. However once it is proven the agreement will be held invalid from the beginning.

Parties' intentions during the mutual rescission agreement are audited in the scope of Turkish Code of Obligations. If the intentions and declarations are not parallel and the intention is defected then it will be inspected.

A defective intention can occur in 3 ways: By duress, fraud and error. In one of the cases in 2017, an employer threaten an employee unless he signs the mutual rescission agreement his children will not be hired by employee in the future and his rights will not be paid. Employee filed suit, claiming he had been duressed by his employer. However it was held by Court of Appeals' twenty second civil chamber that there is no sign of duress in the case. According to the thirty seventh and thirty eight articles of the Turkish Code of Obligations, for a threat to be considered as duress, it has to form a serious pressure, has to be against the law and it should likely to occur. Per this articles the fear must also constitute a relation of causality with the rescission agreement to be signed. However in this case the fear is not concrete, immediate and serious.

CONCLUSION

Mutual rescission agreement will be valid once the employee waives his/her labour rights and gets a payment in return from the employer. Every event should be interpreted case by case basis by the courts.

Employee's intention should not be corrupted and if the employee claims his/her intentions were damaged, he/she has to prove it regardless of the difficulty to find a concrete evidence.

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.

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