Corporate reorganisations may be categorised as ‘transfers of workplace’ under Turkish law. As per article 178 of the TCC and article 6 of the Turkish Labour Code (TLC), unless employees object, employment agreements executed with the transferor company will be transferred to the surviving or the acquiring entity together with all of the rights and obligations that have accrued until the date of transfer. Thus, the transferor ceases to be liable for any employment-related rights that arise after the date of transfer and the surviving or the acquiring entity becomes liable from the start date of the initial employment. For liabilities that accrued prior to the reorganisation, the transferor and the acquiring entity will be held jointly liable for two years as of the date of reorganisation, after which the transferor company (if it still exists) will cease to be liable. However, the above-mentioned two-year liability limit will not apply to joint liability regarding severance pay. The transferor and the surviving or the acquiring entity will be held jointly liable for severance pay without a time limit. The issue of joint liability is not applicable in cases where one of the entities is dissolved after reorganisation and instead the surviving entity will have sole liability.
In practice, sometimes the parties involved prefer to arrange a net cut-off for pre and post-organisation liabilities relating to employees (in cases of merger through new company formation) and instead opt for terminating the existing employment agreements with the employees of the transferor company (by fully paying the requisite termination rights) and executing new agreements between these employees and the acquiring entity. Employment agreements should be terminated upon payment of all employment-related accrued rights that become due on the date of termination (eg, notice pay, severance pay, and annual paid leave). Following termination, the transferor will fully pay the termination-related rights and in return will obtain a release letter from the employee stipulating that he or she does not have any outstanding receivables from the employer as of the date of reorganisation. Such arrangements mostly cover the monetary aspect of the rights accrued up until the date of reorganisation; however, even though legally a new contract is executed with the new acquiring entity, the date of this contract will not reset the term of the employee’s employment, and while calculating employment-related rights of the employee in the future, the term with the initial employer must be taken into consideration. Furthermore, the terms of the new employment contract should not aggravate the previous employment terms, as the new employer may only amend such terms with the written consent of the employee.
Corporate reorganisation alone does not grant the relevant parties involved the right to terminate employment agreements. However, if the address of the workplace, the title, salary, or any other material employment condition is changed or otherwise affected owing to reorganisation, such change will necessitate the employee’s consent, which must be provided within six days following the written notification of the change to the employee by the employer. In the absence of the employee’s consent, the employee will not be bound by such change and the employer may terminate the employment agreement for just cause by serving a written notification to the employee stating that the change has been made on valid grounds. As per court precedent, a valid ground for termination should originate from the employee or business requirements of the employer and such change should be one that the employee is reasonably expected to accept. The employee is not directly entitled to terminate their employment contract in the case of change of material work conditions under the TLC; however, ‘non-implementation of work conditions’ is stated as just cause for an employee to terminate his or her employment agreement. Under article 24 of the TLC, the employee may assert the change of material working conditions as a valid ground for termination. Turkish courts have an employee-friendly approach when analysing the existence and appropriateness of just cause and valid cause.
Also, as per article 5 of the TLC, the employer has the obligation to observe equality between employees who are of the same status unless there is a valid reason to differentiate their treatment. Therefore, in mergers, the employment terms of the transferred employees should be reviewed to determine if there are any differences in the employment terms of the existing employees of the merged entity in light of this equality principle. In such case, the employee with the lower conditions should be granted additional benefits.
Finally, the status of collective bargaining agreements (CBA) in transfers of business is regulated under the unions and Collective Bargaining Law No. 6356 published in the Official Gazette dated 7 November 2012 and numbered 28460 (the Collective Bargaining Law). By analogy, the transfer of business-related provisions is applicable to corporate reorganisations. If only one of the entities in a reorganisation has a CBA, then the other entity will also become bound by the terms and conditions of the same CBA following reorganisation. However, if all of the entities involved in a corporate reorganisation are party to a CBA and if all workplaces are operating in the same line of business, then the CBA executed by the surviving entity or the acquiring entity will be treated as an employment agreement. Nevertheless, employees are entitled to benefit from the CBA that provides a broader set of rights and benefits to them.
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