In this newsletter we will analyze types of employment contracts called fixed-term and indefinite-term employment contracts which have vital importance in the business life.
The fact that employees who work within an indefinite-term employment contracts have better social protection in comparison to employees who work within a fixed-term employment contracts. However, it seems that especially for some occupations a fixed-term employment contract has a characteristic meaning, therefore, this type of employment contract is being used as a policy of the work place or business organization. It should also be underlined that, in order to prevent abuse of fixed-term employment contracts to make over and over fixed-term employment contracts by the business organization is prohibited unless there is a substantial reason.
After this introduction, it may be useful to provide general information concerning employment contracts. A contract of employment is a contract, where one of party (employee) undertakes to perform the work, and the other party (employer) undertakes to pay wages respectively. Therefore, it should be accepted that wage and dependence are characteristics of an employment contract. Unless it is particularly determined in the Labour Law, an employment contract does not depend on any form requirements. The definition of a fixed-term employment contract and an indefinite-term employment contract are determined in article 11 of the Labour Law which have also been the topic of this newsletter. In pursuant of this article, if an employment contract was not concluded for a certain period then the contract is deemed as an indefinite-term employment contract. On the other hand, if a contract depends on a fixed-term work or completion of a particular work or an objective condition such as occurrence of a certain event then the written contract between the employee and employer is deemed as a fixed-term employment contract. The fundamental differences between these two employment contracts are as below: an indefinite-term employment contract may be immediately cancelled in case of the existence of a valid reason without waiting a dismissal notice period. As a matter of this fact, if an employee has at least one year length of service or more then the employee will be entitled to claim a severance pay from the employer. Also, the employer is entitled to cancel an indefinite-term employment contract on base of existence of a valid reason without paying a dismissal period and a severance pay. Moreover, even a fixed-term employment contract may also be cancelled by the employer on base of a valid reason before expiration of the contract period. On the contrary, if a fixed-term contract is cancelled without any valid reason by the employer, the employee will be entitled to claim for the remained contract period to be paid. Also, a penal clause may be awarded if it was agreed in the contract. In that case a claim for damages shall not be made in pursuant of article 325 of Code of Obligations.
A fixed-term employment contract is naturally discharged when the agreed time has expired. However, the parties may also agree to notify each other in a determined period before the expiration of the fixed-term employment contract. On the other hand, in order to renew employment contract even though the contractual time has been expired there should be continuation of the actual performance and intention to continue the employment agreement. vThe contract made between an employee and an employer becomes effectual from the beginning of an actual performance of the employee. The fixed-time employment contract may also be cancelled before become effectual. In that case, if a penal clause agreed in the contract, the amount of penal clause should be paid to the other party. However, the penal clause must not be unilaterally determined in this type of contracts. The Supreme Court delivered in a decision regarding the penal clause was unilaterally determined against the employee in the employment contract as: “The plaintiff had started to work for the defendant according to the fixed-time employment contract which was made for the period starting from 16.10.1989 to 16.10.1991. The plaintiff filed a petition dated 07.08.1990 and informed that he would quit an employment on 07.09.1990 and he left the work on the said date. The plaintiff employer filed a lawsuit in order to collect the amount of 10.500.000 TL penal clause from the defendant. The claim was exactly accepted by the Court and delivered the decision. Actually, according to article 3 of the contract, the defendant was agreed to pay 10.500.000 TL penal clause to the employer when he quits the work with his own consent but there was no provision in the contract regarding the penal clause payable to the employee by the employer when the contract would be cancelled by the employer without a valid ground. It was determined that the employer is only liable to pay dismissal notice in case of cancellation of the contract by the employer without having any valid ground. It can be seen that, in this form the contract was unilaterally formed against the employer. Therefore, the employee is entitled to cancel the contract because of the penal clause in this quality does not binding upon the employee. Under these circumstances, the defendant is not obliged to pay the penal clause as provided in article 3 of the contract and the Court should have dismissed the case instead of accept the case in a written form. For these reasons the decision was reversed.” The plaintiff claimed the penal clause as formed in the contract by this case. However, the Supreme Court decided that an unilateral penal clause provisions in the contract were null and void.
If ever the employee has been trained in order to adaptation to work after recruitment with a fixed-term employment contract and the employment contract is cancelled before expiration of the contract by the employee then the employer will certainly suffer a loss. The employer incurred expenditure for qualified employees for a fixed-term performance. For this reason the employee will be liable to pay the incurred training expenses to the employer if he cancelled the contract on base of some reasons before the contractual time except the reasons determined in article 24/2 of the Labour Law. However, there may be a less contractual period remained in a long term employment and in this situation the training expenses may be reduced in proportion to work performed and not performed.
The legislator restricts the right to make a fixed-term employment contract in article 11 of Labour Law. It regulates the objective conditions in order to this type of contract to be formed and it accepts that not only the contractual time determined by the parties but also the contractual time objectively determinable should be allowed as a fixed-term employment contract. There will be an indefinite-term employment contract if the contractual time between the parties is uncertain or indeterminable. Moreover, to be discussed that a contract is allowed as an implicitly fixed-term contract if a contractual time was not obviously committed for a certain period by the parties but it can be understood from the purpose of the work.
The 9th Civil Chamber of Supreme Court decided in a decision dated 30.06.2005 and numbered 2005/19975 E. 2005/23340 K. as follows: “According to the content of the case even though the fixed-term employment contract made between the parties for four years there was not any objective reason regarding the necessity to make a fixed-term employment contract considering the continuation of the defendant’s work and the plaintiff’s position as a production worker.” As a result of this decision the employment contract was accepted as an indefinite-term employment contract starting from the beginning and the employee enabled to benefit from the social security provisions.
In order to prevent abuse of to make consecutively fixed-term employment contracts without having a substantial reason is prohibited by subparagraph 2 of article 11 of the Labour Law. Accordingly, a fixed-term contract without any substantial reason shall not be made over an over more than one. Otherwise, the employment contract is accepted as an indefinite-term contract from the beginning. However, some employers form a fixed-term contract in order to eliminate of disadvantages of an indefinite-term employment contract. Nevertheless, the Supreme Court has expressed in many decisions that the fixed-term contracts made without any substantial reason are deemed an indefinite-term employment contract from the beginning. Accordingly, the decision of 9th Civil Chamber of Supreme Court which dated 02.05.2006 and numbered 2006/10643 E. 2006/12286 K. provides as follows “There was no substantial reason to make the employment contracts consecutively and in series with the plaintiff employee. Therefore, it should be accepted that the employee was working with an indefinite-employment contract.”
On the other hand, in order to enable to benefit from the social security provisions, there must be at least 6 months length of service. If a fixed-term employment contract was made consecutively without any substantial reason, it turns into an indefinite-term employment contract from the beginning and, consequently, the beginning of 6 month length of service starts from the date of the employee was recruited.
The series employment contracts maintain its characteristic of being a fixed-term contract if they are based on a substantial reason. Here, it is emphasized that the dependency on the conditions of “a particular work to be completed or occurrence of a certain event “.
In pursuant of article 12 of the Labour Law, an employee who works with a fixed–term employment contract shall not be subject to different process because only he works with the fixed-term contract in comparison to an equal employee who works with an indefinite-term employment contract unless existence of a valid reason. According to using a particular time as criteria, the devisable interests related to wages and monies payable to the employee should be paid in proportionate of working time of the employee who works with a fixed-term contract. In addition, in order to benefit from a working conditions in the same working or business place the same length of service should be applied equally to the equal employees who work with a fixed-term and an indefinite–term employment contracts respectively unless existence of a valid ground. The meaning of an equal employee is who works in the same or similar working or business place with an indefinite-term employment contract. However, if there is no such an example of an equal employee then an employee will be taken as criteria, who works with an indefinite-term employment contract in the same or similar sector but conformity with the conditions in the sector.
1. Günay, Cevdet İlhan: İş Hukuku,2. Baskı, Yetkin Basım Yayın Dağıtım A.Ş., Ankara, 2004, p. 343
2. Günay, Cevdet İlhan: İş Hukuku 2. Baskı, Yetkin Basım Yayın Dağıtım A.Ş., Ankara, 2004, p. 480
3. Decision of 9th Civil Chamber of Supreme Court dated 17.11.1992, numbered 1992/8777 E-1992/12603 K
4. Günay, Cevdet İlhan: İş Hukuku 2. Baskı, Yetkin Basım Yayın Dağıtım A.Ş., Ankara, 2004, p. 481
5. Decision of 9th Civil Chamber of Supreme Court 30.06.2005,2005/19975 E-2005/23340 K
6. Decision of 9th Civil Chamber