Employment Contracts

The employment contract forms the basis of the working relationship between the employee and the employer. The preparation of this contract in accordance with the Labor Law No. 4857 and relevant legislation is of great importance for clearly defining the obligations of the parties, preventing loss of rights, and reducing potential future disputes.

Table of Contents

• What is the definition of an employment contract and what elements does it include?
• What are the legal differences between fixed-term and indefinite-term employment contracts?
• What is the form and mandatory content of the employment contract?
• What legal matters should be regulated in the employment contract?
• What principles apply in the negotiation and interpretation of employment contracts?
• What are the legal consequences of errors made in employment contracts?
• Conclusion

What is the definition of an employment contract and what elements does it include?

Article 8 of the Labour Law defines the employment contract as "a contract whereby one party (the employee) undertakes to perform work in a dependent manner, and the other party (the employer) undertakes to pay wages". The employment contract, while subject to the general provisions of the Turkish Code of Obligations, has a sui generis (unique) character due to the mandatory and protective provisions of the Labour Law.

The legal validity of the employment contract depends on the presence of the conditions for the formation of contracts regulated in Articles 26 et seq. of the Turkish Code of Obligations No. 6098. In this context:

• The parties must have legal capacity
• The declarations of intent must be free from defects of will such as mistake, fraud, and duress
• The subject matter of the contract must not be impossible, indefinite or unlawful

The constituent elements of the employment contract can be listed as follows:

Work obligation: The obligation of the employee to perform work at the employer's workplace or at a place determined by the employer. This obligation has a personal nature, and the employee must fulfil the obligation personally.

Wage payment obligation: The employer's obligation to pay a certain or determinable amount in return for the work performed by the employee. Wages may consist of benefits in kind as well as money.

Element of dependency: The most fundamental element that distinguishes the employment contract from other service contracts. It means that the employee works according to the employer's orders and instructions, under their supervision and control.

What are the legal differences between fixed-term and indefinite-term employment contracts?

Within the systematic structure of the Labour Law, employment contracts are divided into two categories in terms of duration: fixed-term and indefinite-term. This distinction produces different legal consequences, particularly regarding termination, job security, and entitlement to severance pay.

Indefinite-Term Employment Contracts

An indefinite-term employment contract is a contract concluded between the parties without specifying a duration and is accepted as the main contract type in the labour law system. In this type of contract:

• Job security provisions apply (in workplaces employing 30 or more employees)
• Notice periods and notice indemnity provisions apply
• Entitlement to severance pay arises

Fixed-Term Employment Contracts

For the conclusion of a fixed-term employment contract, a "valid reason" is required. The valid reason varies according to the purpose of the contract and the nature of the work.

Without limitation, valid reasons can be as follows:

• Completion of a specific project or work
• Temporary increase in work under objective conditions
• Seasonal work
• Substitution due to temporary absence of the employee (e.g., illness, maternity leave)

Fixed-term contracts concluded without a valid reason are considered indefinite-term from the outset. Additionally, for consecutive fixed-term contracts to be made, the valid reason must be present at each renewal; otherwise, the contract is considered indefinite-term from the beginning.

What is the form and mandatory content of the employment contract?

Form Requirement

The employment contract is not legally required to be in writing; it can also be established orally or through conduct. However, in employment relationships lasting longer than one month, the employer is obliged to inform the employee of the working conditions in writing.

In practice, concluding the contract in writing is important both for clarifying the rights and obligations of the parties and for facilitating proof in case of dispute.

Mandatory Provisions

Employment contracts should include the following elements:

Identification information of the parties: The employer's title, address, tax/registration number, and the employee's identification information
Type and description of the work: Clear, understandable and concrete determination of the work to be performed by the employee, establishment of job description
Duration of the employment contract: Start date, end date for fixed-term contracts and valid reason
Wages and payment terms: Gross or net wage amount, payment period and method
Working conditions: Daily and weekly working hours, rest intervals, shift system
Leave entitlements: Duration of annual paid leave and principles of use

What legal matters should be regulated in the employment contract?

Probation Period

A probation period of up to two months can be agreed upon in employment contracts. During this period, the parties can terminate the contract without notice period and compensation. The explicit inclusion of the probation period in the contract prevents future disputes.

Confidentiality Obligation

The employee is obliged not to disclose confidential information about the workplace. Although this obligation already exists within the legal framework, it is important to clarify its scope in the employment contract. Information that may fall within the scope of confidentiality can be exemplified as follows:

• Trade secrets and technical information
• Business and production know-how
• Customer portfolio and supplier information
• Financial data and strategic plans

Furthermore, it should be added that the confidentiality obligation is an obligation that continues even after the termination of the employment relationship.

Intellectual Property Rights

The rights to inventions and intellectual products that the employee creates while performing their work or by using the employer's facilities and experience should be clearly regulated in the employment contract. This regulation prevents future confusion regarding ownership and usage rights.

Social Benefits and Fringe Benefits

Social rights such as meals, transportation, accommodation, private health insurance, and premiums to be provided to the employee should be specified in detail in the employment contract. These regulations are important in terms of whether these benefits constitute wages and whether they should be included in severance calculations.

Termination Conditions

Notice periods are clearly regulated in the law and cannot be reduced to the detriment of the employee. However, the parties may agree on longer notice periods in favour of the employee. Additionally, determining how the termination processes will be conducted in the contract provides practical convenience.

What principles apply in the negotiation and interpretation of employment contracts?

When preparing and interpreting employment contracts, both the fundamental principles of labour law and general contract rules are considered together. These principles are of great importance for ensuring the balance of power between employee and employer and legal security.

Employee Protection Principle

The employee protection principle, which forms the fundamental philosophy of Turkish Labor Law, plays a decisive role in the negotiation and interpretation of employment contracts. According to this principle:

• The mandatory provisions of the Labour Law cannot be changed to the detriment of the employee
• Provisions in favour of the employee are always valid
• In doubtful cases, interpretation is made in favour of the employee
• In case of ambiguous contract provisions, no interpretation can be made to the detriment of the employee

Freedom of Contract and Its Limits

The parties can freely determine the content of the contract. However, this freedom is limited by the mandatory provisions of the Labour Law. The freedom of contract of the parties:

• Cannot fall below the minimum standards of the law
• Must not be contrary to public order and morality
• Cannot limit the fundamental rights of the employee
• Cannot contain provisions contrary to the principle of equality

Good Faith Principle

Article 2 of the Turkish Code of Obligations makes it mandatory to comply with the principle of good faith in the formation and performance of contracts. With regard to employment contracts, this principle requires:

• The duty of the parties to inform each other during the negotiation phase
• The equal treatment obligation of the employer
• Reasonable and equitable interpretation of contract provisions
• The parties acting within a mutual relationship of trust

Interpretation in Favor of the Employee

The principle of interpretation in favour of the employee is one of the fundamental principles in the interpretation of employment contracts. According to this principle:

• If a contract provision has multiple meanings, the meaning favourable to the employee is preferred
• Unclear or incomplete provisions cannot be completed to the detriment of the employee
• For matters not expressly regulated in the contract, the statutory regulation favourable to the employee is applied

Prohibition of Modification and Addition

Article 22 of the Labour Law limits the employer's ability to make substantial changes to the employee's employment contract. In the employment contract, the employer:

• Cannot make unilateral changes to essential elements such as wages, working hours and workplace
• Cannot add new obligations without the employee's consent
• Cannot reduce the existing rights of the employee

This principle aims to preserve the balance agreed upon during contract negotiation.

Clarity and Definiteness Principle

The clarity, understandability and definiteness of employment contract provisions is essential for legal certainty. Unclear or contradictory provisions:

• Create proof difficulties
• Are interpreted in favour of the employee
• Increase the risk of dispute
• May limit the employer's discretion

Therefore, it is necessary to regulate economic elements such as wages, bonuses, gratifications, as well as obligations such as non-compete and confidentiality with concrete and measurable criteria.

What are the legal consequences of errors made in employment contracts?

Errors made in the preparation of employment contracts can have serious legal and financial consequences for the parties. Considering the mandatory nature of Turkish Labor Law and its employee-protective approach, the effects of these errors become even more significant.

Violation of Mandatory Provisions

Contract provisions that violate mandatory legal provisions and result in detriment to the employee are deemed invalid. For example:

• Setting the duration of annual paid leave shorter than legally stipulated
• The employee waiving severance pay rights in advance
• Agreeing on notice periods shorter than those stipulated by law
• Nullifying the minimum rights of job security

In such cases, the legal provisions are directly applied instead of the invalid provision, and the employee can claim their rights.

Unclear or Contradictory Provisions

Unclear or contradictory statements in the employment contract are evaluated in favour of the employee pursuant to the principle of "interpretation in favour of the employee".

According to this principle:

• If conditions for bonuses, gratifications or similar payments are left unclear, the interpretation is made in favour of the employee
• If a contract provision has multiple meanings, the meaning favourable to the employee is preferred
• Incomplete or ambiguous regulations cannot be completed to the detriment of the employee

Lack of Essential Elements

The failure to determine essential elements such as wages, job description or working hours in the employment contract does not affect the validity of the contract; however, it creates proof difficulties. In this case, the court can complete the missing elements by taking into account criteria such as comparable wages or custom.

Form Error and Proof Problem

Although the employment contract not being in writing does not affect the validity of the contract, it creates proof difficulties in case of dispute. In particular, the absence of written evidence regarding fringe benefits, bonus arrangements and non-compete clauses makes it difficult or impossible for the employer to prove these rights.

Financial and Criminal Liability

Errors in the employment contract may also:

• Result in the employer being ordered to pay compensation in labour courts
• Lead to administrative fines (for example, in case of violation of written notification obligation)
• Lead to premium difference assessments by the Social Security Institution, and
• Lead to additional assessments and penalties in tax audits

Conclusion

Employment contracts are legal documents that must be carefully prepared within the framework of the Labor Law and relevant legislative provisions. The determination of the type of contract, the presence of mandatory elements, and the balancing of the interests of the parties are essential both for legal security and for minimizing possible disputes.

In particular, the legal differences between fixed-term and indefinite-term employment contracts have important consequences in terms of job security, severance pay and termination law. Therefore, the most appropriate contract type must be selected according to the specific circumstances of the case.

Ancillary obligations such as non-compete clauses and confidentiality obligations require a fair balance between the protection of the employer's legitimate interests and the employee's right to work. Judicial review ensures that this balance is maintained in an equitable manner.

GEMS Schindhelm's labour law department provides legal consultancy to its clients on the preparation of employment contracts, review of compliance with regulations, and protection of the interests of the parties.