BREACH OF LOYALTY OBLIGATION BY THE EMPLOYEE

The 9th Civil Chamber of the Turkish Supreme Court, in its decision dated 7 November 2017 and numbered 2016/28922 E., 2017/17642 K., provides a noteworthy perspective for employers, where brand integrity, employee loyalty, and customer trust are critical. The decision indicates that even in the absence of a specific written policy, an employee’s misuse of high-value corporate benefits for personal commercial gain may, depending on the circumstances, be considered a valid ground for termination.

The dispute concerned the termination of a mechanical technician. The employer alleged that the employee had taken advantage of a discounted vehicle purchase program designed to foster employee loyalty and meet personal needs, to generate commercial profit, in breach of the duty of loyalty (in Turkish, “sadakat borcu”). Evidence revealed that the employee purchased a vehicle through the personnel discount scheme for TRY 64,300 and subsequently advertised it for sale online for TRY 68,750.

The court of first instance accepted that the employee’s actions were contrary to the intended purpose of the benefit, but held that, since there was no written rule expressly prohibiting resale and the vehicle remained registered in the employee’s name, the termination lacked a valid ground. On that basis, the court of first instance ordered the employees’ re-employment (in Turkish, “işe iade”).

Upon appeal, the Supreme Court reversed the decision. Referring to Article 20/II of the Labor Code No. 4857, the Court reaffirmed that the burden of proof lies with the employer to establish valid grounds for termination, and under Article 396/1 of the Turkish Code of Obligations, employees are obliged to refrain from any conduct that could harm the employer’s interests or undermine mutual trust.

The Court emphasized that “even in the absence of a written restriction, employee conduct that disturbs workplace harmony and erodes trust may justify termination.” In this particular case, the attempt to profit from the resale of the discounted vehicle was deemed to have disrupted workplace peace and rendered the continuation of the employment relationship unreasonable for the employer.

The Supreme Court finally concluded that the termination was lawful and rejected the re-employment claim of the employee.

While this decision does not establish an absolute rule and given that there is no established line of case law of the Supreme Court in this respect, it illustrates that in certain circumstances, concrete evidence of disloyal conduct may be deemed sufficient to justify termination. This underlines the importance of a fact-based assessment of the employee’s actual behavior and the clear identification of the individual responsible.

This decision may as well interest employers operating in the luxury retail sector, where employees are often granted side benefits entitling them to purchase company’s products with considerable discounts to foster employee loyalty and meet personal needs.

Accordingly, while employers are advised to ensure that internal policies governing employee benefits are clearly defined, effectively communicated, and properly documented, this precedent suggests that, even in the absence of explicit written provisions, well-substantiated evidence of disloyal behavior together with the clear identification of the individual responsible, may in some cases provide sufficient grounds for disciplinary actions.

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