BREACH OF CORPORATE ETHICAL RULES
In labor law, the employee’s duty of loyalty towards the employer constitutes one of the fundamental principles of the employment relationship. The scope of this obligation includes not only the employee’s faithful performance of work but also the avoidance of any conduct that may undermine the employer’s trust.
Article 25/II of the Turkish Labor Law No. 4857 grants the employer the right to terminate the employment contract for “just cause” (in Turkish “haklı neden”) in cases of “immoral and bad faith conduct” and the article 25/II (e) specifically regulates acts against loyalty and honesty. This provision is not limited to the enumerated circumstances in the law; rather, it includes any behavior by the employee constituting a breach of the duty of loyalty to be classified as severe breach by the employee for the loyalty and honesty obligation of the employee.
The decision of the 9th Civil Chamber of the Court of Cassation dated 2 February 2016, numbered 2014/26445 E., 2016/2336 K. is a significant reflection of this principle. In the case at issue, the dispute between the employee and the employer arose from the termination of the employment contract due to the employee’s conduct in violation of the “Code of Ethical Conduct,” particularly the breach of the obligation to “avoid conflicts of interest.”
In the present case, the Code of Ethical Conduct issued by the employer expressly included a conflict of interest obligation stipulating that employees are under an obligation to notify their superiors and wait for a decision in this respect in the event of entering into a business relationship with companies in which they or their friends or relatives hold any direct or indirect interest. Furthermore, it was explicitly provided that a breach of this rule could result in dismissal.
The Court of Cassation, based on the evidence, determined that the employee maintained personal relations with the shareholders and owners of the firms doing business with the employer and that these relationships had an impact on the employer’s commercial processes with these firms. It was further concluded that the employee failed to follow the procedure to which they were bound and did not fulfill the reporting obligation as regulated under the employer’s Code of Ethical Conduct. Consequently, the Court emphasized that the employee’s breach of the duty of loyalty did not require proof of material benefit; rather, the presence of breach against the loyalty and honesty obligation was deemed sufficient to constitute just cause for termination.
This decision demonstrates that the scope of the employee’s duty of loyalty may be interpreted broadly, especially when the Employer regulates specific acts against this duty in its internal regulations, code of conduct etc. The Court’s acceptance of employer-issued ethical codes as binding regulations for employees and the acknowledgment that violations thereof may constitute legal basis for termination are particularly noteworthy. However, it must be underlined that this decision does not constitute established jurisprudence of the Court of Cassation. Nevertheless, it remains essential for employers to regulate binding corporate ethical rules and duly notify to the employees, in line with the requirements of Turkish Labor Law as part of their employment contracts, in order to incorporate certain working rules and principles that are important for the employer and to prevent conflicts of interest. Providing such rules in a transparent, accessible, and applicable manner will serve the principle of legal certainty for both employees and employers.
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