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As per the “freedom of contract” principle set forth in the Constitution of the Republic of Turkey and Turkish Code of Obligations numbered 6098 (hereinafter referred to as “Code”) employers and employees can terminate an employment contract by Mutual Termination Agreement (hereinafter referred to as “MTA”, in Turkish “İkale Sözleşmesi”) at any time.

MTAs are not expressly regulated under the Turkish Law; however the Supreme Court recognizes its practice and determined with its constant precedents the criteria for its validity. Supreme Court has pointed out that the (i) form, (ii) execution, (iii) scope and the (iv) validity of a MTA shall be subject to the related provisions of the Code and that “the principle of interpretation in favor of employee” shall be applied since the termination of employment by MTA is closely associated with Labor Law. Offer and acceptance are elements required for the formation of a legally binding MTA; thus, the termination of employment by MTA is not a unilateral termination, it is bilateral.

As a result of a valid MTA, the provisions of job security set forth in the Labor Code numbered 4857 shall not be applied; employee shall not legally be entitled to the severance and notice pay as well as to the unemployment allowance within the scope of unemployment insurance and shall not have the legal ground to demand re-employment.

Form of the MTA

The validity of the MTA does not depend on any required specific form; thus, it may be executed either orally or in writing. However, since the form of the agreement is of great importance in terms of proof, it would be beneficial to execute a MTA in writing in order to demonstrate clearly the common will of the parties.

Criteria for a valid MTA

MTA must be founded upon mutual agreement and free will of both the employee and the employer; therefore, the MTA made under the influence of error, fraud or coercion shall be deemed invalid. Moreover, employer must act the MTA within the framework of good faith and clearly inform the employee of the scope and consequences thereof.

The Supreme Court attributes the validity of the MTA to the existence of “appropriate benefit” of the employee. In other words, the employee must have an “appropriate benefit” in order to act a MTA and therefore Supreme Court investigates from whose side the demand of termination came. The main reason underlying the Supreme Court’s “appropriate benefit” criteria, is the suspicion of the Court concerning the circumvention of the provisions of job security by the employer.

What should we understand from the appropriate benefit principle? Firstly, all the legal indemnities and due salaries (i.e. the seniority indemnity, notice indemnity, last salary, bonus -if any- salary corresponding to unused annual paid leave term) should be paid to the employee as if the employer conducts a unilateral termination.

Secondly, to accept that the appropriate benefit principle is respected by the employer, in cases where the request to execute  a  MTA is  made by the  employer, the  Supreme Court expects from the employer to grant an additional package to the employee in addition to his above-mentioned legal indemnities and due salaries which would have been paid under the unilateral termination of the employer.

There is neither any fixed amount nor any upper/ lower limit set forth for the additional package; in case of a legal dispute, its amount shall be evaluated by the court for each present case. During this evaluation, one of the criteria that Supreme Court takes into account is the seniority of the employee. Providing the said additional package in addition to the ordinary legal indemnity payments is crucial in terms of displaying the respect by the employer of appropriate benefit principle.

Consequences of an invalid MTA

In cases where the MTA deemed invalid by the court, the re-employment lawsuit of the employee shall be accepted by the court, if the conditions are met for the application of job security provisions under Article 18 of the Code.

Should the employer fail to prove the valid cause for the termination of the employment contract or should the court rule out the given cause as being invalid and thus disregard the termination, the employer is required to re-employ the employee within one month. The employee is obliged to apply to the employer in order to start to work within ten business days as of the receipt of the finalized decision of the court.

If the employer does not re-employ the employee  within one month from  the  application of the employee, the employer shall be liable to pay  compensation to the employee, amounting to a minimum of four-months’ salary and a maximum of eight-months’ salary. In this case, court shall also determine the compensation amount to be paid in the event when the employee is not allowed to restart his employment post.

The employee is also entitled with the court’s decision to receive maximum four months of salary for the duration of unemployment until the finalization of the court decision. If the employee has started his job, the payment made by the employer at the date of invalid termination for the notification period and the severance pay, shall be deducted from the payment to be made in accordance with the court’s decision.

If the employee fails to apply to the employer within the abovementioned period, the employer’s termination shall be deemed valid and the employer shall only bear its legal consequences.

Our Firm remains at your disposal for any further clarifications you may require.

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