APPLICATION AREA OF THE DECREE ON PROTECTION OF THE VALUE OF THE TURKISH CURRENCY NR. 32 IN LABOR LAW CONTRACTS

The Presidential Decree Nr. 85 on Amendments to the Decree on Protection of the Value of the Turkish Currency Nr. 32 entered into force on 13.09.2018. According to the Presidential Decree, the contract value may not be determined in foreign currency for certain types of contracts; the parties shall re-determine the agreed value in the contracts within thirty days following the effective date of the decision. In addition to this, the Ministry of Treasury and Finance has issued regulations on application of the Presidential Decree under which some exceptions have been granted with respect to determination of the contract value in foreign currency or indexing to foreign currency [1].

As per the Labor Law; all kinds of salaries, premiums, bonuses, and all similar payments shall be paid in Turkish Liras. If such payments are fixed in a foreign currency, payments may be effected on the exchange rate prevailing on the date of payment. However; pursuant to the Turkish Code of Obligations, debts shall be paid in the currency of the country where they are borrowed. If the payment is fixed in another currency other than the domestic currency, then the debt may be paid in the domestic currency on the basis of the exchange rate prevailing on the date of payment, unless the contract contains a provision that requires effectuation of the payment in the original currency. If the payment is fixed in another currency other than the domestic currency and if the contract does not contain any contrary provision and if the debt is not paid on the maturity date, then the creditor may demand that the debt be paid in the original currency or in the domestic currency on the basis of the exchange rate prevailing on the date of payment.

Another regulation, set out under the general provisions of the Turkish Code of Obligations, allows debtors to ask the judge to adjust the contract to new conditions and authorize them to cancel the contract if, after executing the contract, extraordinary situations occur that are unforeseeable by the parties and that cause excessive difficulties to fulfill the contractual obligations thereof. The text of the Article states that this regulation shall be applied also for debts in foreign currencies.

Whereas the statutory regulations are in this format, amendments brought on the secondary regulations related to the Law on the Protection of the Value of Turkish Currency nr. 1567 have forbidden some contract types to have payment liabilities in foreign currencies. The Presidential Decree nr. 85 sets out that this prohibition took effect on 13.09.2018. This decree prohibits persons, resident in Turkey, to establish contract prices or other payment obligations emanating from contracts in "foreign currencies or index such obligations to foreign currencies" in some contracts they execute, which excludes some situations determined by the Ministry of Finance.

Scope of the Term "Labor Contract" Used under the Decree

In General Terms

Whereas it is understood that the term "Service Contract", as used under the Decree and the Communiqué, does not technically refer to labor (service) contracts and this does not represent the service contracts regulated by the Turkish Code of Obligations, the term "labor contract" used under the said Decree covers the Labor Law, the Maritime Labor Law, Labor Law on the Press and the labor/service contracts of all employees that are covered by the Turkish Code of Obligations.

The said Decree does not refer to any law while mentioning labor contracts and it does not contain any expression stating that the prohibition is specific to employees that are bound by a certain law. Considering the scope of labor contracts, it is seen that following the amendment made on 16 November 2018, labor contracts, to which seamen are a party, have been included as exceptions. The type of labor contract does not have any importance for entering the scope of the Decree. It does not matter if the labor contract is executed for a definite-indefinite period, is based on working on-call working or telecommuting, or if the employee has a temporary business relationship, or not.

SCOPE OF THE PROHIBITION IN TERMS OF LABOR CONTRACTS

Determination of Contract Price and Other Payment Obligations Arising from the Contract in Terms of Labor Contracts

As the Decree prohibits, without any differentiation, to establish all payment obligations arising from labor contracts in foreign currencies, all salaries as well as all payments that are made in addition to such payments covered by the said agreements, for which the prohibition is valid, shall be assessed within this scope. This scope also includes payments such as employees' basic salary, overtime, annual leave, receivables such as premiums, advance payments, family-child-education allowances, fuel allowances and food allowances. This scope further includes penal clauses, death indemnities, penal clauses & counteractions in terms of competition bans and the amounts that are due and payable as per mutual rescission contracts.

It does not only include the payments, of which the employer is the debtor, but also the payment obligations of the employee. For instance, if the labor contract is prematurely terminated without any just cause, and if the agreement includes a penal provision therefor, then the penal clause incumbent on the employee shall also be covered by the prohibition. A similar situation exists for penal clauses foreseen for violations of competition bans or educational expenses the employee will be obliged to pay under certain circumstances.

The Prohibition Does Not Include a Prohibition on "Payments"

The prohibition, introduced by the Decree on labor contracts and other agreements, only prevents contract prices or other payment obligations arising from the contract from being established in foreign currencies or from being indexed to foreign currencies. At this point, it should be noted that a fundamental exception is introduced to the Decree and provisions by the Communiqué, and that therefore, these provisions should be interpreted on a narrow scope. For instance, when the salary is established in Turkish Liras (e.g.: TRY 10.000.-), the Decree does not prohibit the parties from paying the said TRY 10.000.- in a foreign currency on the basis of the-then exchange rate upon their mutual consent.

EXCEPTIONS FORESEEN FOR LABOR CONTRACTS

General Rule: Absence of Prohibition for Those Not Resident in Turkey

The Decree only prohibits "persons resident in Turkey to determine the contract price and other contractual payment obligations on the basis of foreign currencies or the values thereof in labor contracts that they execute with each other".  Thus, this prohibition does not apply if either of the parties is not resident in Turkey.

Exceptions Foreseen for Persons Resident in Turkey

The exceptions, set out under Article 8 of the Communiqué for labor contracts, are as follows:

  • Labor contracts executed abroad;
  • Labor contracts including seamen as (a) party (ies);
  • Labor contracts having parties that are resident in Turkey but not citizens of the Republic of Turkey;
  • Labor contracts including public bodies and institutions as (a) party (ies);
  • Labor contracts including the companies of the Turkish Armed Forces Foundation as (a) party (ies);
  • Labor contracts, the parties of which include the branch offices, liaison offices, representation offices of persons resident abroad or which include their shareholders who own fifty percent or more of their shares or which include the companies, of which such foreign persons possess the common control and/or control by more than fifty percent or more;
  • Labor contracts, the parties of which include companies operating across free zones as employers within the scope of their activities across such free zones.

 

Delal Roza Doğan

Trainee Lawyer

 

References:

1. Ozkaraca, E. (2019). Turk Parasinin Kiymetini Koruma Hakkinda 32 Sayili Is.

Legal Research Journals of the Faculty of Law, Marmara University, 185-2020.