Decision of the 9th Civil Chamber of the Supreme Court dated 27.06.2024 and case number 2024/7673, decision number 2024/10230
Contents
Aslı Ceyda Akdoğan and Berk Reçber co-authored this article.
The decision of the 9th Civil Chamber of the Supreme Court dated 27.06.2024 and case number 2024/7673, decision number 2024/10230 (“Decision”) was published in the Official Gazette numbered 32662 and dated 14.09.2024. The Decision focuses on the assessment of the applicable law within the framework of an employment relationship with foreign elements and addresses the interaction between Turkish law and foreign law (Russian Federation). You may find the detailed analysis of the Decision below.
A. Summary
– The employee (“Claimant”) was working under an employment agreement signed in Türkiye and was assigned to a construction project in the Russian Federation managed by a subsidiary of the employer.
– The employer terminated the Claimant's employment agreement on the grounds of absenteeism.
– The Claimant argued that the termination was unlawful and claimed severance pay, notice pay and other labor receivables. The employer defended the termination by claiming that absenteeism is a valid reason for termination.
– Upon the issuance of the final judgment by the Court of First Instance, the Ministry of Justice petitioned the Supreme Court to review the case by way of appeal in the interest of the law.
B. Evaluation of the Supreme Court
In its judgement, the Supreme Court provided a comprehensive analysis on the determination of the applicable law to the employment agreement.
1. The Decision defines the element of foreignness as “the element that makes a legal transaction or relationship or event, connected with the law of more than one state”. There should be no hesitation that there is a foreign element in the particular case.
2. According to Article 40 and Article 44 which regulated disputes relating to employment agreements of the Law on Private International Law and Procedural Law (“PILPL”), the Turkish Court where the habitual workplace, the employer’s domicile, the employee’s domicile or habitual residence is located are deemed to have jurisdiction.
3. Pursuant to the Turkish Conflict of Law rules, the Turkish judge may apply the foreign law ex officio, or may resort to expert examination in cases where the determination of the foreign law requires special and technical knowledge. In the event that the applicable provisions of the foreign law cannot be determined despite all investigations, Turkish law will be applied.
In the specific case, while the court of first instance should have applied the law of the Russian Federation in terms of the law applicable to the employment agreement ex officio or through an expert examination, it was inaccurate to apply Turkish Law without conducting an examination.
4. If the provision of the competent foreign law applicable to a particular case is clearly contrary to the Turkish public order, this provision shall not be applied. However, the Supreme Court emphasized that the public order intervention is of a limited and exceptional nature by stating that “it is not possible to say that every violation of a mandatory provision or every foreign judgment that violates a mandatory provision is contrary to the Turkish public order.“ In addition, the mere differences between the provisions or the fact that they provide less protection than Turkish law alone is not sufficient for public order intervention.
In the specific case, the Claimant claimed severance pay, notice pay and other labor receivables. Although the aforementioned reasons are of mandatory nature, it is not possible to reach the conclusion that they would be against public order without examination. If, as a result of the examination, it is understood that the rights in question are not protected at all in Russian law, then Turkish law may be applied due to violation of public order. In this context, the concept of public order should be interpreted more narrowly than domestic law regulation when it comes to conflict of laws.
5. If there is a violation of the fundamental values of Turkish law, manners and morals, understanding of justice and legal policy, fundamental rights and freedoms, common and accepted legal principles valid in the international field, and international bilateral agreements, a violation of public order will be considered. The Supreme Court has given the examples of "allowing young children to work or racial discrimination in wages and other rights" and stated that these situations will constitute a violation of public order.
However, without examining the specific case, it would be an inaccurate assessment to conclude that the regulations will be contrary to public order and therefore Turkish Law will be applied.
6. Another situation that prevents the application of foreign law is directly applicable rules. These rules are called "Intrusive norms". Not all mandatory provisions regulated by labor legislation should be considered as directly applicable rules. The Supreme Court has given "occupational safety provisions, provisions protecting special groups of workers, provisions on legal strikes and regulations on minimum wage" as examples of directly applicable rules.
In this context, the Supreme Court decision has repeated the view that “it cannot be expected a dispute which falls within the scope of application of the rule regarding the minimum wage regulated under Turkish law” for employment agreements wholly performed abroad.
7. The parties to an employment agreement are free to choose the applicable law. However, if the law chosen by the parties is below the minimum protection of the mandatory provisions of the law of the employee's habitual workplace, the law of the habitual workplace must be applied. In its relevant decision, the Supreme Court defined the habitual workplace as "The workplace where the work is primarily performed in terms of time and content. In other words, the habitual workplace is the place where the employee actually performs their work."
In determining the habitual workplace, factors such as the currency in which the wage is paid, the method of payment, or the countries where the work is temporarily performed are not considered determinative.
At the same time, the Supreme Court added to its assessment by stating that if the employee is hired only to work in the foreign country or if the employer does not intend to take back the employee sent to the foreign country as temporary or if the employee does not intend to return, the foreign country where the employee was sent to work, actually becomes the habitual workplace.
In the case under review by the Supreme Court, it can be inferred that the Claimant's habitual workplace is in Russia, given that the Claimant is employed at the workplace of the employer’s subsidiary in Russia and physically performs his duties there. In fact, the Supreme Court has conducted its examination along these lines.
8. In an employment agreement with a foreign element, if the parties have not made a choice of law or if their choice is deemed invalid for any reason, the law of the habitual workplace will be applied.
In determining the habitual workplace, if the employee performs their work in more than one country, factors such as the country where the majority of the employment activities are carried out, where the employee primarily fulfills their obligations to the employer, the country in which they spend the most time, and where the principal or predominant portion of their work is conducted may be considered.
Pursuant to the PILPL, in case the employee does not habitually perform their work in a specific country but continuously performs their duties in multiple countries, the employment agreement shall be governed by the law of the country where the employer's principal place of business is located.
In the present case, the Claimant performs their work in Russia. Accordingly, there should be no circumstance necessitating the application of the laws of the country where the employer’s principal place of business is located.
9. Issues such as compensation that the employee will be entitled to in the event of termination of the agreement, overtime work, annual paid leave, the nature of the employer's practices and payments and the statute of limitations shall be evaluated in accordance with the rules of law determined pursuant to Article 27 of the PILPL. The Supreme Court has given the example of "In a labor relationship entirely performed abroad, the days of religious and national holidays are not determined according to Turkish law".
In this context, where a choice of law is made in an employment agreement involving a foreign element, or where the habitual workplace is determined to be in a foreign country, national and public holidays shall be governed by the laws of the relevant foreign country. Consequently, holidays stipulated under Turkish law will not be applicable.
10. The Defendant argued that the case should be resolved according to foreign law since the Claimant worked at construction sites abroad. The Court of First Instance made a final decision by applying Turkish law contrary to the defense. However, in accordance with the Supreme Court’s view, this decision was not compliant with this particular case.
11. In its decision, the Supreme Court stated that the Claimant was employed to work on overseas projects and worked in the Republic of Tatarstan of the Russian Federation during this period, that he performed his work in this country; therefore, his habitual workplace was Tatarstan of the Russian Federation.
12. Although the parties are free to choose the applicable law to the employment agreement, no choice was made in the particular case. The parties are given the opportunity to choose the applicable law until the case goes to the merits. It should be understood that the parties may choose the applicable law until the reply petition is submitted. Even if the Defendant objected to the applicable law by requesting the habitual workplace practice in the reply petition, the parties could not reach an agreement at the latest, at the preliminary examination hearing.
In this context, no choice of law shall be deemed to have been chosen and the law of the habitual workplace shall be applied to the relevant dispute.
13. The employment agreement between the parties was executed in the Russian language. However, as previously noted, the language in which the agreement was concluded cannot be interpreted as a valid choice of law, given that it has not been established that the Claimant understands Russian. Accordingly, the fact that the agreement was drafted in Russian is not binding upon the Claimant in terms of the applicable law.
Upon further examination, it is understood that even when a choice of law is included in an employment agreement drafted in a foreign language, such a choice may be deemed invalid if it cannot be demonstrated that the employee comprehends the language in question. Therefore, it is necessary to emphasize once again the importance of drafting employment agreements in Turkish or in a bilingual format.
14. In the present case, it is concluded that there is no valid choice of law. Given that no investigation was conducted into the law most closely connected to the employment agreement, and considering that Turkish law does not hold a closer connection, the law of the habitual workplace must apply to the dispute in accordance with the PILPL.
C. Conclusion
The Supreme Court Decision is a guideline on the issues to be considered regarding the determination of the applicable law in labor law disputes with a foreign element. The Court of First Instance, while determining the applicable law in the case, decided to apply Turkish law by considering public order and the mandatory provisions of labor law. However, the Supreme Court concluded that the law of the Russian Federation, which is the law of the place of the Claimant's habitual workplace, should be applied, and justified this decision in detail, on the grounds that there is no choice of law in the employment agreement and there is no other law with a closer relationship in the specific case.
The Supreme Court also addressed the concept of public order in its reasoning, emphasizing that it would not be appropriate to apply Turkish law based on public order in all cases concerning employee claims. While the mandatory provisions of labor law are acknowledged to have a public order nature, the Court noted that Turkish law may only be applied if the foreign law fails to adequately protect the employee's rights. The Court further recognized that the parties retain the freedom to choose the applicable law. However, in this particular case, the fact that the employment agreement was drafted in Russian and the Claimant could not prove proficiency in the Russian language did not establish a valid choice of law. Consequently, the applicable law was determined to be that of the Russian Federation, based on the law of the habitual workplace, rather than any explicit choice of law by the parties.
You may review the Decision from this link. (In Turkish)
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