Key Employment Law Decision Impacting Companies with International Operations: Is Turkish Law Applicable? The Court of Appeal Disagrees.

The decision of the Court of Appeal 9th Civil Chamber numbered 2024/7673 E. and 2024/10230 K. published in the Official Gazette dated September 14, 2024 rules that foreign law is applicable to a Turkish employee working abroad.

The employee, who was working at a construction site overseas, requested compensation for unpaid notice pay from the Turkish company instead of the foreign company. This was despite the construction site being located abroad and the employment contract being with the foreign company. The first instance court ruled that the claimant’s employment contract was governed by Turkish law, noting that the employer’s operation of a Turkish worker abroad was subject to Turkish labor standards. Therefore, the court accepted the claimant’s claims as consistent with Turkish law. Following an appeal by the Ministry of Justice, the Court of Appeal’s 9th Civil Chamber determined that the first instance court’s decision was legally incorrect.

Among others, the Court of Appeal’s emphasised that:

• According to Article 24, Paragraph 3 of Law No. 5718, parties can select or change the applicable law before the court examines the merits of the case. However, this choice is valid only if the defendant does not object to the choice of law in their statement of defense or if an agreement on the applicable law is reached by the parties no later than at the preliminary examination stage. In the case at hand, the defendant raised an objection regarding the applicable law in their statement of defense, and no agreement was reached between the parties regarding the application of Turkish law at the preliminary examination stage. Additionally, the employment contracts were drafted in Russian, and since it could not be proven that the plaintiff understands Russian, these contracts are not binding on the plaintiff. This situation affects the validity of the Russian-language contracts based on the parties’ ability to understand and accept them. The Russian law needs to be applicable rather than Turkish law.
• In employment contracts with a foreign element, if the parties have not chosen the applicable law, the law of the place where the employee habitually performs their work will apply. The criteria for determining the habitual workplace include:

• The place where the employee primarily performs their duties
• The location where the employee fulfils most of their obligations towards the employer
• The place where the work is organized
• The country where the employee spends most of their working time
• The place where the main and substantial part of the work is carried out

If the employee works continuously in multiple countries, the law of the country where the employer’s main place of business is located will apply.

The Court of Appeal’s ruling provides both employers and employees with a valuable opportunity to resolve legal uncertainties in employment contracts and to devise appropriate legal strategies. This groundbreaking decision requires a reassessment of international employment agreements under both Turkish and international labor law, emphasizing the need to minimize legal risks.