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Penal Clauses in Employment Agreements
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Att. Suleyman Sevinc
Introduction
The penal clause is a mechanism employed to indemnify the losses
which occur or may occur when one party to an agreement does not fulfill
his obligations, or to enforce a negligent party to fulfill his obligations
as per the agreement. Pursuant to the principle of freedom of contract
accepted in Turkish legal system, a penal clause may be stipulated in
agreements and its amount may be determined by the parties. However,
this freedom is not unlimited and it is possible to nullify the penal clause
or reduce its amount in accordance with equity.
Penal Clauses in Employment Agreements
Since there is no explicit provision in Labor Act No. 4857 (“Labor
Act”) on penal clauses in employment agreements, provisions of the Code
of Obligations No. 6098 (“Code of Obligations”) and general principles
of labor law shall be considered. Within this scope, a penal clause may be,
in principle, stipulated in an employment agreement as a measure in favor
of both the employer and the employee against the risk of termination of
said agreement.
A penal clause may be stipulated to “limit the right of the employee
to terminate the agreement”. Therefore, in the event the employment
agreement is terminated before the determined period of time, the party
who terminates the agreement unlawfully shall pay an amount as a
penalty to the other party. In practice, such clauses are included mainly in
agreements made with skilled employees. The purpose of such a practice is
to prevent the employer from suffering a loss while seeking another skilled
employee to replace the skilled employee who terminates their employment
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Article of March 2013