Decision of the Court of Cassation General Assembly of Civil Chambers on Choice of Law in Employment Contracts with a Foreign Element
Introduction
Determining the applicable law in employment contracts and disputes arising from these contracts requires a balance between the principle of protection of the employee and the parties’ autonomy based on the choice of law. In this context, the decision of the Court of Cassation General Assembly of Civil Chambers ("General Assembly”) dated 10.05.2023 and numbered 2022/873 E., 2023/424 K. (“General Assembly Decision”) outlines critical principles regarding the limits of the choice of law made by the parties, the law of the habitual place of work and the effect of standardized terms of contract on the choice of law.
In this article, the dispute subject to the General Assembly Decision will be evaluated within the framework of the provisions of Law No. 5718 on Private International Law and Procedural Law (“IPCPL”) on choice of law and applicable law, standardized terms of contract and the principle of employee protection in this context.
Subject of Dispute
The dispute regards which law shall be applied to the employment claims filed by a Turkish citizen employee for his work abroad. It is seen that the claimant asserts his claims arising from the performing duties of work abroad based on Turkish law.
Court of First Instance Decision
The court of first instance held that the case should be assessed under Turkish law because (i) The claimant is a Turkish citizen, (ii) The respondent company is headquartered in Türkiye, (iii) the claimant's insurance premiums are paid from Türkiye, (iv) The employee has closer connections with Türkiye.
Regional Court of Appeal Decision
The Regional Court of Appeal, on the other hand, decided that (i) Under Article 27 of the IPCPL, the choice of law can only be valid if it is in favor of the employee, (ii) Even if the parties have chosen a foreign law, this choice cannot be considered valid if it limits the rights of the employee, (iii) Turkish law is more protective, and the case should be evaluated within the framework of Turkish law.
Decision of the 9th Civil Chamber of the Court of Cassation
The 9th Civil Chamber of the Court of Cassation reversed the decision of the Court of Appeal and ruled that the case should be re-evaluated on the following grounds: (i) Under Article 27/1 of the IPCPL, a choice of law was made between the parties, (ii) The contracts concluded for the periods during which the claimant worked in Russia and Oman clearly states that Russian and Omani law would be applied, and (iii) In the context of the law of habitual place of work, the application of Russian and Omani law during these two periods is more appropriate. As a result, the Court of Cassation reversed the decision of the Regional Court of Appeal, stating that the dispute should be evaluated with the reports to be obtained from experts specialized in Russian and Omani law.
Regional Court of Appeals Decision to Resist
It is observed that the Regional Court of Appeals did not comply with the Court of Cassation's reversal decision and decided to resist. The following points are emphasized in the resisting decision: (i) Standard employment contracts prepared by the employer are invalid under the standardized terms of contract provisions of the Turkish Code of Obligations No. 6098, (ii) Turkish labor law must be applied in cases filed in Türkiye due to public order, (iii) The social and economic relations of the employee and his rights in Türkiye must be protected.
Choice of Law of the Parties in Employment Contracts in General, Habitual Place of Work Law, and Applicable Law
Before analyzing the General Assembly Decision, it is essential to touch upon the concepts of “choice of law of the parties in employment contracts” and “law of the habitual place of work”, which play a critical role in interpreting and resolving the dispute.
Choice of Law in Employment Contracts
In employment contracts with a foreign element, the provisions of international agreements to which Türkiye is a party, if any, should be taken into consideration; otherwise, as a rule, the applicable law should be determined by Article 1 of the IPCPL.
In this context, under Article 27 of the IPCPL titled “Employment Contracts”, employment contracts shall be governed by the law chosen by the parties, without prejudice to the mandatory provisions of the law of the employee's habitual place of work[1] . In this context, it is stated that the choice of law should be compared with the law of the habitual place of work and whichever law provides more protection to the employee should be applied. Therefore, even if there is a choice of law between the parties, the protective provisions of the law of the habitual place of work shall always apply to the employee[2] .
In the previous decisions of the Court of Cassation on the subject, there is a tendency to directly apply Turkish law in cases brought by Turkish employees abroad against Turkish employers in Türkiye, considering the protection of the employee. However, since 2020, this approach has started to change and the Court of Cassation has developed a practice based on the choice of law and the comparison of the law of the habitual place of work[3] .
Habitual Place of Work
A habitual place of work is defined as the place where the employee regularly and continuously performs their work and is generally identified as the place where the work's center of gravity is located. Therefore, the quality and quantity of the employees' work are evaluated together, and the country in which the employees are predominantly active is taken into consideration[4]. For this reason, the temporary assignment of the employee, i.e. when the employee temporarily performs his/her work, does not constitute a habitual workplace.
The law of the habitual place of work is considered by the courts ex officio, even if the parties have chosen the law. On the other hand, if the parties have not chosen law, the law of the habitual place of work shall be applied in priority under Article 27/2 of the IPCPL.
As a result, according to the evaluations made in the doctrine, if it is determined that the law chosen by the parties is more advantageous in favor of the employee than the law of the habitual place of work, it becomes possible to apply the chosen law in the concrete dispute. On the other hand, in cases where the minimum protection requirement is not met, even if the parties have chosen the law, the provisions of the law of the habitual place of work protecting the employee shall apply. In other words, it is stated that the minimum protection provided to the employee by the law of the habitual place of work cannot be eliminated by the parties’ choice of law[5] .
Decision of the Court of Cassation General Assembly of Civil Chambers
By the reversal decision of the 9th Civil Chamber of the Court of Cassation, the General Assembly assesses that the law chosen by the parties should be applied, since the law of the habitual place of work is compatible with the law chosen by the parties. According to the General Assembly Decision, it is clear that a clear choice of law has been made between the parties and this choice is clearly stated in the relevant articles of the employment contract. Accordingly, it is noted that the legislation of the country where the performance of work is performed within the framework of the employment contract shall apply, and in case of disputes, the legislation of these countries shall prevail. The General Assembly also concluded that the laws of Russia and Oman should be considered not only in the context of the choice of law of the parties, but also as the law of the habitual workplace where the claimant worked.
Another issue emphasized by the General Assembly is the validity assessment of the parties' choice of law by considering the standardized contract terms. It is observed that the General Assembly did not accept the claim that the employee signed printed contracts, and thus, the clause regarding the choice of law was invalid under the standardized terms of the contract.
Evaluation and Conclusion
Beforehand, the General Assembly Decision deals with assessing the governing law by distinguishing between the periods in which the parties chose law and those in which they did not. It is seen that the parties entered into employment contracts for three different working periods. In this context, it is stated that the parties agreed on applying Russian and Omani law in the contracts regarding the first and third working periods. The General Assembly does not find it appropriate to apply Turkish law directly to protect the employee for the periods in which the parties chose law. Moreover, the General Assembly Decision’s determination that the law chosen by the parties should be applied first is essential. Furthermore, the General Assembly Decision draws attention to its approach that printed agreements should not be considered invalid with a categorical approach when evaluating the parties’ choice of law in the context of standardized contract terms.
In conclusion, the General Assembly Decision, which gives precedence to the choice of law of the parties, contains significant clues in terms of the choice of law in employment contracts and the approach of the courts, which directly apply Turkish law without taking into account the choice of law without taking into account the choice of law and with the motive of protecting the employee, is not accurate.
- The preamble is as follows: “In line with the general approach in the field of debt contracts, the opportunity of choice of law has been accepted in the field of employment contracts and has taken the first place when regulating the rule of conflict of laws. Due to the nature of employment contracts, choice of law is only recognized in favor of the employee and in a limited manner. Because, even if the choice of law is made by the parties, it is not possible to apply the law to be applied according to the objective the rule of conflict of laws if it contains provisions that are less favorable than the provisions protecting the employee. The Article recognizes the provisions of the law of the habitual place of work that protect the employee as the minimum standard of protection and prevents the choice of law from falling below this standard”. See: https://www.tbmm.gov.tr/ (Date of Access: 28.11.2024).
- Şanlı, Cemal / Esen, Emre / Ataman- Figanmeşe, İnci: Milletlerarası Özel Hukuk (Private International Law), 9th Edition, İstanbul, Beta, 2021, p. 354.
- 9th Civil Chamber of the Court of Cassation, decision dated 24.11.2020 and numbered 2020/5618 E., 2020/16557 K., www.lexpera.com (Date of Access: 28.11.2024).
- Şanlı / Esen / Ataman-Figenmeşe: ibid, s. 359.
- Tekinalp, Gülören: Milletlerarası Özel Hukuk Bağlama Kuralları (Private International Law: Rule of Conflict of Laws), 11th Edition, İstanbul, Vedat Kitapçılık, 2011, p.420; Nomer, Ergin: Devletler Hususi Hukuku (Private International Law), 22nd Edition, İstanbul, Beta, 2017, p. 345.
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