Penal Clause in Labor Law
(Y22HD-K.2020/4019)
One of the most common areas where penal clauses are used is labor law. Both the Labor Law No. 1475 and the Labor Law No. 4857 do not contain a provision on penal clauses. However, since the TCO No. 6098 is a general law, the provisions of the Turkish Code of Obligations shall be applied to the extent appropriate to its nature in cases where there is no provision in the Labor Laws, and the provisions of the TCO No. 6098 shall apply in labor law as a rule.
At this point, it should be noted that the Court of Cassation has produced solutions specific to labor law in some aspects through established case law. As a result of the “Principle of Interpretation for the Benefit of the Employee” in labor law, penal clauses that stipulate obligations only against the employee are deemed invalid and the established case law in this direction has been adopted in the doctrine. While there is no explicit provision in the Code of Obligations No. 818 regarding the penal clause in terms of service contracts, Article 420 of the Turkish Code of Obligations No. 6098 stipulates that “The penal clause included in service contracts only against the employee is invalid.” In this respect, penal clauses included in service contracts only against the employee should be considered invalid, while penal clauses included in favor of the employee should be considered valid.
The necessity of the penal clause to be regulated bilaterally against the employee and the employer also reveals that the penal clause agreed against the employee should not be more than the one agreed against the employer. In other words, it is unthinkable that the penal clause determined against the employee exceeds the employer’s responsibility in terms of its conditions and the amount of the penalty. In the event of an inequality against the employee in the bilateral penalty clause, although the penalty clause is not completely invalid, the obligation of the employee cannot exceed the amount and conditions for which the employer is responsible.
It is seen that the penalty clause agreed in labor law is generally introduced in order to prevent the termination of the employment contract for a certain period of time without just cause, to claim back the training expenses in case the minimum working conditions of the trained employee are not complied with, or to ensure compliance with the non-competition agreement. In all these cases, the parties undertake a contractual obligation and the penal clause ensures the effectiveness of these commitments (Canbolat/Erener, p. 230).
In the concrete dispute subject to the application, the penal clause regulation of a similar nature in the employment contracts is as follows: “In the event of termination of the contract by the employer with or without notice, the employer will pay the employee compensation equal to 6 (six) months net wages in addition to the compensation and all other rights required by the Turkish labor legislation”. In the first of the decisions of the regional court of appeal, it was concluded that the penal clause in question was invalid on the grounds that it was not reciprocal, while in the other decision, it was concluded that the penal clause was valid only in favor of the employee, since reciprocity was not required in terms of the penal clause.
As explained in detail above, in labor law, only the penal clause stipulated against the employee is invalid, whereas only the penal clause stipulated in favor of the employee is valid. In this respect, in the concrete dispute, the penalty clause stipulated in the employment contracts is valid, as it is regulated only in favor of the employee.
Reduction of Penalty Clause
Article 179/1 of the TCO (158/1 of the Code of Obligations) regulating the penalty clause; “If a penalty is agreed for the failure to perform a contract at all or properly, the creditor may demand either the performance of the debt or the penalty, unless otherwise understood from the contract.” Article 182/1 of the same law (161/1 of the Code of Obligations) states; “The parties may freely determine the amount of the penalty.” However, this freedom is not unlimited. In the last paragraph of the article; “The judge shall automatically reduce the penalty condition that he deems excessive.”
As can be seen, the first paragraph of the above-mentioned article establishes the principle of freedom in determining the amount of the penalty clause; on the other hand, the last paragraph draws a special limit to this freedom through the right of reduction.
While investigating whether the penalty is excessive or not, the judge shall take into account the damage suffered by the creditor due to the breach of the obligation, the degree of fault of the debtor, the common fault of the creditor and the economic situation of the parties (especially the debtor). When these factors are taken into account, if there is a clear disproportion between the damage suffered by the creditor and the agreed penalty that is incompatible with the measures of equity, the penalty shall be reduced. When assessing whether the penalty clause is excessive, it should be taken into account that the purpose of the penalty clause is to improve the creditor’s situation. While reducing the agreed penalty, in any case, the amount of compensation that the creditor may request according to the general rules in order to cover the positive damage should be exceeded. The possibility to reduce an excessive penalty is a rule of public order to prevent the exploitation of the debtor who is in a weak position. Therefore, the debtor’s “prior waiver of the possibility of reduction” is invalid (Reisoğlu, S: Obligations Law General Provisions, Istanbul, 2004, p:391,392, citing Oser-Schönenberger, Tunçomağ, Becker, von Tuhr).
On the other hand, pursuant to Article 24 of the TCC, although the debtor who has the title of merchant cannot request the reduction of the penal clause, if it is (heavy) and (high) to the extent that it will cause the economic ruin of the debtor merchant and will not allow him to continue his commercial activity as before, then, it is possible to consider such a (penal clause) as a clause contrary to morality and decency, and (partially) or (completely) cancel it. This is because the (nullity) of a (penal clause) in a contract due to breach of morality and decency is a general principle of law. It is not possible to think that the provision of Article 24 of the TCC is outside the scope of this general sanction. Any (penal clause) that reaches a level that would jeopardize or destroy the economic and commercial activities and existence of a debtor is contrary to morality and decency.
While deciding on this matter, the court, if the debtor is a company, must investigate whether it is possible for the company to continue its commercial life as before, if the debtor is a company, by subpoenaing the (articles of association) of this company in the trade registry, with what amount of capital it operates commercially, how much its assets amount to, and whether it is possible for that company to continue its commercial life as before in case of the collection of the agreed penal clause, if necessary, by taking the opinion of an expert, and it must also make the same examination for the real person (merchant) (Doğanay, 237). It should be noted that in order for Article 24 of the TCC to be applicable, the debtor must be a merchant or be in a position to be liable as a merchant at the time the penal clause or the fee or the interest is determined and determined. In addition, the debtor must have undertaken the penal clause, interest or fee in the course of its own commercial enterprise (Doğanay, p:238).
It is important to emphasize that the moment to be taken as a basis when investigating the existence of merchant status is not the moment the penal clause becomes due, but the moment of commitment. In this respect, if the promisor became a merchant after undertaking the penal clause, he is authorized to request a reduction. On the other hand, a person who loses his/her merchant status after undertaking a penal clause is not entitled to claim a reduction, nor is a person who takes on the penal clause obligation and is not a merchant authorized to claim a reduction.
In the concrete case, although the defendants claimed that they are not merchants and requested the discretionary reduction right to be taken into consideration within the scope of Article 182 of the TCO, it is understood from the scope of the file that the defendants … and … were not investigated whether they were merchants or not and whether the penalty clause could be considered excessive and therefore whether it should be reduced or not was not discussed by the court based on sufficient concrete data. A judgment cannot be established with incomplete examination, grounds that are not suitable for inspection, subjective statements and abstract statements. In this case, within the framework of Articles 14, 17, 1463 of the TCC and Article 3 of the Law No. 5362 on Tradesmen and Craftsmen Professional Organizations. Within the framework of Article 3 of the Law No. 5362 on Tradesmen and Craftsmen Professional Organizations, it should be investigated whether the defendants are merchants or not, and if they are merchants, whether the penalty clause will cause the defendants to suffer economic collapse, and if it is determined that they are not merchants, the amount of the receivable should be determined and a decision should be made according to the result, taking into account that the judge may make a discount from the penalty clause that the judge deems excessive in accordance with Article 182/last of the TCO, while ignoring the aforementioned issues, it was not deemed correct to make a judgment with incomplete examination, abstract and insufficient justification, and required a reversal.
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