1. Introduction
The employment contract, where the parties involved are the employer and the employee, is regulated under the Labor Law No. 4857 (İşK). According to Article 8/1 of the Labor Law:
“An employment contract is an agreement whereby one party (the employee) undertakes to perform work in a dependent relationship, while the other party (the employer) undertakes to pay wages.”
An employment contract can be terminated either by mutual agreement of the parties or through a notice of termination by either the employer or the employee.
This article examines the process of termination of an employment contract by the employer due to the employee’s poor performance.
2. General Overview of the Termination of Employment Contracts
Under an employment contract, the employee is obligated to continuously perform their work duties during the term of the agreement. Consequently, an employment contract is classified as a contract that establishes a continuous obligation. In such contracts, one party may terminate the agreement unilaterally, without the consent of the other party, by issuing a notice of termination, thus ending the contract prospectively.
Employment contracts are divided into two categories: fixed-term and indefinite-term. Fixed-term employment contracts automatically terminate upon the expiration of their term without requiring a notice of termination. However, the parties may agree that a fixed-term employment contract can also be terminated with a notice of termination.
It is important to note that, as a rule, the concept of notice of termination is primarily associated with indefinite-term employment contracts. Before terminating an indefinite-term contract, the terminating party must provide the other party with a notice of termination. Following such notice, the legal consequences of the termination begin to take effect.
3. Termination of Employment Contracts Due to Poor Performance
An employee’s performance is assessed based on their productivity. As stated in the Decision of the 9th Civil Chamber of the Court of Cassation, dated 10.12.2015, Case No. 2015/24521, Decision No. 2015/35075, an employee’s performance consists of the quality and level of effort they put into their work and contribute to the production process. Examples of poor performance include an employee working less efficiently than their peers or being unsuited to the job.
This raises the question: Can an employment contract be terminated by the employer due to the employee’s poor performance?
The employer’s right to terminate an employment contract is governed by Article 18 of the Labor Law. According to this article, in workplaces employing 30 or more employees, an employer terminating an indefinite-term employment contract of an employee with at least six months of seniority must rely on a valid reason. Such reasons may stem from the employee’s inadequacies, behavior, or the operational requirements of the business, workplace, or work. Poor performance is considered within this scope, allowing the employer to terminate the indefinite-term employment contract of the employee under Article 18/1 of the Labor Law.
However, to prevent employers from abusing this right, the termination of an employment contract due to poor performance — in other words, for poor performance to be considered a valid reason for termination — requires certain conditions to be met, as outlined in precedents set by the Court of Cassation:
a. Development of a Performance Evaluation System:
The employer must establish a performance evaluation system to observe and assess the performance of their employees. The Court of Cassation has emphasized the necessity of such a system in its rulings:
“…The employee’s qualifications, behaviors, and the goals achieved are significant. These criteria must be objectively and concretely defined, consistent with the employee’s job description, productivity, the employer’s institutional principles, and workplace rules. Performance evaluation forms should be prepared based on these criteria. A Performance Evaluation System specific to the workplace should be developed and implemented to assess the employees’ performance.”
b. Notification of the System to the Employee:
The performance evaluation system must be communicated to the employee, and the employee must have access to the performance evaluation criteria.
c. Evaluation Based on Job Description:
The employee’s productivity must be measured based on the tasks outlined in their job description, with realistic and appropriate standards established.
d. Sustained Poor Performance:
The employee’s poor performance must be continuous. Termination of the employment contract cannot be based solely on the results of a single performance evaluation.
e. Opportunity for Improvement:
The employee must be informed about the areas in their job description where they are underperforming and must be given a reasonable period to improve their productivity in those areas.
f. Training for Improvement:
Training sessions must be provided to help the employee enhance their productivity.
The 9th Civil Chamber of the Court of Cassation, in its decision dated 09.03.2009 (Case No. 2008/20570, Decision No. 2009/6142), elaborated on these conditions as follows:
“For the performance and productivity outcomes of an employee to constitute a valid reason, objective criteria must be established. Performance and productivity standards should be specific to the workplace. The objectivity criterion must be applied in such a way that all employees performing the same job at that workplace are subject to the same rules. Performance and productivity standards should be realistic and reasonable. For valid grounds to exist based on performance and productivity outcomes, there must be consistently low or declining results. Results that vary depending on conditions and are not continuous may not suffice for valid grounds. Moreover, the mere failure to achieve performance and productivity targets aimed at improvement should not constitute valid grounds alone. If the employee has the capacity to meet high targets but does not exert the necessary effort, valid grounds may exist (Decision dated 08.04.2008, Case No. 2007/27829, Decision No. 2008/7831).
Furthermore, to ensure objectivity in performance evaluations and to acknowledge valid grounds, performance evaluation criteria must be determined in advance, communicated to the employee, and based on the competencies required for the job, such as knowledge, skills, and experience, as well as behaviors appropriate to the workplace and the personal and professional development goals expected of the employee. In other words, the employee’s qualifications, behaviors, and the goals achieved are significant. These criteria must be objectively and concretely defined, consistent with the employee’s job description, productivity, the employer’s institutional principles, and workplace rules. Performance evaluation forms should be prepared based on these criteria. A Performance Evaluation System specific to the workplace should be developed and implemented to assess employees’ performance (Decision dated 24.09.2007, Case No. 2007/13994, Decision No. 2007/27720).”
If the performance evaluation is not objective, if the employee’s poor performance cannot be proven, if employees with poor performance are compared with others performing different tasks, or if the evaluation does not comply with the necessary conditions, the performance evaluation will be deemed invalid.
In summary, an employer may terminate the employment contract of an employee whose prolonged poor performance has been identified through properly conducted performance evaluations, provided the conditions outlined in the Court of Cassation rulings are met. According to Article 19 of the Turkish Labor Code, the employer must issue the termination notice in writing and clearly state the reason for termination. Additionally, the employer is required to obtain the employee’s defense regarding the matter before proceeding with the termination.
It is important to note that, beyond the necessity of presenting concrete evidence for termination due to poor performance, courts will evaluate each case based on its specific circumstances to determine whether the termination is valid.
4. Conclusion
An employer has the right to terminate an employee’s contract on the grounds of poor performance. However, as demonstrated by the precedents of the Court of Cassation, this right is subject to compliance with specific procedures. To accurately assess an employee’s poor performance, the employer must first develop and implement a performance evaluation system. Furthermore, the process initiated through the implementation of the performance evaluation system must be conducted correctly, and the additional conditions discussed in the third section must be fulfilled to prevent misuse of the employer’s right to terminate.
If an employee’s poor performance persists for an extended period, as determined by performance evaluations conducted in accordance with established criteria, and if the employee does not show improvement despite being provided with training to enhance productivity, the employer may terminate the employment contract on the grounds of poor performance.
Note: For the sources of the article, please check Turkish version of the article.
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