Fundamentals Of Adjustıng The Fx Based Labour Contracts As Per The Decree Numbered 32

The communique amending the “Communique Regarding the Decree of Protection of the Value on Turkish Currency Numbered 32”(communique number:2008-32/34) has been published in the Official Gazette on 06.10.2018(communique number:2018-32/51) and entered into force. In this article, we will analyse the labour contract aspect of the said communique.

The sections of the Communique with respect to the Labour Contract is as follows:

1. (RULE)

Persons residing in Turkey, may not determine the price and other payment obligations of the labour contract that they may be made in between, as a foreign currency or on the basis of the value of a foreign currency save as the ones in which the performance is fulfilled in abroad.

This regulation is explicit and draws the general frame. As can been seen, except the labour contracts in which the performance is fulfilled in abroad; it is forbidden to determine a remuneration in or on the basis of a foreign currency. As explained in detail below, the existing contracts shall be adjusted either with a mutual understanding of the parties or through a base rate, in case of a disagreement.

2. (EXCEPTION)

It is possible to determine the contract value or the payment obligations arising out of the contract in or on the basis of a foreign currency in such labour or service contracts that are made by non-Turkish residents’ Turkish branches, representative offices, liaison offices and Turkish companies in which a non-resident person directly or indirectly holds %50 or more of the share capital and free zone companies only for their activities in the free zone.

Labour contracts that are exempted from the general rule fall in four groups and these are the exemptions that allows the covenants to determine the remuneration and other payment obligations in or on the basis of a foreign currency.

• Labour contracts made between the persons residing in Turkey but where the performance is fulfilled in abroad,
• Labour contracts in which non-Turkish residents’ Turkish branches, representative offices, liaison offices are party to
• Labour contracts that Turkish companies in which a non-resident person directly or indirectly holds %50 or more of the share capital are party to
• Labour contracts in which free zone companies- only for their activities in the free zone- are party to.

3. (OBLIGATION TO CONVERT FOREIGN CURRENCY TO TURKISH LIRA)

As per this provision, the value of the agreement and other payment obligations arising out of the agreements about which the conversion is compulsory, have to be converted by the parties to Turkish Lira within the context of the Decree of Protection of the Value on Turkish Currency Numbered 32, Provisional Section 8.

Therefore, the parties need to adjust the payment obligations of the labour contracts that do not fall into the exempted list.

Without drowning within the argument of freedom of contract; the regulations stated thus far are in conformity with the use of authority within the scope of the Decree and there is no excess of power in terms of the general principle and the exemptions.

4. (DISAGREEMENT-BASE RATE ADJUSTMENT)

As per this provision, in the event of a disagreement between the covenants on conversion amount; they should utilize the indicative selling rates of the Central Bank of the Republic of Turkey on January 2, 2018. The converted amount must then be adjusted based on the monthly consumer price index rates changes (TÜFE) determined by the Turkish Statistical Institute for the period from January 2, 2018 to the restatement date.

The provision on the Decree regulating the event of disagreement through stating a base rate for conversion does not conform with the Power granted to the authority with the Decree. In other words, there is no doubt that stating a base rate through a Communique is excess of power and not legitimate.

Yet, it may be thought that the regulation causes imbalance between the parties and eases the possibility of the party(employer) not to come to an agreement and may compel the employee to accept the base rate determined with the Communique. This comes with an increased number of disputes. However, in terms of the labour contracts, although the event of disagreement and application of base rate appears to be a substantial alteration of the labour contract; due to the fact that it is not put forward by the employer but occurred as a consequence of a legal act; it is seen that the acceptance of the alteration by the employee is a must. On the other hand, it may be said that the employer’s malicious acts in order not to come to an agreement may cause the application of the rules regarding “substantial alteration”. Therefore, the best way to reduce the amount of dispute is to regard the regulation (base rate rule) as it is already to the detriment of the employee and get close to the will of the same through determining the conversion rate above the base rate.

If the issue of conversion howsoever comes to the point of application of the base rate, then the principles of “legal security”, “legal certainty” and “non-retroactivity” shall be questioned by the parties that the regulations is against to(employees) and disputes shall arise. The courts should consider the principles stated above in resolving such disputes as the Communique intervenes to the wills of the parties in the form that is not stipulated in the Decree.