Applicable Law to the Basis of Employment Contracts Containing Foreign Element in Case That the Law Choice Has Not Been Made

1- Introduction

Recently, the economic, commercial, political and cultural relations between countries become more frequent and a large number of people are going to foreign countries to work. Accordingly, the determination of the law to be applied to employment contracts containing foreign element emerges as an important issue. Numerous Turkish companies doing business in foreign countries, usually employ Turkish employees; as well as many so many foreign employees come to our country to work in foreign companies producing goods and services in Turkey. As a result, it is an important issue which country’s law will be applied to employment contracts that contain foreign elements.

The law of the country to be applied is determined according to the provisions of Law No 5718 concerning Private International Law and International Civil Procedure (MÖHUK). Accordingly, first of all, there should be a foreign element in the employment contract. The foreign element is the element that connects a legal act or relationship or event with the law of more than one state. In cases where the employee or employer is a foreigner, the employer’s business centre is located in a foreign country, the employee does his/her job in a foreign country, or it is understood from the general situation that the business relationship is closely connected with a foreign country, it is considered that there is a foreign element in the employment contract.

The law to be applied to the contracts containing foreign elements was regulated with a single and general article in the abrogated MÖHUK numbered 2675 (Article 24) and no special rules were included. On the other hand, MÖHUK numbered 5718 in force, in addition to a general binding rule on the law applicable to contracts (Article 24), contracts related to immovable (Article 25), consumer contracts (Article 26), employment contracts (Article 27), intellectual property contracts (art.28), contracts for the carriage of goods (art.29) adopted special binding rules. With the article titled “Employment Contracts” regulated in MÖHUK Art.27, this issue is arranged as follows:

Employment contracts ARTICLE 27

(1) Employment contracts are subject to the law chosen by the parties, without prejudice to the minimum protection that the employee will have in accordance with the mandatory provisions of the habitual workplace law. (2) In the event that the parties have not made a choice of law, the workplace law, where the employee does his/her job, shall apply to the employment contract. In case the employee temporarily performs his/her job in another country, this workplace is not considered as his/her habitual workplace. (3) In the event that the employee does his/ her job in a particular country and does his/ her job continuously in more than one country, the employment contract is subject to the law of the country where the employer’s main workplace is located. (4) However, if there is a law that is more closely related to the employment contract, this law can be applied to the contract instead of the provisions of the second and third paragraphs.

In the doctrine and practice, in order to determine the law to be applied to the principle of the employment contract in the event that the choice of law has not been made, it is seen that many binding points are taken into account such as the parties’ national law, residence, habitual residence, workplace, place of employment contract, place of work / execution. Looking at today’s positive regulations, both comparative law and Turkish law include specific objective binding rules on employment contracts, and regulations that are separate from the rules that will generally apply to contracts have been introduced. The reason for this approach is the principle of protecting the weak contracting party.

There was no special regulation regarding the law applicable to employment contracts in the abrogated MÖHUK numbered 2675. Therefore, the general regulation on the law to be applied to the contracts was applied. In MÖHUK, which is currently in effect, a special binding rule is included in order to determine the law to be applied to employment contracts in parallel with the current regulations in comparative law. The legislator has identified some binding points to which employment contracts are closely linked. Generally speaking, if a choice of law has not been made by the parties according to the article, the employment contract will be subject to the law of the country where the workplace is located, primarily where the employee does his/her job. If the employee does not have his/her habitual workplace, the law of the country where the employer’s main place of work is located will be applied to the contract. In addition, if a law that is more closely related to the contract is determined, this law is applied.

In employment contracts, it is generally accepted that the closest contact law is the law of the place of work (lex loci laboris). Moreover, in practice, when looking at the place of work, it is generally seen that the employee’s habitual residence or residence is the same with the country in which he/ she is located. According to the article 27 of MÖHUK, even if the parties have made a choice of law, the law to be applied in accordance with paragraph 2 will have to be determined. That is to say, the chosen law can only be valid that it does not contradict the mandatory rules of the objective contractual status. Objective contract status will need to be determined for comparison. Here, in accordance with the principle of protecting the weak contracting party, the boundaries of the choice of law are determined by the rule of objective binding. Therefore, although a choice of law has been made by the parties, it is not possible to implement provisions that provide less protection than the mandatory provisions of the law determined according to the objective binding rule and which are more unfavourable for the employee. The provisions of the workplace law that protect the employee are accepted as the minimum protection standard and the parties are prevented from falling below this standard with the choice of law.

A. Customary Workplace Law

The first objective binding rule adopted in MÖHUK in terms of employment contracts is the employee’s habitual workplace law (lex loci laboris). In the provision 27/2 of MÖHUK, it is provided that “If the parties have not made a choice of law, the workplace law where the employee does his/her job as usual, to be applied to the employment contract “. According to this provision, which is a special provision in terms of employment contracts, it has been determined that the law most closely related to the employment relationship is the workplace law where the employee does his/her job regularly. In addition, in determining the workplace, the internal organization of an enterprise, the existence of a company registered in the trade registry or the existence of a business are not taken into account. If the employee fulfills his obligations arising from the employment contract in more than one state, the place where he/she fulfills at least fifty percent of his obligations after taking into account the characteristics of each concrete case is accepted as his/her habitual workplace.

In case of a change in the habitual workplace, the law to which the employment contract will be subject will change accordingly, and the variability of the employment contract status is mentioned. In the event that the employee is sent to a different workplace to perform his/her job routinely, the law of the country where the employee had his/her job routinely on the date of the dispute will be applied. In addition to all of these, the change of the workplace just before the termination of the business relationship or the employee leaving the workplace temporarily without any actual effect by the employer will not be taken into account in determining the habitual workplace. For example, if the employer calls the employee from the habitual workplace to the employer’s headquarters in order to terminate the employment contract and complete the necessary procedures and the employment contract is terminated within a few days, it cannot be said that the habitual workplace has changed.

The employee can be temporarily sent to another country to do his/her job. According to the 2nd sentence of the article 27/2 of MÖHUK “… In case the employee temporarily performs his/her job in another country, this workplace is not considered as his/her habitual workplace”. If the employee is sent to another state temporarily, even for a long time, the habitual workplace will not change. However, in order for this provision to be applied, an existing habitual workplace must be determined before sending. Shortterm and temporary services such as business trips to another country, assembly works, fair and exhibition organization activities will not change the habitual workplace. In the said services doctrine, it is called the “extension” or “extension theory” of the habitual workplace. The place where the employee is temporarily posted is an exception to his/her habitual workplace where he/she will return in the future. At this point, the will of the

parties is important. Temporary posting may be mentioned in cases where the employee is sent to complete a specific job and send for a certain period of time or to complete a project. It should be investigated whether the employee is hired solely to work in the country of origin. In other words, it should be understood that the employee intends to return to the country where he/she has done his/her job after completing his/her work in the country where he/she was sent and the employer intends to recall the employee. If the employee gives up his/her intention to return, or if it is understood that the employer intends to employ the employee permanently in the place where he/she was sent, the temporary posted country will become the habitual workplace and the law applicable to the employment contract will change.

Another point that should be mentioned here is whether the mandatory provisions of the customary workplace law will also be valid in the case of sending or extension. In this case, it should be determined whether the mandatory provision restricts itself to the habitual workplace. For example, rules

on occupational safety are countrywide restricted in terms of location. Therefore, if the employee is sent to another country temporarily, the mandatory provisions regarding job security of the country where his/her habitual workplace is located will not be applied. MÖHUK article 27/2 is parallel to the Rome I Statute. In the article 8/2 of Rome I Statute, “… if the law to be applied to the employment contracts is not chosen by the parties, the contract is governed by the law of the country in which the employee performs his/her job as usual”. In the continuation of the article, it is stated that temporary references will not change the habitual workplace. As agreed in the doctrine, the place where the employee habitually does his/her job is the place where the employee receives the instructions or the place where he/she will deliver when he/she finishes his/her work or other factors that characterize the service relationship. According to this regulation, even if the employee does his /her job in more than one country, if he/she has an office or habitual residence in a country and he/she returns to that country after his/her travels, that country will be considered as the place where the work is carried out.

In the Turkish doctrine, the workplace is defined as a unit in which the employer is organized by bringing together the human workforce with tangible and intangible means to achieve a technical purpose with a continuous activity. It is claimed that the concepts of “actual workplace” and “place of actual work (country)” are different from each other. The reason for this is that instead of the expression “country” in which the employee does his/her job in the Rome I Statute, the expression “work place” has been adopted in MÖHUK. According to an opinion in the doctrine, with this regulation introduced by the Turkish legislator, the interests of the employer are protected by applying the workplace law where the work closer to the employer is commonly done.

B. Law of Country of Employer’s Main Workplace

Sometimes in a business relationship, habitual workplace may not be determined. In today’s business world, it is frequently encountered that the employee performs his/her job at the same intensity and continuously in different countries. The employee may be doing his/her job in more than one country. For example, working in international transportation, doing international assembly work, or working on the high seas, in space or in stateless areas. In such cases, it will not be possible to apply the law of the workplace where the employee does his/her job

routinely, and if the parties have not made a choice of law, the law of the country where the employer’s main place of work is applied to the employment contract. For example, an employee working in an international search and rescue organization performs search and rescue activities by going to the country wherever the need arises due to a natural or environmental disaster. In such a case, there is no workplace where the employee does his/her job routinely. For this reason, the law of the country where the employer’s main workplace is located, that is, the law of the country where the headquarters of the search and rescue organization is located, will be applied to the employment contract.

According to the article 27/3 of MÖHUK, “If the employee does his/her job in a certain country and does his/her job continuously in more than one country, the employment contract is subject to the law of the country where the employer is located.” In order for the law of the country where the main place of business is to be implemented, first of all, the employer must have a workplace. If the

employer’s main place of work is not found, each case will be evaluated separately and the law that is in a closer relationship with the service relationship will be determined and applied to the dispute. Here, the main workplace of the employer is the country where the employer’s “workplace centre” is located.

In practice, this rule is important for flight personnel, seafarers on high seas, sales representatives and journalists. This rule is also known as the “flight attendant clause”. In terms of employees working in the international transport sector, such as flight personnel or heavy vehicle drivers, the place where the employee undertakes the transportation, delivers the load he carries, organizes his/her work, keeps the necessary equipment or returns at the end of the transportation is accepted as the workplace centre. In the doctrine, while determining the law to be applied to flight personnel and their crew on ships, it was also argued that the employer should apply the flag country law or the stricter legal exception instead of the actual workplace law. At the same time, according to an opinion put forward in the doctrine, while article 27/3 of MÖHUK is applied, in parallel with the Rome I Statute, in cases where the employee does not perform his/her job in a common country, the law of the country where the workplace is located will be applied. It is also stated in the doctrine that the concept of “main place of work” belongs to the terminology of commercial law, not employment law. In order to determine the workplace, the work needs to be organized for a technical purpose. Onn the other hand, business is an economic concept that is closer to the field of commercial law. For example, a bank with branches is business, and branches are Workplace S. According to this view, the main workplace is the business centre and if the employer has more than one business centre, the law of the business centre where the employee is hired must be applied.

Cross-border home-working is an example of the absence or detection of a place where the employee has done his/her job regularly in today’s modern working life. This situation is more common in fields such as advertising, translation, and programming. In addition, with the advancement of technology, in recent years, especially due to the current Covid-19 pandemic, communication technologies or online working systems have become very common. According to a different opinion in the doctrine, in order to apply the law of the place where the employer’s main workplace is located, the work should not be done in a particular country, but also should be done in more than one country continuously. According to this view, this provision will also apply in open seas, in space or in stateless regions, where the business is not subject to any nationality. In such cases, it is stated that the connection power of the habitual workplace is reduced or completely lost. For example, in case of a dispute arising from the employment contract of a university research assistant working in an area of Antarctica that is not under the sovereignty of any state, the law of the location of the university headquarters, which is the law of the place where the employer’s main place of work is located, will have to be applied (MÖHUK article 27/3). Looking at the Rome I Statute, article 8/3, if the applicable law cannot be determined according to the 8/2 provision, the law of the country where the employer hires the employee will be applied to the employment contract. In other words, if there is no country where the employee performs his/her job or cannot be determined, the law of the country where the employee is employed will be applied. The article does not regulate how the country of employment of the employee will be determined. Here, the concept of the workplace where the employee is hired should be understood broadly, including subsidiaries, branches and other units.

The place where the employee is hired may not have any connection with the places where the work is done. There is also a potential for misuse of the regulation by hiring the employee in a country that provides a lower level of protection by the employer. For this reason, it is stated in the doctrine that the regulation in question should only be applied when one of the different places where the work is done cannot be qualified as central business activities. In addition, the place where the employment contract is concluded should not be understood from the concept of “the workplace where the employee is hired”; because the place where the employee is hired may be accidental or the employer can choose this place according to his/her own interests. For this reason, it is stated in the doctrine that the place where the employee participates in the work organization should be understood from the concept of “where the employee is hired”.

C. Tighter-Related Location Law

While the law to be applied to the employment contract is determined according to the objective binding rules, if the current situation and conditions show that there is a law that is more closely related to the employment contract, then the more strictly related law can be applied instead of the objective contract status. It is left to the courts to determine the more strictly related location law. The application of the place law, which is more closely related with the employment contract (which is almost an escape rule), aims to operate the principle of protecting the weak contracting party according to the characteristics of each case. The most important factor in deciding the implementation of the more closely related location law will be the interests of the employee.

The article 27/4 of MÖHUK is provided as “However, if there is a law more closely related to the employment contract, this law can be applied instead of the provisions of the second and third paragraphs”. The aforementioned article grants a discretionary power to the judge, unlike Article 24/4237, which regulates the law to be applied to contracts in general, and Article 28/2238 that regulates the law to be applied to contracts on intellectual property rights, and Article 29/3239, which regulates contracts on the transportation of goods. The customary workplace law and the law of the country where the employer’s main workplace is located are not binding rules, which are mandatory in all cases. Moreover, in which cases a more closely related law will exist, it is not specified in the law. In line with the principle of protecting the weak contracting party regulated in the article 27, although it has identified a rule, that is more closely related to the law of the country where the employer’s principal place of business is located or the law of the country where the employer’s principal place of business is located, the judge is should be able to avoid applying the more stringent law, if the law of the country where the habitual workplace law or the employer’s principal place of business contains provisions that protect employee’s interests more.

Looking at the text of the article 27, if the parties have made a choice of law, a more stringent legal will not be searched. As an example of a Turkish employee hired in Turkey, when he/she is sent to a foreign country to work, the minimum protection provisions of the law habitual place of work may provide a lower level of protection from the Turkish law. In this case, taking into account the interests of the employee, more stringent exceptions can be used and Turkish law can be applied to the employment contract.

Another application area of the article 27/4 of MÖHUK is the absence of the habitual workplace and also the absence of the employer’s main workplace. In such cases, the law to be applied to the employment contract can be determined by applying the more stringent legal binding rule. In terms of circus ensembles, ice revues and international dance groups, there is neither the habitual workplace nor the employer’s main workplace. In such cases, the characteristics of each case will be examined separately and the law more closely related to the contract will be determined. For example, circus groups travel from country to country as a group and perform their shows. Just as they do not stay in one place permanently, there is no country to which they return, they are constantly on the move. Therefore, the habitual workplace or the employer’s main workplace does not exist. For this reason, it is necessary to determine the law that is in a closer relationship with the employment contract by evaluating the characteristics of each case in dispute separately.

In cases where there is no work depending on a workplace and the employer does not have the main workplace, it is no longer possible to apply the article 27/3 of MÖHUK. In this possibility, more stringent law will have to be applied. Pursuant to the article 8/4 of Rome I Statute, “the law of this country will be applied to the contract if the contract is more closely connected with another country from the countries specified in the second or third paragraphs”. According to the doctrine common citizenship of the employee and the employer, the currency in which the wage is paid, reference to a previous contract applied in the law of the country in question, the employee’s place of residence, the employer’s centre of business, the employer’s place of residence, the language used in the contract or the form of the contract, more closely connected are the factors that can be taken into consideration when determining the law.

2- Conclusion

If the law to be applied in employment contracts containing foreign elements, is not chosen by the parties, the law of the country where the employee is subject to the workplace where the employee is doing his/her job is applied. If the employee does not have a workplace where he/she does his/her job regularly, in other words, if he/ she is constantly travels and does his/her job in different countries, then the provisions of the law of the country where the employer is based are taken as basis. On the other hand, in cases where the law to be applied to the employment contract is not determined by the parties, the law of the place where the work is carried out and the country where the employer’s main workplace is located can be applied to the contract, even in cases where the workplace of the employee or the employer’s main workplace is taken into account.

According to the article 27/1 of MÖHUK, the parties of the employment contract can choose the law of any country they wish, whether it is linked to the contract or not. However, in the event that this legal order chosen by the parties falls under the minimum protection that the employee will have in accordance with the mandatory provisions of the habitual workplace law, the habitual workplace law is applied. In this case, a usefulness comparison should be made between the law chosen and the customary workplace law. The habitual workplace is the workplace where the work is performed mainly in terms of time and content. In other words, the habitual workplace is where the employee actually does his/her job. The method and currency in which the wage is paid is not decisive in determining the habitual workplace. If the employee temporarily works in another country, for example, is assigned abroad for assembly, this workplace will not be considered as his/her habitual workplace. The amount of temporary work should be determined by the judge according to the characteristics of each case. If the employee is hired only to work in a foreign country, or if the employer gives up the intention to take back the employee sent to the foreign country to work or the employee gives up the intention to return, the place where the employee sent to the foreign country actually works becomes his/her habitual workplace.

If the parties do not choose the law to be applied in the work contracts with foreign element or the law choice agreement they have made is not valid for any reason, the workplace law where the employee is doing his/her job is applied. In case the employee temporarily works in another country, this workplace is not considered as the habitual workplace (MÖHUK art. 27/2). In the performance of the work in more than one country, it is necessary to try to determine the habitual workplace. In this case, the habitual workplace is the place where the employee performs the majority of his/her job performance activities or performance activities as specified in the decisions and doctrine of the European Court of Justice, the place where the employee essentially fulfills his/her obligations to the employer, the country in which the employee spends more time to perform his/her job, (Supreme Court 22. HD,

1. 2016/9339
2. 2019/16564,
3. 18.09.2019). However, in the event that the employee does his/her job in a certain country and does his/her job continuously in more than one country, the employment contract is subject to the law of the country where the employer’s main workplace is located (MÖHUK art. 27/3). The main workplace is the country where the employer’s office is located. For example, the law of the country where their main workplace is located is important for seafarers working on high seas. However, if there is a law that is more closely related to the employment contract according to all the conditions, this law can be applied instead of the habitual workplace law and the law of the country where the employer’s main workplace is located (MÖHUK art. 27/4). The most important factor in the application of the more tightly related law is the employee’s interest. For example, if the social environment of the employee locates in Turkey, or the employee is under the Turkey’s social security system, or the wage is paid as Turkish Lira, or the contract refers to a previous employment contract subject to Turkish law, or the employment contract is drafted in Turkish, it can be concluded that the employment contract is in close relationship with Turkish law.

Accordingly, matters such as whether the employment contract can be concluded for a certain period of time; the compensation, overtime, annual leave that the employee will be entitled to have due to the termination of the contract; the nature of the application and payments made by the employer; or the statute of time should be considered according to the law that is determined pursuant to the article 27 of MÖHUK.