ABSTRACT

Commercial companies may choose to merge for various different reasons, and this leads to some legal consequences. Since the principle of complete succession is applied in mergers, all the assets and liabilities of the transferor company, as well as the employment contracts, will automatically pass on to the transferee company. In this article, it has been examined how the employment contracts of the employees will be affected by the mergers and whether the employees have a right to object in this regard. 

In the first part of the article, mergers and their types are explained, in the second part, the provisions regarding the employees’ right to object in the mergers are examined, which provision to prevail is determined, and finally the implementation of the relevant provision is demonstrated. 

I. INTRODUCTION

Factors such as the global market, technological developments, and a competitive environment lead companies to structural changes. Some of the underlying reasons are being able to cope with current conditions more powerfully and having a more efficient and more sustainable commercial structure. These structural changes also raise the question of what the fate of the employment relations of the employees working in that company will be. The issue of whether the employment relations will continue or not and whether the employee has the right to object to this change is very important, especially in terms of labor law. 

Although the relevant issue should have been subject to regulation in the Labor Code due to its importance in that area, it has been regulated in the Turkish Commercial Code (“TCC”) on the basis of the Swiss Code of Obligations (“SCO”). The existence of different regulations has brought with it the question of which provision will prevail. This ambiguity has been resolved in the light of certain criteria with the Parliamentary Justice Commission Report. 

Some details regarding the implementation of the provision regulating the employees1 right to object were not regulated by law, and a gap was left in this regard. In this article, the opinions in the doctrine have been evaluated and the gaps have been resolved, and how the employment relations of the employees will be affected by the structural changes of the company has been identified.

II. COMPANY MERGERS

A. The Concept of Mergers

One of the preferred structural changes in order to stand stronger in today's business world is company mergers. While the concept of mergers is expressed with the term "fusion" in the German and French texts of the Swiss Merger Act, it is expressed with the term "merger" in the British and American legal systems2. This type of restructuring, which is expressed as merger in Turkish law, is defined in many different ways in the doctrine. 

Bahtiyar defined merger as “the combination of more than one company under the roof of one of the companies or a newly established company, without liquidating their assets, and the partners of the merging company getting a share from the merged partnership according to a change measure”3. 

The restructuring of commercial companies through the merger is regulated between Articles 134 and 158 of the TCC4. The definition of merger has not been made in the TCC, but different types of mergers are mentioned in Article 136/3. The relevant provision is as follows: “Merger occurs when the shares of the transferee are acquired by the shareholders of the assignee on the basis of an exchange ratio in return for the wealth of the assignee…”. At the end of the merger, the transferee company acquires the assets of the transferor company as a whole, and finally, the transferor company is dissolved and removed from the trade registry.

B. Types of Mergers

In accordance with Article 136/1 of the TCC, the merger of companies can occur in two ways. These are “merger by new establishment” and “merger by acquisition”. In both scenarios, the assets of the merging commercial companies, that is, all the rights and debts of these companies, combine and form a whole5.

1. Merger by New Establishment

Merger by new establishment occurs when two or more commercial companies transfer their assets to a newly established company through the principle of complete succession6. All assets, rights and debts of the companies dissolved in the merger through the new establishment pass to the newly established company as a whole. Companies that lose their legal personality as a result of the merger are terminated by being removed from the registry7.

2. Merger by Acquisition

In a merger by acquisition, one or more companies are transferred to another company with all their assets. In this merger between a transferor and a transferee, the transferee continues to exist, and the transferor ends up without liquidation by adding its assets to the transferee. As a result, the transferred company is deleted from the trade registry. Such mergers are also called "joining", "fusion", or "amalgamation"9.

C. Effects of the Merger on Employment Contracts

Mergers are one of the legal transactions that enable the transfer of the workplace. In order to protect the rights of employees working in an establishment, the aftermath of employment contracts in case of transfer is regulated by the legislator. The relevant regulation in Article 6/1 of the Labor Code10 is as follows: “When, due to a legal transaction, the establishment or one of its sections is transferred to another person, employment contracts existing in the establishment or in the section transferred on the date of the transfer shall pass on to the transferee with all the rights and obligations involved.” As a result of the totality of the merger, the existing employment contracts on the date of transfer automatically (ipso iure) pass to the transferee. There are different regulations on whether the employees have the right to object to the merger, and, therefore, to the transfer.

III. EMPLOYEES'RIGHT TO OBJECT IN MERGERS

A. Conflicting Regulations

1. Generally

The right to object is a right that prevents the continuation of the employment relationship with the transferee employer, in case the employee does not want to work with an employer that has been changed against his will. This right is a reflection of the right of the employee to freely choose his employer in case of transfer of workplace and the will to protect the personal rights of the employee11. 

Looking at the above-mentioned Labor Code Article 6 regulation, it is seen that the legislator does not grant the employee a right to object against the transfer. At the same time, it is stipulated in the relevant provision that the transfer will not be considered as a reason for rightful termination for the employee. Article 6 of the Labor Code is an inadequate and inappropriate regulation because freedom of contract of employees is protected under Turkish Constitution Article 49. Besides that, it also includes the right to freely determine the other party of the labor contract12. Forcing the employee to work with an employer he/ she does not want will be a violation of his/ her freedom of labor and contract. 

In response to this regulation in the Labor Code, Article 178 of the TCC titled "Expiration of labor relations" provides the right to object in favor of the employee. Although Article 178 is regulated under the section regarding company divisions, it will also be valid for mergers with the reference of Article 158/4 of the TCC13. The relevant provision is as follows: “In a split-up or spin-off, provided that the related employee does not object, the service contracts with employees are transferred to the transferee with all rights and debts arisen thereby until the transfer day. If the employee objects, the service contract is terminated at the end of the legal period of dismissal; the transferee and the employee are liable to fulfil the contract until that date.” In accordance with this regulation, the service contracts made with the employees pass to the transferee with all the rights and obligations arising from this contract until the transfer day, unless the employee objects. If the employee objects, the service contract will expire at the end of the statutory dismissal period. The right to object regulated in this article will find application in cases such as mergers, divisions and conversions in commercial companies14. 

The provision of Article 178 of the TCC is also an inadequate regulation because the employees will continue to work in that workplace during the notice period in order not to pay the notice pay (/fee).

2. Justice Commission Report

In the event that there are two such conflicting provisions, which legal provision will find an application area depends on a number of criteria. In this respect, the relationship between the previous law and the next law and the special law and the general law should be evaluated. As a result of this evaluation, the new and special law will prevail over the old and general law and will find an execution area. 

Considering the previous law – next law relationship of the above-mentioned Labor Code and the TCC, it is clear that the TCC dated 13.01.2011 will prevail over the Labor Code dated 22.05.2003. In addition, even if  there is no general-private law relationship between the two laws, the regulation in the TCC can be considered as a special provision compared to the Labor Code since it only concerns the transfer of business relations that will occur as a result of mergers, divisions and conversions in commercial companies. In light of the specified criteria, it will be possible to say that the provision of Article 178 of the TCC will prevail over Article 6 of the Labor Code. However, the source that will show the best way to reach a definite conclusion on the subject will be the Parliamentary Justice Commission Report (“Report”), which reveals the will of the legislator while making the regulations. 

In the Report, it is stated that Article 6 of the Labor Code will be applied in all cases of full and partial transfer of the workplace, and the following statements are included in terms of Article 178 of the TCC: “Article 178 of TCC, which is applied only in mergers, divisions and conversions, is a special provision compared to Article 6 of the Labor Code. The superior aspect of this article to Article 6 of the Labor Code is that it has accepted joint responsibility in favor of the employee.15”. In this report, it was discussed whether Article 178 of the TCC is necessary while there is Article 6 of the Labor Code and it was concluded that it is necessary. At the same time, it was stated that the gaps in Article 6 of the Labor Code could be filled by making use of Article 178 of the TCC, and that Article 178 of the TCC was better and more appropriate for the purpose than Article 6 of the Labor Code.

B. Interpretation of Article 178 of the TCC

1. Legal Nature of the Objection

In order to evaluate the way in which the right to object is exercised and its results in the most accurate way, first of all, it is necessary to determine its legal nature correctly. The right of the employee to object to the transfer is a right that creates a new legal status. Rights in this nature, if used, result in the emergence of a new legal situation. A new situation may occur in the form of establishing a new legal relationship, changing or terminating an existing legal situation16. The employee's right to object to the transfer is a right that terminates a legal situation, since it terminates the employment relationship between the employee and the employer. No justifiable reason is sought for the use of the right that creates a new legal status, so the employee will be able to use this right arising from the law, even if he/ she does not have a justified reason. 

One of the most basic features of these rights is that they end with the duly exercise of the right. As a result of this feature, once the right is exercised and the result occurs, it cannot be reversed17. Since the employee’s right to object is of that nature, the right gets ceased when the employee uses his/ her right, and the employee cannot withdraw from this statement.

2. Exercise of the Right to Object

i. Period and Addressee of the Objection

Although the employees' right to object to the transfer has been regulated in Article 178 of the TCC, no regulation has been brought about on how the right of objection will be used; its duration, addressee or practice. The fact that the objection period is not determined is a situation that may cause problems in practice. In the process of solving this problem, it is necessary to benefit from the legal regulations in comparative law and the views in the doctrine18. 

TCC Article 178 is based on Article 133 of the SCO, as can be understood from the reasoning of the article. Since the period of the objection is not clearly determined in the SCO, it is necessary to evaluate the thoughts in the doctrine. An opinion in Swiss doctrine argues that the one-month probationary period stipulated for employment contracts in SCO Article 355/b/1 should also be applied in terms of the objection period. Another view argues that this gap should be filled within a reasonable period of time, which can be given in accordance with the rule of good faith. In terms of both views, the employer is required to inform the employees about the transfer in accordance with Article 333/a of the SCO19. 

An opinion in Turkish doctrine argues that the six working days given to employees in Article 22 of the Labor Code titled "Change in working conditions and termination of the contract" should be applied here as well by analogy20. Pursuant to this opinion, any change in the employment relationship by the employer will be accepted as a substantial change in the contract and a period of six working days will be applied. This view is criticized in the doctrine because the time given is not enough for the employee to make a well-thought decision. 

Another view, in line with the above-mentioned Swiss doctrine, is that from the moment the employee learns of the merger, he/ she can exercise his/ her right to object within a reasonable period of time in accordance with the characteristics of the concrete case21. 

The most appropriate view, on the other hand, is the adoption of the one-month objection period accepted in Swiss judicial decisions and comparative law, which is considered reasonable22. 

Uncertainty about the period is also in question for the addressee. Since there is no clear regulation in Article 178 of the TCC, it is unclear whether the objection should be made to the transferor employer, the transferee employer or both23. 

Uncertainty regarding the objection period in the legal regulations is also in question for the starting moment of the objection period. For this reason, it is suggested in the doctrine that the objection period will start from the moment of notification if the employer notifies the employee of the transfer, and from the moment the employee is aware of the transfer of the workplace if the notification is not made24.

ii. Content and Form of the Objection

Under Article 178 of the TCC, the content of the objection to be made by the employee is not especially regulated. For this reason, a clear statement that the employee objects to the transfer should be considered sufficient in terms of the content of the objection. As stated above, the employee does not need to show a just cause while making an objection, so it is sufficient for the employee to simply state that he objects to the transfer. 

As for the form of the objection, since no form requirement is sought, it will be sufficient for the employee to convey his/ her objection verbally or in writing to the addressee, but a written objection will be useful for ease of proof25.

3. Nature of Termination and Severance Pay

Another uncertainty created by Article 178 of the TCC is whether there is a termination as a result of the employee's objection and whether the employee is entitled to severance pay. 

It is debatable in the doctrine whether the right to object stipulated in Article 178 of the TCC constitutes a type of termination. According to one opinion, the execution of the right to object does not bind the finalization of the employment contract to its termination but it argues that it is required by law. This opinion states that in the SCO, the employee's objection is not regulated as a termination, but as a specific finalization26. According to another view, since the spontaneous termination of the contract is foreign to our legal system, it should be accepted that the employment contract is finalized by the employer if the right to object is exercised27. Another opinion argues that the contract is terminated by the employee when he uses his right to object, but if this opinion is accepted, the employees will be deprived of their labor rights, and it will be inconsistent with the purpose of the provision. In Swiss doctrine, the employee's objection is not considered a form of termination. In this respect, the most accurate interpretation is the acceptance that the contract is automatically finalized as per the law. 

Another issue to be determined, apart from the nature of termination, is the issue of severance pay. Severance pay is one of the rights that may arise depending on the termination of the employment contract. Its legal basis is Article 14 of the Labor Code No. 1475, which is still in force28. If the employee terminates the employment contract due to one of the limited situations regulated in Article 14 of the Labor Code No. 1475, the employee may be entitled to severance pay. There is no clarity in the relevant article in terms of the employee's termination of the employment relationship by using his/ her right to object. As stated above, according to the view mostly adopted in the doctrine, it is accepted that the objection regulated in Article 178/2 of the TCC is not a notice of termination. For this reason, the employee’s objection cannot be considered among the cases of rightful termination, which entitles the employee to severance pay. However, since the provision of Article 178 of the TCC is a regulation for the benefit of the employee, if an assessment is made in accordance with the purpose, the employee’s failure to qualify for severance pay will be contrary to the purpose of the provision29, “The right to object is a right granted to the employee by law, and it cannot be considered that if it is exercised, it will result in deprivation of another right.”30 . 

The most advantageous method in terms of solving the uncertainty created by this gap in the law is for the legislator to fill the relevant gap by making a legal regulation. Until such a regulation is made, it should be accepted that the employee should not be deprived of severance pay when the provision is interpreted together with its purpose.

IV. CONCLUSION

Mergers, which are increasing day by day due to the change in the commercial conditions mentioned in the article, result in the transfer of the workplace. How the business affairs will be affected by this transfer is subject to separate regulations in various laws. While the Labor Code does not give the employee the right to object to the transfer, the TCC regulates the right to object in favor of the employee. As explained above, the provision of Article 178 of the TCC will prevail as a new and special law compared to Article 6 of the Labor Code. This point, reached in light of general principles, is supported by the Parliamentary Justice Commission Report. This situation will also be effective in terms of ensuring the constitutional rights of the employee. 

After it has been determined that Article 178 of the TCC will be applied, it should be determined how, in what time, and against whom this right to object shall be used. Since there is a gap in the law in this regard, there are various opinions in the doctrine. While evaluating the opinions, they should be assessed on the basis of the interests of the employee, who is in a powerless position against the employer. In this article, some conclusions have been reached by keeping the interests of the employee in the foreground, both in terms of the period of the objection and the severance pay that the employee will be entitled to. 

With the provision of Article 178 of the TCC, the interests of the employer are also well protected. Even if the employee objects, he/ she must continue to work with his/ her employer until the end of the legal dismissal period. As stated in the Parliamentary Justice Commission Report, the provision of Article 178 of the TCC is a necessary regulation, and it plays an important role in ensuring the interests of both parties.

BIBLIOGRAPHY

FATİH BİLGİLİ, ERTAN DEMİRKAPI, Şirketler Hukuku, Dora Yayınları, Volume 9, Bursa 2013. 

FAZLI ENES DÖNMEZ, 6102 sayılı TTK Kapsamında Ticaret Şirketlerinde Birleşme, Bölünme ve Tür Değiştirmenin İş İlişkilerine Etkisi, (İş İlişkilerine Etkisi) Volume 1, Adalet Yayınevi, Ankara 2021. 

FERNA İPEKEL KAYALI, Türk Ticaret Kanunu’na Göre Birleşmeler, Volume 1, Vedat Kitapçılık, Istanbul 2014. 

GÜLSEVİL ALPAGUT, İşyerinin Devri ve İş Sözleşmesini Fesih Hakkı, Beta Yayınları, Istanbul, 2010. 

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MEHMET BAHTİYAR, Ortaklıklar Hukuku, Beta Yayınları, Updated Volume 12, Istanbul 2017. 

MUHİTTİN ASTARLI, ‘‘Karşılaştırmalı Hukukta ve Türk Hukukunda İşyeri Devrinde İş İlişkisinin Devralan İşverene Geçişine İtiraz Hakkı’’ (İtiraz Hakkı), Çalışma ve Toplum Dergisi, Volume 36, 2013/1. 

MUSTAFA ALP, “Yeni Türk Ticaret Kanunu’na Göre Bölünme Birleşme ve Tür Değiştirme İş İlişkileri”, Çalışma ve Toplum Dergisi, 2012/1, Volume 32. 

NURİ ÇELİK, NURŞEN CANİKLİOĞLU, TALAT CANBOLAT, İş Hukuku Dersleri, Updated Volume 32, Istanbul 2019. 

REHA POROY, ÜNAL TEKİNALP, ERSİN ÇAMOĞLU, Ortaklıklar Hukuku I, Updated Rewritten Volume 14, Istanbul 2019. 

SİMGE ZERCEK, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, Postgraduate Thesis, 2020, Istanbul. Turkish Commercial Code Draft and Justice Commission Report (1/324), Grand National Assembly of Turkey, Legislative Session: 23, Legislative Year: 2, Volume: 96. Official Gazette dated 10.06.2003, Number: 25134. Official Gazette dated 14.02.2011, Number: 27486. 

FOOTNOTE

1 Reha Poroy, Ünal Tekinalp, Ersin Çamoğlu, Ortaklıklar Hukuku I, Updated Rewritten Volume 14, Istanbul 2019, p.90. 

2 Ferna İpekel Kayalı, Türk Ticaret Kanunu’na Göre Birleşmeler, Volume 1, Vedat Kitapçılık, Istanbul 2014, p. 1-2. 

3 Mehmet Bahtiyar, Ortaklıklar Hukuku, Beta Basım, Updated Volume 12, Istanbul 2017, p. 60.

4 Official Gazette dated 14.02.2011, Number: 27486. 

5 Hasan Pulaşlı, Şirketler Hukuku Genel Esaslar, Volume 6, Adalet Yayınevi, Ankara 2020. 

6 Hasan Pulaşlı, Şirketler Hukuku Şerhi, Volume 2, Adalet Yayınevi 2015, p. 130. 

7 Fazlı Enes Dönmez, 6102 sayılı TTK Kapsamında Ticaret Şirketlerinde Birleşme, Bölünme ve Tür Değiştirmenin İş İlişkilerine Etkisi (İş İlişkilerine Etkisi), Volume 1, Adalet Yayınevi, Ankara 2021, p. 75. 

8 Fatih Bilgili, Ertan Demirkapı, Şirketler Hukuku, Dora Yayınları, Volume 9, Bursa 2013, p. 69. 

9 Poroy, Tekinalp, Çamoğlu, Ortaklıklar Hukuku I, p. 102. 

10 Official Gazette dated 10.06.2003, Number: 25134. 

11 Simge Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, Postgraduate Thesis, 2020, Istanbul, p. 81.

12 Fazlı Enes Dönmez, İş İlişkilerine Etkisi, p. 107. 

13 Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, p. 115. 

14 Mustafa Alp, ‘‘Yeni Türk Ticaret Kanunu’na Göre Bölünme Birleşme ve Tür Değiştirme İş İlişkileri’’, Çalışma ve Toplum Dergisi, 2012/1, Volume 32, p. 56. 

15 Turkish Commercial Code Draft and Justice Commission Report (1/324), Grand National Assembly of Turkey, Legislative Session: 23, Legislative Year: 2, Volume 96.

16 Kemal Oğuzman, Nami Barlas, Medeni Hukuk, Istanbul 2016, Volume 22, p. 164. 

17 Oğuzman, Barlas, Medeni Hukuk, İstanbul 2016, Volume 22, p. 169. 

18 Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, p. 87. 

19 Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, p. 87. 

20 Alp, İş İlişkileri, p. 63

21 Nuri Çelik, Nurşen Caniklioğlu, Talat Canbolat, İş Hukuku Dersleri, Updated Volume 32, Istanbul 2019, p. 147. 

22 Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, p. 89. 

23 Muhittin Astarlı, ‘‘Karşılaştırmalı Hukukta ve Türk Hukukunda İşyeri Devrinde İş İlişkisinin Devralan İşverene Geçişine İtiraz Hakkı’’ (İtiraz Hakkı), Çalışma ve Toplum Dergisi, Volume 36, 2013/1, p. 90. 

24 Astarlı, İtiraz Hakkı’, p. 92. 

25 Alp, İş İlişkileri, p. 63. 

26 Astarlı, İtiraz Hakkı, p. 95. 

27 Gülsevil Alpagut, İşyerinin Devri ve İş Sözleşmesini Fesih Hakkı, Beta Yayınları, Istanbul, 2010, p. 196. 

28 Zercek, “Şirketlerde Yapısal Değişikliklerin İş Sözleşmelerine Etkisi”, p. 93.

29 Alp, İş İlişkileri, p. 66. 

30 Alp, İş İlişkileri, p. 66.