ABSTRACT
Determining which law applies to employment contracts with a foreign element is a frequently encountered issue today. The article addresses the topics of directly applicable rules and public policy intervention, which play a significant role in determining the law applicable to employment contracts with a foreign element.
I. INTRODUCTION
The globalization of the world has removed borders in workeremployer relationships, just as in cultural and commercial relations, giving these relationships an international dimension. Today, multinational companies enter into employment contracts with employees in different countries, and employees seek job opportunities in international companies. This situation brings with it an important legal question: Which country’s law will apply to employment contracts that involve parties from different nationalities, are performed in different countries, or are connected to different countries? Determining the law applicable to employment contracts with a foreign element is of great importance for defining the rights and obligations of both employees and employers. Applying the wrong law can lead to outcomes that do not align with the parties’ expectations and can cause serious legal issues.
While parties can determine the law applicable to the contract they will enter into under the principle of freedom of contract, they do not always make an explicit choice of law. In such cases, international treaties, private international law rules, and doctrinal opinions come into play, creating a complex legal picture. This article aims to provide botha theoretical and practical examination by addressing the methods used to determine the law applicable to employment contracts with a foreign element, relevant international agreements such as the Rome Convention on the Law Applicable to Contractual Obligations dated 19.06.1980 in the AET area, and the Rome I Regulation, as well as the Law No. 5718 on Private International Law and Procedural Law (“MÖHÜK”), the regulations of Turkish Private International Law and Turkish Labor Law on this subject, and situations encountered in practice. In this context, it is aimed to contribute to resolving legal uncertainties that may arise in international employment relationships and to more effectively protect the rights of the parties.
II. FOREIGN ELEMENT
The foreign element indicates that a legal relationship is connected to the legal systems of more than one country and requires the determination of which country’s law will apply. The presence of this element leads to the involvement of private international law rules and the emergence of legal disputes. With the rapid rise of globalization in the 21st century, the intensification of international interaction has also brought about labor mobility. The increase in the number of people going to other countries for work has made the determination of the legal status of employment contracts with a foreign element an important issue. The question of which country’s law will apply to such contracts is important for both employees and employers, as well as for maintaining public order.
Determining the foreign element is a fundamental issue of private international law and is also of great importance for legal stability and predictability. The law applicable to contracts with a foreign element is regulated in Article 1 of the MÖHÜK as follows: “The law applicable to transactions and relations of private law with a foreign element, the international jurisdiction of Turkish courts, and the recognition and enforcement of foreign judgments are regulated by this Law.”1. This regulation provides guidance on the foreign ployee habitually performs their work applies to the employment contract. If the employee temporarily performs their work in another country, this workplace is not considered the habitual workplace. (3) If the employee does not habitually perform their work in a specific country but continuously performs it in more than one country, the employment contract is subject to the law of the country where the employer’s principal place of business is located. (4) However, if there is a law more closely related to the employment contract according to all the circumstances of the case, this law may be applied instead of the provisions of the second and third paragraphs.”2. The law applicable to employment contracts is specified by the legislator. Within the framework of Article 27 of the MÖHÜK, for an employment contract to have a foreign element, it is understood that criteria such as the employee or employer being a foreign national, the employer’s business center being located abroad, the employee mostly working abroad, or the contract being closely connected with a foreign country in general terms are required.
III. EMPLOYMENT CONTRACTS
Labor law is the branch of law that regulates the working relationship between the employee and the employer. While this branch of law establishes the rules regarding the formation, execution, and termination of the employment contract, it also defines the rights and obligations of the employee and the employer. Topics such as occupational health and safety, trade union rights, collective bargaining agreements, strikes, and lockouts are also within the scope of labor law. The primary aim of labor law is to ensure justice and social balance in working life, as well as to protect the worker and improve working conditions. Labor law exhibits a dynamic structure that adapts to constantly evolving and changing social and economic conditions.
The definition of an employment contract is provided in the Labor Law No. 48573. An employment contract is a type of contract that imposes obligations on both parties, where one party (the employee) undertakes to perform work dependently, and the other party (the employer) undertakes to pay wages in return for this work. Employment contracts determine the type of work the employee will perform, working conditions, the amount of wages, working hours, and other important matters. An employment contract can be made in writing, verbally, or implicitly, but having it in writing is important to prevent potential disputes in the future. The Labor Law and related legislation contain detailed regulations regarding the content of the employment contract and the rights and obligations of the parties.
IV. APPLICABLE LAW
For the provisions of the MÖHÜK to be applicable, the employment contract must first contain a foreign element. When parties choose the law applicable to a contract, they are deemed to have accepted all the rules of that legal system—mandatory, supplementary, and interpretative—as a whole. Although the parties choose the law applicable to the employment contract, they can later change the applicable law in accordance with the second paragraph of Article 24 of the MÖHÜK4. However, these changes must be made before the contract is concluded. This limitation is introduced in the third paragraph of Article 24 of the MÖHÜK. To speak of a foreign element, the employee or employer constituting the parties to the employment contract must be a foreign national, the employer’s main business center must be located in a foreign country, or the employee must habitually perform their work in a different country.
Although these matters are specifically mentioned in Article 27 of the MÖHÜK, in cases where the parties to the contract do not express a clear intention, Article 24 of the MÖHÜK5 should be referred to. The fourth paragraph of Article 24 states6: “If the parties have not made a choice of law, the law most closely connected to the relationship arising from the contract shall apply. This law is considered to be the law of the habitual residence of the party performing the characteristic obligation at the time of the conclusion of the contract, or in contracts established for commercial or professional activities, the law of the place of business of the party performing the characteristic obligation, or if not available, the law of the place of residence, or if the party performing the characteristic obligation has multiple places of business, the law of the place of business most closely connected with the contract. However, if there is a law more closely related to the contract according to all the circumstances of the case, the contract shall be subject to this law.”
Although employment contracts arise from a private law relationship, the parties are not entirely in equal positions. Therefore, some limitations have been imposed during the choice of law. In employment contracts, due to the economic and social power imbalance between the parties, limitations have been placed on the principle of freedom of contract to protect the employee. The purpose of these limitations is to prevent the employer from using their strong position to force the employee into choosing a law that serves the employer’s interests. In this context, the freedom of the parties to choose the law is restricted to protect the employee. This restriction allows for the choice of law only in a manner that benefits the employee.
The parties are free to choose the law applicable to their employment contracts and can select the law of any country; the chosen law does not need to be connected to the contract. However, the chosen law cannot provide less protection than the minimum protection provided to the employee by the mandatory provisions of labor laws. According to the second paragraph of Article 27 of the MÖHÜK7, if the law chosen by the parties provides less protection than the law that would normally apply, the choice of law by the parties is deemed invalid, and the objective legal provisions that protect the employee are applied. Therefore, the law chosen by the parties applies to an employment contract. If it results in a more advantageous situation for the employee, the law of another country may also be applied due to mandatory provisions and objective connecting rules. However, even if a law that contains less advantageous provisions for the employee is chosen, this choice is not entirely invalid. Instead of the provisions against the employee, the law of the employee’s usual place of work is applied. In other matters, the law chosen by the parties remains valid. In determining the most appropriate law, the judge must make an objective assessment from a neutral perspective. This assessment is made by identifying the most advantageous provisions for the employee within the scope of the employment contract, based on the perspective of a reasonable employee. This limitation is referred to as the “limitation in terms of the principle of utility.”
V. OBJECTIVE BINDING RULES
A. Habitual Workplace
According to the second paragraph of Article 27 of the MÖHÜK, “If the parties have not made a choice of law, the law of the workplace where the employee habitually performs their work shall apply to the employment contract.”8. Therefore, the first connecting rule accepted in the law is the law of the habitual workplace where the employee performs their work. The habitual workplace refers to the place where the work subject to the employment contract is mostly performed by the employee. To determine the employee’s habitual workplace, the entire employment contract should be considered, and an assessment should be made of which country the employee predominantly performs their duties in terms of quality, quantity, and duration. It is generally accepted that the most appropriate law for the parties in employment contracts is the law of the place where the work is performed (lex loci laboris). Article 27 of the MÖHÜK introduces a special connecting rule for employment contracts, based on the principle of the closest connection, by taking the law of the habitual workplace, which is the place of performance of the characteristic obligation, as the basis.
The second paragraph of Article 27 of the MÖHÜK states that an employee’s temporary work in another country does not change the habitual workplace, but it does not define the concept of “temporary.” According to doctrine, shortterm assignments such as business trips, assembly, fair, and exhibition assignments do not affect the center of gravity of the work and, therefore, the habitual workplace, and are considered as an “extension” of the habitual workplace. However, for temporary local workers who work only at a specific location such as a fair or exhibition, the habitual workplace is the location of the fair or exhibition where the work is performed, and the situation of the habitual workplace’s extension cannot be mentioned.
B. The Country Where the Employer’s Main Workplace is Located
According to the third paragraph of Article 27 of the MÖHUK, “In cases where the employee does not habitually perform their work in a specific country but continuously works in more than one country, the employment contract is subject to the law of the country where the employer’s main workplace is located”9. In the regulation made to protect the parties of the employment contract from uncertainties and difficulties, the concept of “main workplace,” as stated in the rationale of the law, refers to the country where the employer’s central workplace is located. In a globalizing world, it is now common for an employee to work continuously in different countries with the same work intensity. The law of the country where the employer’s main workplace is located applies only when the work is not continuously performed in a specific country but is continuously performed in different countries. This rule applies to longhaul drivers, air, sea, and railway transportation personnel, personnel assigned in international aidrequiring disasters (such as maritime accidents, oil fires, etc.), and work conducted in international waters, space, or stateless areas. This rule is particularly observed in disputes concerning flight personnel in airline companies and ship crews working in international waters.
If a job is performed in more than one country or if an employee continuously fulfills their obligations to the employer in more than one country, determining the “habitual workplace” becomes challenging. Therefore, if the habitual workplace cannot be determined, the law of the country where the employer’s main workplace is located is applied.
According to the decisions of the European Court of Justice, an employee’s “habitual workplace” is determined by considering various criteria. These criteria include the central point of the employee’s activities, the place they return to after business trips, the place where they organize their work, the location of their office in the country where they reside, the country where they spend the most time for work purposes, and the place where they fulfil their obligations to the employer.
C. Application of the Law More Closely Related to the Employment Contract (Exception Clause)
According to the fourth paragraph of Article 27 of the MÖHUK, “However, if there is a law more closely related to the employment contract according to all the conditions of the case, this law may be applied to the contract instead of the provisions of the second and third paragraphs”10. This flexible provision, which can come into play in determining the law applicable to the employment contract as specified in the second and third paragraphs of Article 27 of the MÖHUK, is left to the discretion of the judge. With the term “may be applied” in the legal article, the judge’s discretion is strengthened, and it can be said that this provision can be used by the judge as an “escape ramp” in favor of the employee. Therefore, by using this provision in favor of the employee, the judge will have made a decision in line with the “principle of utility”.
In determining a closer connection for employment contracts, criteria such as the nationalities of the parties, the employee’s place of residence, the employer’s business center and domicile, the language and form of the contract, the place where the contract was signed, the currency in which the salary is paid, the national labor law on which the contract is based, references to previous contracts, the place where the employee was hired, and the place where tax and social security registration is held are evaluated.
VI. SITUATIONS PREVENTING THE APPLICATION OF FOREIGN LAW
A. Directly Applicable Rules
Directly applicable rules are substantive legal rules that reflect the economic, social, or political policies of states in private law relations and are necessary for the implementation of these policies, and they must be applied in all relevant disputes. Directly applicable rules not only consider the interests of the parties but also the public interest. When determining whether provisions in labor law are directly applicable, the focus should be on the purpose of the provision rather than its absolute or relative mandatory nature. Article 6 of the MÖHUK defines the directly applicable rules of Turkish law. According to this, “In cases where foreign law is applicable, if the situation falls within the scope of the directly applicable rules of Turkish law in terms of the purpose and scope of the regulation, that rule is applied.”11. Therefore, if there are directly applicable Turkish legal rules, the judge applies them directly and does not investigate the law to be applied according to conflict of laws rules. It is not necessary for these rules to create a situation in favor of the employee.
B. Public Order
In international employment contracts and labor relations, public order intervention will be less than in other contracts because there are already many mandatory and directly applicable rules in this area. Public order intervention will only be possible if the decision to be made as a result of the application of foreign law is clearly contrary to the fundamental principles of Turkish law. In line with Article 5 of the MÖHUK, it is stipulated that.
“If the provision of the applicable foreign law applied to a specific case is clearly contrary to Turkish public order, this provision shall not be applied; if deemed necessary, Turkish law shall be applied.”12
Public order intervention typically arises when the employment contract provides no protection to the employee. Examples of situations considered contrary to public order within the framework of Turkish law include not granting the employee the right to terminate for just or valid reasons, ignoring the employee’s union rights, stipulating inhumane working hours in the contract, not providing any compensation for the employee’s services, not recognizing rights such as holidays and annual leave, disregarding compensations the employee is entitled to, and not providing any security for the employee in the event of a work accident.
In the 2012 Unification of Judgments Decision of the Court of Cassation, the circumstances under which public order intervention should exist are grounded with expressions such as “contrary to the Turkish general concept of decency and morality, the fundamental understanding of justice on which Turkish laws are based, the general policy on which Turkish laws are based, the fundamental rights and freedoms enshrined in the Constitution, the common principles valid in the international arena and the rules based on the principle of good faith in private law, the legal principles that are the expression of the moral principles and understanding of justice jointly adopted by civilized communities, the level of civilization of society, the political and economic regime, and human rights and freedoms.13
VII. COMPETENT COURT
In labor law disputes involving a foreign element, the question of which courts will have jurisdiction is a separate issue. Under Article 44 of the MÖHUK, “In disputes arising from an individual employment contract or employment relationship, the court where the workplace where the employee habitually performs their work is located in Turkey is competent. In cases where the employee files a lawsuit against the employer, the Turkish courts where the employer’s domicile, the employee’s domicile, or habitual residence is located are also competent.”14. In lawsuits filed by the employee against the employer, the Turkish courts where the employer’s or employee’s residence is located are also competent. The possibility of ignoring the jurisdiction of Turkish courts and granting jurisdiction to the courts of another country through a jurisdiction agreement is limited by another article of the MÖHUK. According to the second paragraph of Article 47 of the MÖHUK, “The jurisdiction of the courts determined in Articles 44, 45, and 46 cannot be eliminated by agreement of the parties.”15. Therefore, in labor law disputes involving a foreign element, only Turkish courts are granted jurisdiction.
VIII. CONCLUSION
In employment contracts with a foreign element, the law to be applied is of great importance in terms of the rights and obligations of both the employee and the employer. Article 27 of the International Private and Procedural Law (MÖHUK) No. 5718 specifies the methods used to determine the law applicable to employment contracts. The parties are free to choose the law applicable to their employment contracts and may select the law of any country; the chosen law does not need to be connected to the contract. However, the chosen law cannot provide less protection than the minimum protection provided to the employee by the mandatory provisions of labor laws. According to the second paragraph of Article 27 of the MÖHUK, if the parties have not made a choice of law, the law of the place where the employee habitually performs their work is applied to the employment contract. The habitual workplace refers to the place where the work subject to the employment contract is predominantly performed by the employee. To determine the employee’s habitual workplace, the entire employment contract should be considered, and an evaluation should be made regarding which country the employee predominantly performs their duties in terms of quality, quantity, and duration. According to the third paragraph of Article 27 of the MÖHUK, if the employee does not habitually perform their work in a specific country but continuously works in more than one country, the employment contract is subject to the law of the country where the employer’s main workplace is located. The law of the country where the employer’s main workplace is located is applied only when the work is not continuously performed in a specific country but is continuously performed in different countries. According to the fourth paragraph of Article 27 of the MÖHUK, if there is a law more closely related to the employment contract according to all the conditions of the case, this law may be applied to the contract instead of the provisions of the second and third paragraphs. This provision is left to the discretion of the judge, and with the term “may be applied” in the legal article, the judge’s discretion is strengthened, allowing this provision to be used by the judge as an “escape ramp” in favor of the employee. In employment contracts with a foreign element, the applicable law may be the law chosen by the parties, the law of the employee’s habitual workplace, the law of the employer’s main workplace, or a law more closely related to the employment contract. However, the chosen law cannot provide less protection than the minimum protection provided to the employee by the mandatory provisions of labor laws.
Directly applicable rules are substantive legal rules that reflect the economic, social, or political policies of states in private law relations and are necessary for the implementation of these policies, and they must be applied in all relevant disputes. Directly applicable rules not only consider the interests of the parties but also the public interest. Public order intervention is possible if the decision to be made as a result of the application of foreign law is clearly contrary to the fundamental principles of Turkish law. In line with Article 5 of the MÖHUK, if the provision of the applicable foreign law applied to a specific case is clearly contrary to Turkish public order, this provision shall not be applied; if deemed necessary, Turkish law shall be applied. The question of which courts will have jurisdiction in labor law disputes involving a foreign element is a separate issue. Under Article 44 of the MÖHUK, in disputes arising from an individual employment contract or employment relationship, the court where the workplace where the employee habitually performs their work is located in Turkey is competent. In cases where the employee files a lawsuit against the employer, the Turkish courts where the employer’s domicile, the employee’s domicile, or habitual residence is located are also competent. In conclusion, in employment contracts with a foreign element, the applicable law may be the law chosen by the parties, the law of the employee’s habitual workplace, the law of the employer’s main workplace, or a law more closely related to the employment contract. However, the chosen law cannot provide less protection than the minimum protection provided to the employee by the mandatory provisions of labor laws. Directly applicable rules and public order intervention also play an important role in determining the law applicable to employment contracts with a foreign element.
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FOOTNOTE
1 Law No. 5718 on Private International Law and Procedural Law Article 1, Official Gazette (OG) No. 26728 dated 12.12.2007.
2 Law No. 5718 on Private International Law and Procedural Law Article 27, Official Gazette (OG) No. 26728 dated 12.12.2007.
3 Law No.4857 on Labor Law Article 8, Official Gazette (OG) No. 25134 dated 10.06.2023.
4 Law No. 5718 on Private International Law and Procedural Law Article 24/2, Official Gazette (OG) No. 26728 dated 12.12.2007.
5 Law No. 5718 on Private International Law and Procedural Law Article 24/3, Official Gazette (OG) No. 26728 dated 12.12.2007.
6 Law No. 5718 on Private International Law and Procedural Law Article 24/4, Official Gazette (OG) No. 26728 dated 12.12.2007.
7 Law No. 5718 on Private International Law and Procedural Law Article 27/2, Official Gazette (OG) No. 26728 dated 12.12.2007.
8 Law No. 5718 on Private International Law and Procedural Law Article 27/2, Official Gazette (OG) No. 26728 dated 12.12.2007.
9 Law No. 5718 on Private International Law and Procedural Law Article 27/3, Official Gazette (OG) No. 26728 dated 12.12.2007.
10 Law No. 5718 on Private International Law and Procedural Law Article 27/4, Official Gazette (OG) No. 26728 dated 12.12.2007.
11 Law No. 5718 on Private International Law and Procedural Law Article 6, Official Gazette (OG) No. 26728 dated 12.12.2007.
12 Law No. 5718 on Private International Law and Procedural Law Article 5, Official Gazette (OG) No. 26728 dated 12.12.2007.
13 Court of Cassation Unification of Judgments Assembly, E. 2010/1, K. 2012/1, Dated: 12.02.2012.
14 Law No. 5718 on Private International Law and Procedural Law Article 44, Official Gazette (OG) No. 26728 dated 12.12.2007.
15 Law No. 5718 on Private International Law and Procedural Law Article 47/2, Official Gazette (OG) No. 26728 dated 12.12.2007.
