Employment & Labour

Penalty in Labor Law

ABSTRACT: Penalty is the obligation of the creditor to perform the obligation to the debtor in the event that a obligation qualified as the primary obligation is not performed at all or as required. In terms of regulating the penalty in the contracts, reserving terms of conditions and the cases of disability of the will, there is no legal validity condition that will cause implementation difficulties, therefore, it is seen that the penalty regulations are frequently encountered in employment contracts. Since there is no regulation in the Labor Law No. 4857 regarding penalty agreed in the contracts of employment, the Turkish Code of Obligations No 6098 and general principles of labor law are implied in this regard.


As it is known, in practice, a penalty clause may be decided between the parties in order to guarantee the receivables of the parties in some form in case of failure of a contract to be performed at all or as required. In this respect, the penalty is an act (performing) obligation that is legally bound to a condition subsequent. The condition subsequent herein is the failure to perform  all kinds of obligations such as undertaking of service promise, procurance of goods or workforce,  at all or without performance as required within the framework of the conditions agreed in the written or oral contract established between the parties. Accordingly, unless otherwise is agreed in the contract, the creditor may directly request the execution of the penalty independent of the commitment and / or this commitment not performed by the other party. However, the basis of the penalty is in any case a debt relationship between the parties, and if there is no binding debtor-creditor relationship between the parties, the validity of the penalty cannot be mentioned. For the penalty, it is adequate if the primary obligation is valid and has not been performed at the stage when the penalty is determined. On the other hand, the invalidity of the penalty will not affect the validity of the primary obligation. 


In the case of a legally valid primary obligation relationship and penalty agreement, the creditor has not the burden of proof that he/she suffers any loss in order to demand the penalty at issue as a result of the debtor’s failure to enforce his obligation or bad performance. Therefore, the penalty is frequently preferred in contracts as it relieves the creditor from the obligation to prove their loss or amount of damage. Because, as a rule, the penal clause can be determined for every obligato. 


Although the content of the penalty agreed by the parties and the form of enforcement can be freely determined by the parties, provided that it is objectively measurable, it appears as a punitive clause that can be requested as optional and in addition to performance because of its legal characteristic. The optional penalty refers to the type requested by waiving the performance of this debt, not with the performance of the primary obligation. In article 179 of the Turkish Code of Obligations, it is regulated that the penalty will be regulated as an optional penal clause. According to this article, if the contract is not performed at all or as required, the creditor may either demand performance or penalty, unless otherwise is agreed. The creditor can exercise her /his right of choice unilaterally and with a declaration of will that must reach the debtor. However, since the debtor does not have such a choice, the type of performance requested by the creditor must be realized.


Another type of penalty is the penalty clause that can be requested together with performance. This type of penalty is also regulated in Turkish Code of Obligation Art.179/II as “If the penalty is determined for the failure of the performance of the obligation on time or place, the creditor can request the enforcement of the penalty associated with the primary obligation.” At this point, it should be reminded that although the penalty depends on the validity of the primary obligation at the time of constitution, if the performance of the primary obligation becomes impossible  to be performed afterwards, the creditor’s right to demand the penalty clause will still continue.


Thirdly, the penalty can be determined in the form of a penalty to rescission of contract. As regulated in Turkish Code of Obligation 179/III, “The debtor reserves the right to prove that she/he is authorized to terminate the contract by rescission or terminating the contract by executing the agreed penalty”. However, in this case, the characteristic of this condition cannot be described as forcing the debtor to perform, since the debtor can relieve the performance by paying the amount agreed in the contract under the name of penalty. For this reason, this condition is also called as the penalty of rescission (termination) in the doctrine. While the penal clause is aimed to ensure that the debtor acts in accordance with her/his obligation, the penalty of termination regulated in 179/III provides the debtor with the opportunity to terminate the contract. The debtor, who pays the penalty, by terminating the contract, is relieved from the obligation to perform the obligation. In order for the creditor to request the penalty, it does not matter whether the debtor is failure to perform at all or as required of the contract.


It will be useful to separately evaluate the concept of penalty in the field of Labor Law. In Article 420 of the Turkish Code of Obligations, it is regulated as “The penalty agreed only against the employee in service contracts is invalid.” In order to the penalty agreed in the employment contracts be valid, it is regulated that it is mutually regulated against both the employee and the employer, or it can only be agree against the employer. In this context, it is aimed to prevent the working conditions to be shaped solely as desired by the employer in order to prevent possible injustices due to the economic dependence of the employee on the employer. Thus, it will be possible to say that the freedom of contract is limited in favor of the employee who is the economically weak party of the contract. Thus, only the regulations against the employee will be deemed invalid under the aforementioned legal regulations. However, it should be emphasized at this point that the invalidity of the unilaterally imposed penalty will not affect the validity of the employment contract, only the penalty will be deemed as invalid.

About Us

We are aware of legal expectations of corporates and business community in need of sustainable growth, development and stability, when they do business in a complicated and emerging jurisdiction.

Recent Posts