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Covid-19 Pandemic Effects on Business

A.BUSINESS CONTINUITY

The “business continuity” means that businesses can continue their activities regardless of time. As the Article 78 of the Turkish Commercial Code (“TCC”) envisages that “valuations, unless they are against the actual or legal situations, shall be conducted pursuant to the principle of business continuity”, it would be true to set forth, continuity of the enterprises and businesses is as accepted as a main priority under relevant law.

By taking into considereation of the prioritized “business continuity” concept throughout this legal opinion, problems and masures which are already taken and might be taken in the future due to Covid-19 outbreak will be analyzed in detail within the framework of the business continuity by aiming to draw attention to key items that we believe companies should consider during these difficult times as Covif-19’s impact on Turkey, like everywhere else worldwide, has become the most important issue on companies’ agendas.

B. PROBLEMS DUE TO COVID-19

Non-Attendance to Work by the Employees or the Employees Being Forced by the Employer to Come to Work

According to the relevant data, as of February 10, 2020, the negative impacts of the Covid-19 outbreak have already outpaced SARS, another type of virus which negatively affected the world. Due to this reason, some employees decided to not go to work, some applied to medical reports, some resigned, and some were dismissed. Employees who do not go to work or who cannot go to work, will obviously experience some economic difficulties if they cannot get their salaries. In short, the epidemic has created such a situation that it is difficult for employees to mitigate the effects of the epidemic considering the cases which employees are nor capable to work or are forced by their employers to go to work. Hence, in order to protect employees’ health safety, some employers have changed their work arrangements and switched towars telework and have given opportunity to their employees to maintain their economic survival. As of today, it can be seen that even large firms have suspended their operations, temporarily shutterd their stores to, if possible, shift online.

Cancellation of the Normal and Ongoing Activities throughout the Country

Since the commencement of the spread of Covid-19 outbreak; cultural and art activities, concerts, conferences, meetings have been either suspended or cancelled whereas even no hearings in the courthouses were conducted. As it is the same for most countries worldwide, education is also suspended in Turkey whereas the central entrance exams regarding the high schools and universities which are highly crucial for the younger citizens are also at the risk of having been suspended.

Economic Problems and Economic Stability Shield as a Solution

Covid-19 has caused agendas to be altered within the entire world and has brought into some very serious measures to be taken in our country, Turkey's economic health and stability measures taken in the corresponding field is an issue that cannot be ignored in order to get the least damage from the epidemic. Some workplaces have gone down due to this epidemic, some people have left work, and some are at risk of failing to receive their salaries. Therefore, economic problems are likely to arise in an environment where workplaces do not work, employees cannot go to work and work activities stop.

As on 18.03.2020, Economic Stability Shield Package (“Package”) which constitutes 100 (hundred) billion Turkish Lira was announced by the Government. The Government emphasized by establishing this Package that, non-impediment of the production and the employment are the priorities whereas loss of employment is not wanted. In the framework of this Package; in accordance with the recommendation on financial matters by Banks Association of Turkey; banks and credit institutions are invited to provide help concerning repayments of loans and liquidty and cash needs of companies.

This Package includes many precautions and actions such as,

  • Postponement of VAT,
  • Non-implementation of Accommodation Tax till November,
  • Postponement of easement right fees and revenue share payments for hotel leases for 6 (six) months for April, May and June,
  • Increase in the credit viability amount from 80% (eighty per cent) to 90% (ninety per cent) in housings below 500 (five hundred) thousand Liras and a decrease in the minimum down payment to 10% (ten per cent),
  • Postponement of SSI (Social Security Institution) premiums and concise and VAT withholdings for 6 (six) months  for the companies operating in retail, shopping mall, iron-steel, automotive, logistics-transportation, cinema-theater, accommodation, food-beverage, textile-garment and event-organization sectors,
  • Ensuring that firms which are in default in April, May and June due to the measures taken against the spread of the virus, will have a “force majeure” note will be written down/annotated on their credit registry,
  • Continuation of minimum wage support,
  • Ensuring that flexible and remote working models under relevant legislation will be more effective,
  • Implementing the Short-Term Employment Allowance, facilitating and speeding up the processes required to benefit from it, thus reducing the cost of employers while providing temporary income support to employees in the workplaces where the operation has stopped,
  • Raising the lowest retirement pension to 1.500 (one thousand five hundred) Turkish Lira,
  • Payment of the holiday bonus of retirees at the beginning of April,
  • Direct deposit of the salary promotion of retirees to their bank accounts, without having the retirees go to branches by themselves,
  • Allocation of additional 2 (two) billion cash aid to families detected pursuant to the criteria set by the Ministry of Family, Labor and Social Policies,
  • Extending the 2 (two) months period to 4 (four) months in relation with “Make-Up Work” in order to procure continuity of employment,
  • Development of alternative channels according to the priorities determined in both production and retail against the possibility of disruption in global supply chains,
  • Implementation of the periodic follow-up program of social services and home health services for the elderly citizens over the age of 80 (eighty) who live alone

C. CONTAGIOUS DISEASE UNDER TURKISH LAW & COVID-19 OUTBREAK

Under Turkish Law, contagious disease is described under the Regulation of Contagious Diseases Surveillance and Control Principles as “the disease that is transmitted from person to person through direct contact with an infected person, or indirectly, such as exposure to a vector, animal, product or environment, or through fluid exchange contaminated with an infectious substance, resulting from a microorganism or its toxic products”. Under the Annex of the relevant Regulation it is explicitly set forth that which diseases are declared to be contagious and Severe Acute Respiratory Syndrome which is known as ”SARS” is determined to be a contagious disease transmitted by respiratory/droplet (air). Considering the fact that Covid-19 is also transmitted by droplet as SARS, it would be justifiable to count Covid-19 as a contagious disease in accordance with the related Regulation.

D. PPRECAUTIONS TO BE TAKEN IN ORDER TO MAIN BUSINESS CONTINUITY AS A CONTRACTING PARTY

Companies while conducting their business activities enter into contracts and undertake either monetary obligations or execution of performance. It is clear that Covid-19 outbreak has negatively affecting the fulfillment of the liabilities of companies. Thus, the companies, whose activities have come to a halt or who will not be able to achieve the benefits they expect, are demanding a postponement in the performance of their liabilities envisaged under the contracts. In this sense, the concept of “force majeure” stands out in terms of contracts.

Force Majeure which is neither described nor regulated especially in terms of its outcomes under Turkish Code of Obligations is an inescapable and even unforeseeable event which restraints the fulfillment of the obligations set under contracts.

Supreme Court Assembly of Civil Chambers defines “Force Majeure” in its decision 2017/1190E and 2018/1259K. as “Force majeure is an extraordinary event occurred outside of the activity and business of the debtor  and which cannot be foreseen and avoided, which leads to an absolute and inevitable violation of a general norm of behavior or non-fulfillment of the obligation.(Eren, Borçlar Hukuku Genel Hükümler, Ankara 2017,p. 582). Natural disasters such as earthquakes, floods, fires and epidemics constitute Force Majeure events.”

In order to count an event as Force Majeure some criteria must be met. Force Majeure events may be natural, social, legal or human related and must occur outside of the activities and business of the party which incurs damages. Moreover, Force Majeure causes the non-performance of norm of behavior or contractual obligation due to such circumstances whereas it is inevitable to mitigate or avoid against the event. Another essential element of Force Majeure is it being unpredictable. If a contractual obligation cannot be fulfilled due to Force Majeure, there must be a causal link between Force Majeure and the non-performance of the obligation, and the assessment must be made on a the basis of every concrete case. Force Majeure can be permanent or temporary. If it is continuous, it may not be possible to perform the contractual obligation. In the event that the Force Majeure event is temporary, performance of such obligation can be postponed for duration of term until the consequences of Force Majeure become ceased. 

Impossibility of Performance and Hardship

Under the Article 136 of the Turkish Code of Obligations “Impossibility of Performance” is foreseen. Under the first paragraph of the related Article, it is envisaged that if the performance of the debt becomes impossible due to the reasons that the debtor cannot be held responsible, the debt will end. In other words, if the debtor’s obligation becomes impossible to perform without responsibility on his part, then the debtor’s obligation extinguishes and the debtor becoems discharged. On the other hand, under the subsequent paragraph, it is regulated that, in cases of impossibility of performance where there is a bilateral contract between the debtor and the counter-party, debtor shall return the performance he/she received from the other party whereas he/she the rescues from his/her obligation if the other party has not performed yet. However it is also regulated that, this provision does not apply to cases where the risk passes either by law or by contract to the creditor prior to the performance of the obligation. Furthermore according to the third paragraph of the aforementioned Article, it is set forth that; if the debtor does not immediately notify the creditor of the subsequent impossibility of the performance or does not take necessary measures to mitigate the resulting damage, he is held liable to pay compensation for damages arising from this omission.

Turkish Code of Obligations Article 138 states that if the performance becomes extremely onerous due to an unexpected change of circumstances after the formation of contract, and if such change is not attributable to the debtor whereas it is against the good faith principle, the debtor may ask the court to adapt the contract to the changed circumstances, or may terminate the contract if such adaptation is not viable.

Covid-19 disease, a pandemic declared by the World Health Organization, in question is a serious threat to the health of the public resulting many of the public places including schools, workplaces, and malls to be emptied and closed and thus, is a Force Majeure event.

In order to detect whether there is an impossibility of performance or a case of hardship, outcome due to Covid-19, Force Majeure, shall be evaluated on every merit base. Such that, if due to Covid-19 it is impossible for the debtor to perform his debt within the normal conditions of life, then provisions regarding the impossibility of performance should be invoked. However, if adaptation of the provisions to the current situation is possible, the contract can be adapted by the consensus of the contracting parties accordingly. To sum up, parties by immediately notifying the Force Majeure event to the other must together decide on the issues we have stated above by evaluating the situation.

E. PRECAUTIONS TO BE TAKEN BY THE EMPLOYER

It is possible that employers may close their workplaces for a temporary period as a result of the increased negative impacts of the related virus or the public recommendation to be made by the State in the current situation.  In addition to this, it is also possible that Administration authorities may order workplaces being temporarily closed. In this case, if the Employers fail to agree with the Employees, it is important whether the Employer pays the wages and fringe benefits. The Employer may agree with the Employees on the implementation of unpaid leave or telework (working from home) according to the nature of the job during this period. Moreover, the Employer may also consider implementing compensatory work or paid leave during this period. First, since majority of workplaces intend to switch towards remote working, it would be more accurate to analyze teleworking as a work arrangement. Besides, other options which are; Employees taking their compensatory leave, paid leave and unpaid leave will be evaluated.

Teleworking/Remote Working/Working from Home

Remote working is defined under the Article 14 of the Labor Law as, “Remote working is a work arrangement based on the principle of performing the action of working at home or by means of technological communication tools, within the scope of the work organization formed by the employer and established in writing.”. As it is explained, telework can be conducted when the telework agreement is executed in writing. Since although it is stated that the telework agreement shall be made in writing above (this is important in terms of resolving legal disputes that may occur), when Covid-19 outbreak is taken into consideration, declaring telework as a new work arrangement by announcing it in writing at the workplace or online would be valid. Also, according to our opinion consent of the emlpoyees can also be taken even after the actual commencement of teleworking.

Considering the possible legal disputes that may arise between the parties to employment contract in the future, we are of the opinion that, it is better to keep all this kind of documents, if any, relating to the refusal of teleworking due to Covid-19 by the employees. On one hand, switching towards remote working may be considered as a substantial change in the employment contract and thus a just reason to rightful termination by the employee. Yet, in our opinion, switching towards telework cannot be considered as a just reason to terminate the employment contract for the fact that the purpose of this new work arrangement is to provide a safer work environment for employees.

If the Employer aims to change the employment contract due to Covid-19 and the Employee refuses work from home, the Employer should obtain the refusal of the Employee in order to protect her/himself possible future legal disputes. We think that the termination of the employment contract of the worker who does not accept can be considered as the worker who does not accept the substantial change in the employment contract or, in our opinion, the termination of the worker cannot be considered justified because the employer was made for the purpose of working in a safer environment.

Occupational Accidents during Telework

Another important issue to be addressed in terms of analyzing telework is whether the employer will be responsible for the occupational accidents occurred at employees’ home. The employer is obliged to; inform the employee about occupational health and safety precautions, provide health surveillance and take necessary safety measures regarding the equipment provided.

There is no consensus on whether the accidents occurred at home during telework will be considered as an occupational accident or not. According to the Supreme Court, each accident occurred at home cannot be considered as an occupational accident as characteristics of each case or the tasks assigned by the employer vary from each other. Yet, if a work-related accident happens as a result of the employer failing to perform the obligations stated above, the employer may be responsible for this accident. In other words, in case the employer decides to implement work from home, all measures should be taken and the employees should be informed pertaining to occupational health and safety.

Unpaid Leave

Employers can also choose to make their employees take unpaid leave. Nevertheless, employers wishing to implement unpaid leave method, have to obtain prior consent of the employees pursuant to the Labor Law and Supreme Court decisions.

However if there is a provision pertaining to unpaid leave under the employment contract  signed between the employer and the employee, the implementation of the unpaid leave should be conducted accordingly.

If the employee does not accept to take the unpaid leave rights, the employer has no right to force his employee to take the unpaid leave. However, it should be noted that the employee is deemed to implicitly accept the implementation of unpaid leave by not raising an objection against the employer's unpaid leave implementation. At the scope of The Supreme Court’s previous decisions; the burden of proof whether there is consent is on the employer.

As a result; as it is stated above it is not legally possible for the employer to force the employee to take unpaid leave unless there is a clear regulation regarding the unpaid leave both under the employment contract and the collective agreement. If the employer implements compulsory unpaid leave, employees are eligible to invoke just termination their employment contract.

Paid Leave

Implementation of paid leave which differs from the annual leave is another method can be implemented by employers. At the scope good faith principle, employers within their own initiative can provide their employees to take paid leave as they are eligible to determine the duration of paid leave at the scope of their right to management according to the previous decisions of Supreme Court.

In parallel with the right of the Employer to determine the annual paid leave period, when employees take annual leave on their own initiative it is considered to be an act of absenteeism. For these reasons, due to the effects of the Covid-19 the implementation of the paid leave by the employer seems legitimate in our opinion.

The concept of “Collective Leave” is also regulated under the Annual Paid Leave Regulation. Under the relevant Regulation it is set forth that "Employer or representative of the employer can apply collective leave covering all or a part of the employees between the beginning of April and the end of October". In this context, in case of an application of collective leave, the employer or the representative of the employer can exclude sufficient number of employees for compulsory situations such as protection of the workplace and maintenance, preparation, cleaning or security of vehicles, equipment, or machinery in the workplace.

Make-Up by the Employees

If the paid and unpaid leave alternatives are to insoluble, another method which is called “make-up by the employees” can be considered by the employers. Employers wishing to make their employees to make-up time shall make sure that they have clarified the reasons and the dates to make-up. Furthermore, it is important to note that; make-up should not be performed on holidays and for more than 3 (three) hours daily within 2 (two) months following the final day of work in the workplace whereas the total daily work of the employees shall not exceed 11 (eleven) hours during make-up.

In contract with the abovementioned, although the foremost feature of the make-up is it being applied for 2 (two) months, pursuant to aforementioned Economic Stability Shield, it was decided to exceed this 2 (two) months period to 4 (four) months in order to ensure business continuity in employment.

F. HALF-SALARY DUE TO COVID-19

The half-salary implementation is also possible in accordance with the Article 40 of the Labor Law. In order to switch to half salary, legally compelling reasons must arise pursuant to the relevant Article. In case the compelling reasons; a) cause the work to stop for more than a week in the workplace or b) prevent the employer working  for a period longer than one week in the workplace, the employer whether he/she has actually worked or not shall be paid half a salary during this waiting period. We are the opinion that, Covid-19 outbreak; which is declared to be a pandemic is a compelling reason.

According to a previous decision of the Supreme Court; the reasons which prevent the employer from working must occur around the employee and does not include the reasons which arise from the workplace and which prevent the conduct of the work. For example, closing the workplace is not a compelling reason. However, conditions such as disconnection due to natural events such as flood, snow, earthquake, and quarantine application due to epidemic disease are compelling reasons. It should be noted that; in order to invoke the notion of compelling reason; employers must close their workplaces for compulsory reasons in accordance with a final resolution announced by the public authorities.

Another important to be clarified is that; the right to terminate the employment contract for the contracting parties arises when the compelling reason occur for both the employer and the employee at the same time. If the employment contract is terminated by the employer for compelling reasons, the employer shall pay the severance pay to the employee. As a result, we believe switching to half-salary is possible due to Covid-19.

G. RIGHT TO SHORT-TERM EMPLOYMENT ALLOWANCE DUE TO COVID-19

Employers are able to benefit from short-term employment allowance, with the acceptance of the virus in question is considered is one of the compelling reasons. In the event that the weekly working hours in the workplace are significantly reduced temporarily or the operation in the workplace is stopped temporarily completely or partially due to the general economic, sectorial or regional crisis and compelling reasons, short-term employment practice may be operated. Short-term employment is regulated under the Unemployment Insurance Law No.4474 and it is envisaged that short-term emlpoyment can be applied if there is a “as temporal shortening of the employment period in the whole or part of the workplace by at least one-thirds or complete or partial suspension of operation for at least four weeks”.

Along with the Economic Stability Shield; it was decided to trigger the short-term employment allowance and to facilitate and accelerate the processes required to benefit from it. Thus, it is aimed to reduce the expenditures of the employers while providing temporary income support to the employees in the workplaces. Therefore, we put forward that within the assumption of the Covid-19 being a compelling reason, employers are eligible to benefit from the short-term employment allowance.

H. TERMINATION OF THE EMPLOYMENT CONTRACT DUE TO COVID-19 BY EMPLOYEES OR EMPLOYERS

Article 25.(3) of Labor Law stated that the compelling reason preventing the employee working for more than a week in the workplace is considered to be a rightful reason to terminate the employment contract by the employer. The precedential compelling reasons according to Supreme Court are as follows: "... disconnection due to natural events such as flood, snow, earthquake, and quarantine application due to epidemic disease are compelling reasons."

It is important whether Covid-19 outbreak is considered a compelling cause. If it is accepted as a compelling reason, employers can terminate the employment contract. It should be noted that despite a termination is made by the employer, severance pay must also be paid to the employee whereas there is no obligation to grant notice period since the reason for termination in question is just termination for immediate reason.

I. CONCLUSION

The Covid-19 outbreak has been declared as a pandemic by the World Health Organization and has become a topic of interest to all companies and employees. When the ways of transmission of the virus are taken into consideration, workplaces are in the first places in terms of places that pose danger to crowded environments.

An economically difficult period is being experienced by the companies whose workplaces are closed pursuant to governor's decision for the public health of the citizens and employees. Throughout this Legal Opinion, we have set forth the work arrangement options of companies under relevant contracts in order to mitigate the negative effects of Covid-19 on business continuity since it is crucial to take the necessary precautions to overcome the impacts of the outbreak in the most undamaged way, both for the employers and employees.

 

Av. Beyza IŞIK

Av. Erhan MUTLU

Av. Özge ÖZGENCİL

Av. Cansu HANGÜL

Av. Doğancan TÖLEK