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Turkiye: Upper-Level Managers in Turkish Labor Law

Turkiye: Upper-Level Managers in Turkish Labor Law

Issue 10.9
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There is no specific definition in the Turkish Labor Code (TLC) for upper-level managers who work at the top management level in companies. Therefore, it is difficult to determine whether they are defined as employees, employers, or an employer’s representatives, and what their rights and obligations are.

The Concept of Employer Representative and Upper-Level Manager

In the TLC, while a distinct definition of “upper-level manager” remains absent, the concept of an “employer’s representative” is well-established. An “employer’s representative” represents an employee entrusted with acting on behalf of the employer, thus embodying the employer’s presence in the management of work, the workplace, or the enterprise. The title of “employer’s representative” does not eliminate the employee rights and obligations of the persons holding this title. However, according to the TLC, employer representatives who are authorized to manage the entire enterprise or those who are entitled to manage the relevant workplace and to recruit and terminate employees cannot file a reinstatement lawsuit. That being said, while every upper-level manager is qualified as an employer’s representative, not every employer representative must hold a position at the upper-level.

Upper-Level Managers in Joint Stock Companies

In joint stock companies, upper-level managers may be members of the board of directors or general executives (chief executive officer, chairman, etc.).

As a rule, being a board member or holding the chairman position does not prevent one from working in the same company with an employment contract. An employment contract may be concluded between the company and the board member in addition to a proxy contract. The upper-level executive’s capacity to give orders and instructions, as well as the extent of the management authority delegated to them, should be evaluated to determine whether they hold the title of an employee. For instance, a board member to whom the authority to manage and represent the company is fully delegated cannot be considered an employee. The Court of Cassation evaluates how the board member maintains their life financially to identify their legal status – for this, the court looks into their position within the company, the nature of their work, working conditions, and their income overall.

Typically, shareholding alone does not automatically disqualify an individual from being classified as an employee. In fact, it is commonly observed that companies allocate shares to their employees without altering their employment status. While the membership status of a shareholder within the board of directors is not a critical factor in recognizing their involvement under an employment arrangement, it is of vital importance to assess the shareholder’s influence over management decisions based on their shareholding rate. This is because the shareholder is not considered as an employee if the shares held by such shareholder enable him/her to control the company.

In joint stock companies, upper-level managers with titles such as general executive, CEO, and similar titles act on behalf of the employer and take part in the management of the company and therefore qualify as the employer’s representatives in terms of the TLC. In practice, these upper-level managers generally work within the framework of their employment contract. This is because being a director of a joint stock company alone is not sufficient to exclude the title of employee.

Upper-Level Managers in Limited Liability Companies

In limited liability companies, upper-level managers are usually “the company manager” or among the shareholders. When a shareholder is granted with the authority to manage and represent the company, then s/he is considered as a person-organ in the capacity of “company manager.” Such company managers are therefore in the position of the employer and not considered employees because they are not in a relationship of dependency, which is the distinguishing element of an employment contract.

According to the Court of Cassation, it has been acknowledged that the managers who do not have a shareholding in the company are also the organs of the limited liability company and thus do not have the status of an employee.

On the other hand, it is possible for a shareholder who is not a manager to be an employee. However, in such a case, it should be checked whether the position, duties, working conditions, and salary of the shareholder in the company are symbolic or not.

By Tarik Guleryuz, Partner, Guleryuz & Partners

This article was originally published in Issue 10.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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