What Is an Employee Receivables Lawsuit?

An employee receivables lawsuit is a lawsuit filed by the employee in the labor court when wages, compensation, and other rights arising from the employment contract are not paid or are underpaid by the employer. The Labor Law No. 4857, the Turkish Code of Obligations No. 6098, and the provisions still in force of the former Labor Law No. 1475 constitute the legal basis for employee receivables.

An employee receivables lawsuit is one of the most frequently filed types of lawsuits in labor law. With the termination of the employment contract, various receivable items become relevant for the employee. Items such as severance pay, notice pay, overtime pay, annual leave pay, wage claims, and national holiday and general public holiday pay can be claimed together in a single lawsuit.

Before filing an employee receivables lawsuit, a mandatory mediation application must be made pursuant to Article 3 of the Labor Courts Law No. 7036. If no agreement is reached during the mediation process, a lawsuit may be filed in the labor court after the non-agreement report is prepared. A lawsuit filed without applying for mediation is dismissed on procedural grounds due to the absence of a procedural prerequisite.

An employee receivables lawsuit may also be filed as an indeterminate claim lawsuit. Pursuant to Article 107 of the Civil Procedure Code, an indeterminate claim lawsuit may be filed when the amount of the receivable cannot be fully determined. In this type of lawsuit, a minimum amount is specified when filing, and the claim may be increased during the proceedings in accordance with the expert report.

Types of Employee Receivables

1. Severance Pay

Severance pay is compensation calculated based on 30 days' dressed gross wage for each full year of work, pursuant to Article 14 of the former Labor Law No. 1475 (which remains in force), when the employment contract of an employee who has worked for at least one year is terminated under the conditions prescribed by law.

The conditions for earning severance pay are as follows: at least 1 year of seniority, unjust termination by the employer, termination with just cause by the employee (Article 24), military service, retirement, termination by a female employee within 1 year of marriage, and the employee's death, among other cases listed in the law.

In calculating severance pay, the dressed gross wage is used as the basis. The dressed wage includes, in addition to the basic wage, regularly paid supplemental payments such as transportation allowance, meal allowance, heating allowance, food allowance, and bonuses. Thirty days' dressed gross wage is calculated for each full year, and fractional periods beyond full years are also included proportionally.

A ceiling applies to severance pay. The annual amount of severance pay may not exceed the annual retirement bonus paid to the highest-ranking civil servant. This ceiling amount is updated annually [TO BE VERIFIED - the current severance pay ceiling should be checked].

Only stamp duty is deducted from severance pay. Income tax and social security premiums are not deducted. The stamp duty rate is 7.59 per thousand [TO BE VERIFIED - the current rate should be checked].

2. Notice Pay

Notice pay is compensation paid when an indefinite-term employment contract is terminated without observing the notice period. Pursuant to Article 17, notice periods range from 2 to 8 weeks depending on seniority. Notice pay is calculated based on the dressed gross wage and the number of days in the notice period.

Income tax and stamp duty are deducted from notice pay. Social security premiums are not deducted. The income tax rate ranges from 15% to 40% depending on the employee's cumulative tax base.

3. Overtime Pay

Overtime pay is premium pay for work exceeding the normal weekly working time of 45 hours. Pursuant to Article 41, 50% more than the normal hourly wage is paid for each hour of overtime work. For work exceeding normal hours, the premium rate is 25%.

Payroll records, entry-exit logs, witness statements, and other written evidence are used to prove overtime pay. An equity reduction of 25-30% is applied in calculations based solely on witness statements. No equity reduction is applied when proven by written evidence.

4. Annual Leave Pay

Annual leave pay is the pay for annual leave periods earned but not used by the employee when the employment contract terminates. Pursuant to Article 59, this pay is calculated based on the bare (basic) gross wage at the date of termination.

Annual leave pay is a wage, not compensation. Therefore, it is subject to income tax, stamp duty, and social security premiums. Leave periods by seniority are: 14 days for 1-5 years, 20 days for 5-15 years, and 26 working days for over 15 years.

5. Wage Claims

Wage claims encompass monthly wages, premiums, bonuses, commissions, and other wage items that the employer should have paid to the employee but failed to pay or underpaid. Pursuant to Article 32, wages must be paid at least once a month. If the employee's wages are not paid within 20 days, the employee may refrain from performing work (Article 34).

Income tax, stamp duty, and social security premiums are deducted from wage claims. The highest deposit interest rate applies to unpaid wages (Article 34). This interest rate is higher than the statutory interest rate.

6. National Holiday and General Public Holiday Pay (UBGT)

Pursuant to Article 47, an employee who works on national holidays and general public holidays is paid one day's wage even if they do not work. If they do work, an additional day's wage is paid. Rules similar to overtime pay apply to proving UBGT claims.

An equity reduction may also be applied in calculations based on witness statements for UBGT claims. The burden of proof lies with the employee; however, the employer is obligated to maintain work records.

7. Minimum Living Allowance (AGI)

The minimum living allowance is a deduction calculated based on the employee's marital status and number of dependents, which is offset against income tax. The employer is obligated to pay the AGI amount to the employee. Unpaid AGI may be claimed within the scope of wage claims [TO BE VERIFIED - the current status of AGI in practice should be checked].

Statutes of Limitations

Statutes of limitations for employee receivables are regulated by Supplementary Article 3 added to the Labor Law by Article 15 of the Labor Courts Law No. 7036. The statutes of limitations effective as of October 25, 2017 are shown in the following table:

Before October 25, 2017, the statute of limitations was 10 years for severance and notice pay, and 5 years for other receivables. Law No. 7036 unified the statute of limitations for all employee receivables at 5 years.

Transitional rule: The new statute of limitations (5 years) applies to receivables whose limitation period had not expired as of the date the law came into force (October 25, 2017). However, if the remaining period under the old regulation is shorter than the remaining period under the new regulation, the shorter period applies [TO BE VERIFIED].

The statute of limitations defense must be raised by the defendant. The court does not consider the statute of limitations on its own motion. The statute of limitations defense must be raised in the response petition or within the period prescribed for the response petition.

Types of Interest and Application

The types of interest to be applied to employee receivables vary according to the nature of the receivable. Determining the correct type of interest is of great importance for the complete calculation of the employee's receivable.

The highest deposit interest rate is significantly higher than the statutory interest rate. This interest rate is the highest among the rates banks apply to deposits and changes periodically. The statutory interest rate is 9% per annum [TO BE VERIFIED - the current statutory interest rate should be checked].

The start date for interest is determined according to the type of receivable and the default situation. For severance pay, interest runs from the termination date. For wage receivables, interest runs from the default date. Default occurs when a formal notice is sent to the employer or when a lawsuit or enforcement proceedings are initiated.

Gross-to-Net Calculation

Different deductions apply when converting employee receivables from gross to net, depending on the type of receivable. Correct calculation is of vital importance for both the employee and the employer.

Severance Pay Deductions

Only stamp duty is deducted from severance pay. Income tax and social security premiums are not deducted. The stamp duty rate is 7.59 per thousand. For example, from 100,000 TL gross severance pay, 759 TL stamp duty is deducted and the net amount is 99,241 TL [TO BE VERIFIED].

Notice Pay Deductions

Income tax and stamp duty are deducted from notice pay. Social security premiums are not deducted. The income tax rate ranges from 15% to 40% depending on the employee's cumulative tax base. The stamp duty rate is 7.59 per thousand.

Deductions from Wage-Type Receivables

Income tax, stamp duty, and social security premiums are deducted from wage-type receivables such as overtime pay, annual leave pay, wage claims, and UBGT pay. These receivables are taxed like normal wages and are subject to all statutory deductions.

Social security premium deductions are divided into employee and employer portions. The employee portion is 14% of total gross wages, and the unemployment insurance employee portion is 1%. The income tax base is calculated on the amount remaining after deducting social security premiums from gross wages [TO BE VERIFIED - current social security premium rates should be checked].

Burden of Proof in Employee Receivables Lawsuits

The burden of proof in employee receivables lawsuits is distributed according to the type of receivable claimed. As a general rule, the party claiming a right bears the burden of proving that the right has arisen. However, in labor law, the burden of proof shifts to the employer in some cases due to the employer's record-keeping obligation.

• Severance pay: The employee must prove the working period and the manner of termination. If the employer claims just cause, the burden of proving the existence of just cause lies with the employer.
• Overtime pay: The burden of proof lies with the employee. However, it is effectively shared due to the employer's obligation to present work records.
• Annual leave pay: The burden of proving that annual leave was granted lies with the employer. The employer must prove granting of leave through leave registers and signed documents.
• Wage claims: The burden of proving that wages were paid lies with the employer. The employer must prove payment through bank records, signed payrolls, or receipts.
• UBGT pay: The burden of proof lies with the employee. The employee must prove that they worked on holidays and public holidays.

Expert Report and Calculation Methods

In employee receivables lawsuits, the court generally has receivable calculations performed by an expert. The expert is a specialist in labor law who performs receivable calculations based on the claims and defenses of the parties and the evidence in the file.

The expert report is not binding on the court but is largely relied upon in practice. The parties may object to the expert report and request an additional report or a new expert examination. The court renders its decision by evaluating whether the expert report is sufficient and consistent.

Key matters to consider in calculations include: determination of the correct wage (the actual wage may differ from the wage shown on the payroll), correct determination of the working period, correct calculation of overtime hours, application of equity reduction, and correct determination of interest start dates.

Litigation Process in Employee Receivables Lawsuits

An employee receivables lawsuit is filed in the labor court. In places where no labor court exists, the civil court of first instance acting as a labor court has jurisdiction. The competent court is the court at the defendant's place of residence or the place where the work was performed.

Proceedings are conducted under simplified trial procedure. Under simplified trial procedure, the pleading phase consists of only the petition and the response petition; no reply to the response or second response petition is submitted. Evidence must be presented during the pleading phase.

The main stages of the lawsuit process are as follows:

1. Mediation application: Mandatory mediation application before filing the lawsuit.
2. Submission of the petition: If no agreement is reached in mediation, the petition is submitted to the court together with the final report.
3. Response petition: The defendant (employer) submits the response petition.
4. Preliminary examination hearing: The court examines procedural prerequisites and initial objections, and encourages the parties toward settlement.
5. Investigation phase: Examination of evidence, hearing of witnesses, obtaining expert reports.
6. Decision: The court renders its decision upon completion of the investigation.

An appeal may be filed against the court decision. The appeal is filed with the Regional Court of Appeal. An appeal to the Court of Cassation may be filed against the Regional Court of Appeal's decision under certain conditions. The cassation review is conducted by the Court of Cassation [TO BE VERIFIED].

Forfeiture Periods in Employee Receivables

Unlike statutes of limitations, some employee rights have forfeiture periods. Forfeiture periods are considered by the court on its own motion and do not need to be raised by the parties.

• Reinstatement lawsuit: Mediation must be applied for within 1 month from the termination notice, and if no agreement is reached, a lawsuit must be filed within 2 weeks.
• Non-reinstatement compensation: An application to start work must be made within 10 working days from the finalization of the reinstatement decision.
• Right to terminate with just cause: Pursuant to Article 26, the right to terminate must be exercised within 6 working days from learning of the just cause and in any case within 1 year.

If forfeiture periods are missed, the right is completely extinguished and cannot be claimed subsequently. For this reason, it is of great importance that employees exercise their rights in a timely manner.

Set-Off and Deduction in Employee Receivables

The employer may set off certain items from the employee's receivables. For example, if the employee resigns without observing the notice period, the employer's notice pay claim may be set off against the employee's severance pay. However, the employer must clearly express this intention for the set-off.

Advances or loans given by the employer to the employee may also be set off against employee receivables. However, this set-off should be made with the employee's consent or by court order. Unilateral wage deductions by the employer are generally prohibited (Article 35).

For the exercise of the right of set-off, both parties must have due receivables against each other. Set-off may be raised during the lawsuit or may be performed before the lawsuit.

This content is for general informational purposes only and does not constitute legal advice. It is strongly recommended that you seek professional support from a lawyer for your specific legal issues.