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12.05.2020

Practical Information for Businesses in the Face of COVID-19

After the first novel coronavirus case in December, COVID-19 has gradually, yet rapidly, expanded and finally has managed to bring the entire world to a collective halt. Social restrictions and containment measures continue to increase to take the pandemic under control and to eliminate its fatal consequences, both on civilians and economies.

Under these circumstances, it has become obvious that the COVID-19 pandemic started to trigger substantial legal consequences predominantly on i) Contractual Obligations, ii) Employment and iii) Data Privacy. Accordingly, this article aims to provide an efficient guide on the repercussions of the novel coronavirus, from a practical perspective.

I. Contractual Obligations

The new coronavirus has caused numerous businesses, enterprises and even individuals that have undertaken contractual obligations to have difficulty performing their obligations arising from these contracts or may have even rendered their execution impossible. Thus, parties to contracts have started to question whether they can avoid performing their obligations due to COVID-19.

While examining the effects of the new coronavirus on contracts and obligations thereunder, first it must be determined whether the contract signed between the parties contains a force majeure clause. Determination of whether conditions giving rise to a force majeure clause are numerus clausus and whether such a pandemic is included within the scope of the force majeure clause shall follow next.

This analysis highly depends on the provisions of each individual contract. In the event the contract does not include a provision stipulating avoidance from fulfillment of obligations in case of an epidemic or triggering the force majeure clause, first of all specific provisions with respect to the pre-defined contract types under various laws should apply (i.e. fundamental provisions of certain major contract types such as sales, rental, service, employment etc. are stipulated under laws), if any; and secondly the general provisions under the Turkish Code of Obligations numbered 6098 (TCO) must be taken into consideration.

TCO contains two different instruments that may enable relief from contractual obligations, that are i) Impossibility of Fulfillment (Articles 136 and 137 of the TCO) and Excessive Hardship to Fulfill (Article 138 of the TCO).

Impossibility of Fulfillment

If the performance of contractual obligations becomes impossible due to reasons that are not attributable to the obligor, the obligor shall be fully released from performing these obligations and cannot be held liable for damages. Indeed, the High Civil Court argues that the concept of force majeure should be assessed under the scope of the impossibility provision of the TCO, since force majeure cases lead to impossibilities of performance without any fault attributable to the obligor.

In another decision of the High Civil Court, force majeure cases are defined as ‘an unexpected event unavoidable by any means or person that occurs beyond the control of the obligor and prevents the performance of obligations’. Other characteristics and examples of force majeure identified under Turkish case law are as follows: ‘an event that does not require foreseeing of it and thereby cannot be eliminated’, or ‘an event preventing performance of the obligation, which is inevitable regardless of any measures’. Also, the requirements of force majeure set forth as the lack of fault of the obligor, foreseeability, irresistibility and real coercion in the doctrine.

Therefore, the unforeseen, inevitable and the unexpected nature of the COVID-19 would qualify it as force majeure, constituting impossibility for performing obligations in principle. Moreover, although it does not provide detailed explanations as to the geographic scope and timing, the Grand Chamber of the High Civil Court accepted ‘epidemic diseases’ among force majeure situations. However, the cause that prevents fulfillment shall be assessed for each specific contractual obligation.

In light of the above, given the current measures and restrictions taken by the government, it is likely that COVID-19 is accepted as a valid ground to claim force majeure with respect to many contractual obligations.

According to Articles 136 and 137 of the TCO, there are two different cases of impossibility, which are Full Impossibility and Partial Impossibility. Whether the impossibility prevents the performance of the obligation completely or partially will determine the applicability of either Full Impossibility or Partial Impossibility. Legal consequences of both alternatives are as follows:

Full Impossibility:

1. The obligor shall refund the already performed obligations within the contract, under unjust enrichment terms of the TCO. The obligor shall also be deprived of the right to request the performance of unperformed obligations.

2. The obligor shall immediately notify the existence of impossibility to the beneficiary and mitigate the losses. If the obligor does not comply with this requirement, it would be obliged to compensate losses arisen.

Partial Impossibility:

1. The obligor shall be relieved from the responsibility of the partial obligation, which has become impossible to perform. In the event:

a. The beneficiary consents to partial performance of the obligation, the beneficiary shall only perform its counter-obligation pro rata with the part it would benefit.

b. The beneficiary does not consent to partial performance of the obligation or the beneficiary’s counter obligation is not divisible, legal consequences of Full Impossibility shall be applied.

2. If it is clearly understood by the contracting parties that they would not have been entered into such contract, in the event they would have foreseen such partial impossibility, the obligor shall be released from the entirety of such obligation.

Excessive Hardship to Fulfill

Pursuant to Article 138 of the TCO, excessive hardship to perform a contractual obligation may be claimed if an event, which has not been foreseen by the contracting parties and could not have been expected to be foreseen, (1) occurs due to reasons that are not attributable to the obligor, and (2) materially changes the circumstances of the performance that were present when the contract has been entered into, to an extent in which one cannot request the performance of the contract in good faith, and (3) the obligor either has not fulfilled its obligation or has fulfilled by reserving its rights for occurrence of any excessive hardship to fulfil, occurs.

Furthermore, the doctrine argues that the unforeseen event causing the hardship should be civil disasters, economic disasters, or extraordinary events, such as epidemic diseases , but must not reach the level of force majeure. Also, according to the 13th Civil Chamber of the High Court , hardship should not be confused with ‘impossibility of performance’ since the impossibility eliminates the contractual relationship itself and does not allow the agreement to be adapted under new circumstances.

In the event of Excessive Hardship:

1. The obligor shall request from the court adaptation of the contract, in accordance with the updated circumstances.

2. If the first consequence is not applicable, the obligor is entitled to exercise right to avoidance of contract, or right to terminate the contract if it is of the nature of continuous performance contract.

Lastly, although the TCO does not include any provision regulating situations, where Impossibility or Excessive Hardship of performance is of temporary nature, case law establishes the distinction between temporary and permanent conditions; with the aim to preserve the contractual relationship. In the event of temporary impossibility, the obligor will be defaulted without fault. Therefore, the due date of its performance shall be postponed until the impossibility ceases. In such a scenario, the beneficiary should not be able to request losses arising from the lag of performance. According to another assertion, the beneficiary of the postponed obligation should be entitled to exercise its right to avoidance of contract, without being able to request reliance damages.

It shall also be noted that according to the principle of genus perire non censetur, generic obligations such as payment of money, sale of a ton of iron, etc. cannot be considered impossible. Therefore, such obligations, including pecuniary debts, cannot be subject to Full or Partial Impossibility mechanisms under the TCO.

II. Obligations as an Employer

A. Obligations in relation to the Health and Safety of the Workplace

As a general rule and principle, employers are responsible to ensure the employees’ work-related security and health. Accordingly, as per the Law on Occupational Health and Safety numbered 6331, within the scope of employers’ general obligations, employers shall carry out risk assessments to proactively detect any dangers that may exist at the work place or come from outside; which may if neglected aggravate to pose a significant risk; to determine and take measures to control and minimise those dangers based on a risk scale; and to prevent any life-threatening or significant risks at work place. Moreover, employers shall inform their employees, contractors and their employers, as well as other organisations that the employer has assigned, on matters that are known to adversely affect or that carry the potential to adversely affect their health, together with the protective and preventive measures addressing the same and employees’ legal rights with respect to their employment relationship.

As the employer’s duty to inform is directly linked with the potential risks and threats to life and health, this provision may be interpreted in a way extending the duty to inform to the city/region/country in accordance with the scope of the risk and danger, at the employer’s discretion. For instance, while a coronavirus case detected in a particular workplace in a remote area may not trigger the duty to inform other employees working at other cities; in the event that there are commuting employees between different workplaces, which may come into contact with an infected employee; then the duty to inform must be interpreted broadly. However, in any case, all notifications shall be done in a manner compliant with the data protection legislation and abstaining from disclosing the personal data to the extent possible, as further detailed below.

B. Employment Law

As the situation is not yet stable, depending on the developments and the severity of the condition, additional government measures, decisions and supports may be declared. However, below analysis is provided within the general framework of Turkish Employment Law.

As a principle under Turkish Employment Law, termination of the employment contract shall remain as the last resort. Therefore, before applying to this last resort solution, the following alternative institutions that are i) work from home, ii) short-time working, iii) compensatory working , iv) paid leave and v) unpaid leave, may be exhausted first within the general scheme of Turkish Employment Law, all of which may work to lift off the burden on the employer’s shoulders due to the novel COVID-19 outbreak, while preventing any legal dispute from arising and preserving the employment contracts of employees to the extent possible.

Moreover, as part of the announcement made by President Erdoğan on 18 March with respect to the economic measures in the fight against COVID-19, which have later become effective with the Omnibus Bill dated 26 March 2020 and numbered 7226 (Law numbered 7226), i) two-month employment compensation period has been increased to four months, and ii) the required processes for short-time work allowance is facilitated.

Alternative Solutions Prior to Termination of Employment

1. Work from Home

An employee may provide his/her services remote from the workplace (e.g. from home and/or via technologic communication means), provided that the employment contract allows such and the employer provides all necessary equipment and materials needed to work remotely. However, in such case, the employer remains responsible for the accidents which may occur during the working time at home unless the employer proves it fulfilled its obligations arising out of or in connection with the employment contract and the relevant laws in order not to be held responsible for such accident. The salary of employees working remotely shall be paid in full. Unless there are complications and/or impracticability arising from the nature of the work or other special circumstances of certain employees, work from home should be one of the most expedient solutions that an employer can adapt.

Currently, a great number of employers in Turkey direct their employees to work from home considering (i) the current circumstances due to the COVID-19 outbreak, (ii) the employer is obliged to provide a healthy and safe working environment for its employees as per Law on Occupational Health and Safety numbered 6331, (iii) work from home as a protection measure against coronavirus cannot be deemed to the detriment of employees and (iv) as a general principle, employees are responsible for fulfilling instructions given by their employer on the basis of the employer’s right to manage and as long as such instructions cannot be considered to the detriment of such employees.

It shall also be noted that if the Turkish government declares a mandatory order to halt business activities, thus to close down workplaces, then the employer would not obliged to pay salaries to employees, who are unable to work from home or elsewhere, due to the very nature of the work, except that the employer must pay half of employee’s salary for each day up to one week during this period.

2. Short-Time Working

In the event of general economic, sectoral or regional crises and compulsory reasons (e.g. coronavirus) (i) the weekly working time at a workplace is temporarily reduced by at least a third or (ii) the workplace or the operation is stopped completely or partially for at least four weeks, then employer may apply to the Turkish Employment Agency (Agency) (and to the relevant union, if any) for short-time working (together with the reasons thereof) and may refrain from paying employees’ salaries and premiums for up to three months once the application is accepted; provided that the following conditions are met:

– Employer (which is registered with the Agency) shall apply to the Agency for short-time working by filling in the relevant printed forms and submit them together with the list of employees which shall be subjected to the short-time working.

– Employees to be subjected to and benefited from the short-time working shall (i) be employed by the employer at least for the last 60 days before the short-time working and (ii) have at least 450 days of paid unemployment insurance premium within the last three years.

– The Agency shall approve the application of the employer.

– Employer shall pay its employees’ salaries (in half) for the first week of the compulsory reason, even if the application is approved by the Agency.

The short-time working allowance is paid by the government directly to the employees and its amount is equal to 60% of employees’ gross salary (in a way not exceeding 150% of the minimum wage which is TRY 4.380,99). The payment is made from the unemployment compensation available for the employees; however, the President has the authority to decide that the amounts paid to the employees as short-time working allowance is not deducted from their unemployment compensation. Please also note that the President is authorised to increase the short-time working to six months. As noted above, with the announcement made by the President Tayyip Erdoğan on 18 March and the Law numbered 7226, the process required for short-time work is facilitated; by enabling that (i) the process to evaluate the short-time working applications due to COVID-19 will be facilitated and conducted online; (ii) workers in workplaces, where business is halted as a result of governmental measures, will particularly be prioritised at the evaluation of the applications.

Part-time working upon mutual agreement

Without prejudice to the short-time working alternative, employers may also consider applying part-time working, as per which their working hours and salaries will be reduced on a pro-rata basis, according to the needs and circumstances of the business as impacted by the COVID-19 outbreak. The conditions, procedure for applying, as well as the consequences of part-time working are all the same with those of Unpaid Leave, as described below.

3. Compensatory Working

As per the Turkish Employment Law, ‘in the event of interruption of work due to compulsory reasons, vacationing of workplace before or after national holidays and general holidays, working significantly lower than normal or not working at all at the workplace due to similar reasons, or providing an employee with time off upon his/her request; an employer may call upon compensatory work within two months in order to compensate for the time lost due to unworked periods. Such work shall not be considered overtime work or work at extra hours. Compensatory work shall not exceed three hours daily and must not exceed the maximum daily working time in any case. Compensatory work shall not be carried out on holidays.’

Thus, an employer may consider giving days off to employees for a certain period, provided that the unworked days are compensated within a period of four months, after the expiry of the off days. As provided above, upon the President’s announcement, followed by the Law numbered 7226, the two months compensatory working period is increased to four months, in order to ensure continuity in employment.

4. Paid Leave

The employer may determine and declare a certain period or periods for the use of the annual paid leave, based on the nature and features of the works carried out in the workplace and the employer may send all or a part of its employees on a collective annual paid leave. If the employer would not call for a collective annual leave and decide to send employees on paid leave individually, both the ones, who are already entitled to annual paid leave and those who are not, may benefit from this institution.

Apart from that, an employer, depending on the workload of the employees and departments may ensure that the employees, of which the workload is drastically lowered, due to the COVID-19 outbreak, are sent to paid leave, while the rest of the workforce may continue to work.

5. Unpaid Leave

Unpaid leave is not defined or allowed under the Turkish Employment Law, except for certain exceptional cases such as pregnancy leave. However, unpaid leave may constitute an option available to employees during the COVID-19 outbreak, provided that the employer and employee mutually agree to its application. While either the employer or the employee may propose unpaid leave; if the proposal comes from the employee, the reason for the leave request must be reasonable and the duration must be temporary. However, it is not as simple for employers to propose unpaid leave. In the absence of a request from an employee or their consent, employers should ensure that they are not forcing employees to take leave.

Unpaid leave must be mutually determined, upon a written notice served by the employer (unless the request comes from the employee) and accepted by the employee in writing within six working days thereupon. Otherwise, it shall not be binding on the employee and it will constitute active termination of the employment contract, via settlement of Termination Payables, consisting of severance pay, notice pay and the uncovered allowances, including unused annual leave.

This would nevertheless trigger a reinstatement claim by the employee, which may force the employer (i) to make the employee start at his/her former position and pay an amount equal to employee’s four months’ wage to compensate the term passed in the meantime or (ii) (instead of making the employee start at his/her former position) to pay an amount equal to his/her four months’ wage to compensate the term passed in the meantime and pay a compensation equal to his/her wage of four to eight months, together with notice and severance pays).

6. Termination of Employment

Under Turkish Employment Law, in the event that compelling reasons (e.g. coronavirus) that prevent the work from running, last more than one week, it may be deemed as a justified ground for termination both for the employer and the employee. For example, a quarantine lasting more than one week in the neighbourhood of the workplace due to coronavirus may constitute a justified ground for termination for employee, whereas a quarantine lasting more than one week in the neighbourhood of the employee will give the same right to the employer. In both cases, parties shall not have the burden to comply with the notice periods or to pay notice compensation. However, the employer shall pay the employee with half salary during the one-week period and would also be obliged to pay the severance pay to the employee in consideration of the employee’s length of service. Other grounds of termination are as follows:

• Employer may terminate an employee’s employment contract based on a justified ground, if such employee cannot continue working for a period lasting for their mandatory notice period (ranging from two weeks to eight weeks based on the length of service) + six weeks, due to sickness e.g. coronavirus. However, in such a case the employer shall be responsible for paying employee’s severance pay calculated considering such employee’s length of service.

• In the event an employee having contracted coronavirus and being aware of such incident insists on coming to the work place, despite employer’s orders to the contrary, employer may terminate the employee’s employment contract without paying severance pay, due to their actions, which jeopardise the safety of the workplace and other employees, under Turkish Employment Law and as per the employer’s obligation to provide a healthy and safe working environment for its employees.

• The employer may terminate the employment contract of an employee by relying on a valid ground due to the requirements of the work and the business by issuing a board decision and hence a written termination notice, explaining requirements of the work and the reasons for terminating the employment contract in a proper manner. Although requirements of the work and the business are not listed under the Turkish Employment Law, issues which makes the continuation of work in the workplace impossible, such as decline in sales and wholesales opportunities, decrease in demand and orders, energy shortages, economic crisis in the country, widespread stagnation in the market, loss of foreign markets, raw material shortages etc. may be considered in this regard. Since decrease in demands and orders and widespread stagnation in the market are the possible consequences of the coronavirus outbreak in Turkey, employment contracts may be terminated based on this article. However, such termination shall be completed by complying with the following process: (i) the notice periods of the employee depending on employee’s length of service at the workplace shall be recognised or the wage corresponding to such notice period shall be paid in lieu, (ii) the severance pay shall be paid to the employee and (iii) the vested but uncovered allowances such as unused annual leave entitlement, unpaid salary or bonus shall be paid, if any.

Nevertheless, it should be noted that the risk for a reinstatement claim is saved for all these termination grounds. The employer, while effecting a termination resulting from the impacts of COVID-19 outbreak should (i) be sincere at relying on such termination ground; be in a position to prove with concrete evidences that either the whole or part of the business was impacted seriously or certain positions were not needed at all; and pursue the principle for termination being applied as the last resort; (ii) consider to invite the terminated employees to return to their positions, when the impact of the COVID-19 has gone and the business is returned to its normal sequence.

Collective Dismissal

Finally, please note that as per the Turkish Employment Law, ‘Collective dismissal’ occurs where the total number of employees in the workplace is between:

• 20 and 100, and at least ten employees are being dismissed on the same date or different dates in one month, or

• 101 and 300, and at least 10% employees are being dismissed on the same date or different dates in one month, or

• 301 and more, and at least 30 employees are being dismissed on the same date or different dates in one month.

In the event of ‘collective dismissal’, it is required to notify in writing and 30 days prior to the termination, (i) the Regional Social Security Directorate and (ii) Turkish Employment Agency. The notification should contain information regarding the date and cause of termination and the number of dismissed employees.

If the number of the employees that will be dismissed reaches the above figures, the employer should follow the collective termination procedure and consummate the foregoing notifications. Yet, the payables upon termination (except for notice periods/pay) and the risk for a reinstatement claim continue to remain in the event the employment of individual employees is terminated via a collective dismissal.

III. Data Privacy Obligations

In response to the rapid spread of the COVID-19 pandemic, almost all companies from various industries take certain measures to protect their employees and their business activities. In doing so, companies may have to initiate personal data processing activities that they have not been involved in before. However, in doing so, companies shall comply with the Law on the Protection of Personal Data (DPL).

As per DPL, personal data concerning health data is deemed to be a special category of personal data; processing of which is subject to stricter protection. Hence, it is prohibited to process health data without explicit consent of the data subject, in this case the employee.

As per the Article 6 of DPL, personal data concerning health may only be processed, without seeking explicit consent of the data subject (employee), by the persons subject to secrecy obligation (e.g. workplace doctor or health care personnel), or competent public institutions and organisations, for the purposes of protection of public health, operation of preventive medicine, medical diagnosis, treatment and nursing services, planning and management of healthcare services as well as their financing. Accordingly, provided that the employee is informed about the data processing, persons subject to such secrecy obligation can measure the temperature of the employees. If diagnostic temperature measurement is to be carried out by a person under a secrecy obligation, then informing the employee about the processing will suffice. However, if this measurement is to be carried out by any other person, then, in addition to informing, the explicit consent of the employee must be obtained.

It shall also be noted that as per DPL, explicit consent of the data subject/employee is required to transfer personal health data abroad. Moreover, as per the decision taken by the Turkish Data Protection Board, additional measures must also be taken by the data controllers (employers) to process special categories of personal data. These measures include a company policy and procedure in this regard, execution of confidentiality agreements, periodic authority checks, storage of personal data with cryptographic methods, keys of which are to be held at safe and various environments.

Moreover, if records regarding questions on the health status of an employee are to be stored, mandatory data security measures must be taken with regards to the processing of such personal data. It would be appropriate to erase such personal data during the first periodic erasure process, when the reasons for processing such personal data are no longer valid. Records of erasure are required to be retained for three years.

Practical information and measures that employers may implement, and the data privacy related obligations attached to these actions of the employers are summarised below:

• In the event an employee tests positive for COVID-19; as per employer’s obligations arising from both the Law on Occupational Health and Safety and the Turkish Employment Law, employers shall inform other employees, provided that the announcement does not contain any personal data. Other employees can be notified, provided that the identity of the person who has contracted the virus is not disclosed. According to Article 4 of DPL, personal data must be relevant, limited and proportionate to the purposes for which they are processed. In this regard, a balance must be struck between the privacy of the person who has tested positive for Covid-19 and the employer’s obligation to provide a healthy and safe working environment for its employees.

• Employers may implement thermal cameras to be used on company premises, in order to ensure that no person carrying a risk of virus is allowed to enter the premises; provided that employers and visitors are clearly informed on this measure in accordance with Article 10 of DPL, prior to their visit to the company premises. Prior to their visit, visitors must be specifically informed about thermal camera scans that are being carried out in order to protect and safeguard public health. Provided that the person is informed, temperature measurements can be carried out only by persons under a secrecy obligation. If these scans are to be carried out by any other person, then, in addition to informing, the explicit consent of the related person must be obtained.

However, it should also be noted that, general principles set forth under DPL must be taken into consideration when processing personal data. For example, conducting health checks at workplaces, where customers do not have any direct contact with the employees would contradict with the principle of ‘(data processed) being relevant, limited and proportionate with the purpose of the processing’. As another example, failure to erase the results of such measurements following the expiration of health risks would contradict the general principle of ‘retaining personal data only for the period necessitated by the purpose of processing’.

• Companies can, upon a request from an authorised public institution, disclose information about their customers, visitors, and employees to public institutions for purposes of protecting public health. Under these circumstances, personal data can be disclosed or transferred, without obtaining explicit consent from the data subject. Generally, for purposes of responding to information and document requests coming from authorised public institutions, condition for processing personal data that is ‘being necessary for compliance with legal obligations to which the data controller is subject’ may be applicable. However, if the requested information includes health data, then, in accordance with Article 6 of DPL, such data can be transferred without obtaining explicit consent from the data subject, only for purposes of protecting public health, and only by persons under a secrecy obligation (e.g., a workplace doctor or a healthcare professional).

During the time of the COVID-19 pandemic, a significant portion of the workforce has started working from home. Please also note that working from home does not eliminate the obligations of the employers to implement necessary administrative and technical measures to ensure the security of the personal data. In order to minimise the risks that may be caused by working remotely, the necessary measures must be implemented. For example, the data should be transferred between the home computer and the company servers via a secure communication protocol. The related up-to-date anti-virus systems and firewalls should be installed on employees’ computers and the employees must be carefully informed on the importance of the security of personal data. However, the measures taken by employees do not eliminate the obligation of data controllers to ensure the security of personal data under DPL.

Lastly, within the scope of DPL and personal data protection legislation, data controllers (employers) must perform certain activities in a tight deadline, such as answering/fulfilling data subjects’ demands, within 30 days and inform the Personal Data Protection Authority of any data breach within 72 hours. Although these periods are not extended due to the COVID-19 outbreak, in the Public Announcement published by the Authority, it has been stated that the extraordinary conditions will be taken into account in the evaluation of each data subject application and data breach notification.