EMPLOYER’S OBLIGATION TO PAY WAGE DURING PROCESSING OF SHORT-TERM EMPLOYMENT APPLICATION 06 April 2020

During the Processing of an Application for Short-Term Employment Allowance, and if the ApplicationiIs Rejected, What Happens to Employer’s Obligation to Pay Wages?

Provisional Article 23 has been added to the Unemployment İnsurance Law No. 4447 by Law No. 7226, which entered into force on 25 March 2020.

 “PROVISIONAL ARTICLE 23 – It is effective until 30.06.2020, for short-term employment applications made due to the act of providence arising from new coronavirus (Covid-19), in order for the worker to be entitled to the short-term employment allowance, stipulated provision in third paragraph of additional Article 2 to fulfill the conditions of entitlement to unemployment insurance, excluding termination of labor contract, is enforced for those who have been paid unemployment insurance for at least 450 days within the past three years and who are subject to a labor contract for 60 days before starting short-time employment. Those who do not meet this condition continue to benefit from short-term employment for a period not to exceed the period of short-term employment remaining from their last unemployment.

In order to benefit from the short-term employment practice under this article, the worker should not be removed by the employer within the period of short-term employment except for reasons mentioned in the sub-paragraph numbered (II) of the first paragraph of Article 25 of Labor Law No. 4857. Applications made within the scope of this article are to be finalized within 60 days from the date of application.

The President is authorized to extend the date of applications made within scope of this article to 31/12/2020 and to amend the days specified in first paragraph.”

With this amendment, the examination period of the Institution (i.e., İşkur) is extended by providing that applications are to be finalized within 60 days of date of application. We discuss below the debates that has arisen about whether an employer’s obligation to pay wages continues, or not, during the Institution’s of examination of application that it ultimately rejects:

1. Does the Employer’s Obligation to Pay Wages Continue during the Processing of an Application for Short-Term Employment Allowance?

Although finalizing short-term employment allowance applications is treated as urgent by previous regulation found the Unemployment İnsurance Law No. 4447, it is now required, by the 25 March 2020 amendment, that applications are to be finalized by the Institution within 60 days. No legal regulation, however, addresses whether the employer’s obligation to pay wages continues, or not, while the processing of the applications is ongoing.

With the amendment in the Unemployment Insurance Law, new coronavirus (Covid-19) has been accepted as an act of providence. In light of this newly recognized act of providence, an application for short-term employment allowance may be done on the grounds that either work activity has stopped partly or wholly, or that weekly working hours have been decreased. For an employer whose workplace has been shut down by an administrative decision, there is no debate about existence of an act of providence. However, where a workplace has been shut down partly or wholly, or its weekly working hours have been decreased by a managerial decision, whether a justification exists based on an act of providence is the subject of debate. Accordingly, employers should assume each application will be be evaluated on a case by case basis.

When the result of evaluations made within the scope of existing regulations as considerd, it is possible to reach a conclusion about whether employers are obligation to pay wages to workers whose short-term employment allowance applications are not yet finalized. We will first consider the situation where activity at workplace is stopped wholly or significantly, followed by our considering the situation where weekly working hours are decreased significantly.

When taking into consideration short-term employment application's justification and legal regulation:

1. In the case work activity is wholly stopped, in accordance with Article 40 of the Labor Law No. 4857 half wage is to be paid, including week-end wage, for a one-week period from the date the activity is stopped. In other words, because the labor contract is to be suspended after this one-week period, there is no obligation for the employer to pay wages beyond this point in time.
2. In the case work activity is significantly decreased, half wage is to be paid for a one-week period, even during the period an application is being evaluated. The Institution’s evaluation will include whether Covid-19 epidemic, in light of the specific circumstance related to the decrease in work being considered,  is an act of providence, or not, according to how that is defined in the Labor Law. Employers should do the same when deciding whether to pay the wages of the workers in question in full or proportionally after the one-week period and up until their short-term employment allowance applications are finalized . There are different bodies of opinion about whether, in all situations, the Covid-19 epidemic will be found to be an act of providence, or not, under the applicable law.

One body of opinion focuses on whether the Covid-19 epidemic will be found to be an act of providence as defined in Article 25/III of the Labor Law. As long as Covid-19 epidemic is accepted as an act of providence within the scope of this Article, whenever an employer has the obligation to pay half wage for one week,  as discussed above, wages should continue to be paid to the workers in proportion to their working time until application is finalized. However, in the event that the epidemic is not accepted as an act of providence, the risk of workers requesting missing wages may arise.

Another view is until there are be administrative decisions regarding quarantine, curfew or the shutdown of workplace based on the finding that the Covid-19 epidemic is an act of providence, the epidemic cannot be considered an act of providence pursuant to Article 25/III of the Labor Law. According to this opinion, even if working hours in workplaces are significantly decreased, worker’s full wages should be paid during the process of the employer’s application as it obligation to do so continues.

2. Does the Eemployer’s Obligation to Pay Wages continue in the case an Application for Short-Term Employment Allowance is ultimately Rejected?

When considering the case where an application for short-term employment allowance is not accepted by the Institution, we have approached this question by considering the same two bodies of opinion considered in Part 1.3 above:

The first body of opinion focused on whether the Covid-19 epidemic is an act of providence within scope of Article 25/III of the Labor Law. In the case the epidemic is accepted as an act of providence within the frame of this Article, even if application for short-term employment allowance is rejected by İşkur, the existence of an act of providence will no longer be in dispute. Accordingly, the employer, who will have paid half wage of first one week, will no longer be obligated to pay wages for the reason labor contract will have been terminated. Even in the event the Covid-19 epidemic is found to be an act of providence, the employer is at risk the workers whose contract has been suspended, even validly, are likely to be entitled to severance pay and the unpaid balance for the pay period in question, because their wages would not have been paid completely or not paid in accordance with Article 24/II-f of the Labor Law No. 4857. Related to that risk is the workers in question will likely be entitled severance pay for  the termination of the labor contract based on an act of the providence causing work to stop for a period of more than one week .

The other body of opinion is that in order for Covid-19 epidemic to be considered an act of providence there must first be administrative decisions about the cause of any given quarantine, curfew or shut down of a workplace. So until that time the Covid-19 epidemic is not to be considered an act of providence in accordance with Article 25/III of the Labor Law. According to this body of opinion, because the relationship between worker and employer is not suspended, at least until there are determinative administrative decisions, employers need to consider other options, such as the imposition of administrative and annual leaves, or the paying of half wage . In that case, make up wages may be requested when normal work order is started.

According to us:

Both bodies of opinions should be taken into consideration by employers and they should act cautiously in light of the risks noted above by taking action most appropriate given their commercial situation, while to ensuring as best as they can the interests of worker and the continuity of their business. It should not be forgotten that the negative effects of covid-19 epidemic on social life and business life are presently increasing day by day. Considering that the epidemic has not yet reached its peak point, employers must not lose sight of the issue as to whether there is, or will be, an act of providence as defined in the Labor Law. It should also not be forgotten that, over time, it will doubt be become clearer through discussions of doctrine, ajudications and legal regulations whether the Covid-19 epidemic is to be accepted as an act of providence, or not, within scope of Article 25/III of Labor Law.