Determination Of The Law Applicable To Workers Sent Abroad To Be Employed

Labour law, by its very nature, is based on the principle of protecting the employee, who is regarded as the weaker party to the contract. The fact that the employee's bargaining power is limited vis-à-vis the employer carries this need for protection into the international sphere as well. With the increase in international employment relations, the question of which country's law is to be applied to disputes arising from such contracts has brought fundamental debates in the field of Private International Law.

In particular, in recent years, it has been observed that, in disputes involving Turkish workers who are taken from Türkiye to other countries to be employed abroad, mostly in sectors such as construction and international shipping, this situation has led to a number of different practices. In our country, with respect to such employment contracts containing a foreign element, Turkish courts have, for the most part, approached the matter from a perspective advanced under headings such as public policy and the "organic link" of employers and, for this reason, Article 27 of the currently applicable Law on International Private and Civil Law (MÖHUK), which provides that: "(1) Employment contracts shall be subject to the law chosen by the parties, without prejudice to the minimum protection to which the employee would be entitled under the mandatory provisions of the law of the habitual place of work. (2) In the absence of a choice of law by the parties, the law of the place where the employee habitually carries out his work shall apply to the employment contract. If the employee temporarily carries out his work in another country, this place of work shall not be deemed to be the habitual place of work. (3) If the employee does not habitually carry out his work in any one country but performs it continuously in more than one country, the employment contract shall be subject to the law of the country in which the employer's principal place of business is situated. (4) However, if, in view of all the circumstances, there is a law that is more closely connected with the employment contract, that law shall apply to the contract instead of the provisions of paragraphs two and three." has in practice been deprived of its field of application, and Article 27 of MÖHUK has been ignored in disputes arising from this type of overseas service contracts on the ground that the Turkish element is more predominant.

With the rapid global acceleration of developments in the construction sector and, in particular, the steadily increasing number of disputes arising between Turkish workers and Turkish employers or their affiliates, differing interpretations have emerged before the Turkish courts as to the application of the Law, and, ultimately, a process has unfolded that has gone so far as to question the constitutionality of Article 27 of the Law on Private International Law and Procedural Law.

It should be noted that Article 27 of MÖHUK regulates the law applicable to employment contracts containing a foreign element. However, the differing court decisions and interpretations that arose regarding the former version of the article led to the matter being brought before the Constitutional Court in 2023. At the root of the current debates lies, as Yıldız also points out, the fact that in standard contracts signed under the supervision of İŞKUR it is stipulated that the law of the country where the work is carried out shall be applied to the dispute, and that the laws of those countries often provide less protection compared to Turkish law.

Particularly in the 1990s and early 2000s, the Court of Cassation (Yargıtay) almost invariably applied Turkish law in disputes concerning workers taken abroad. In the recent period, however, the 9th Civil Chamber of the Court of Cassation has begun to render decisions in some disputes to the effect that the foreign law designated in the contract must be applied. With this change of approach, differences of opinion have arisen between first instance courts and regional courts of appeal on the one hand and the Court of Cassation on the other, and, ultimately, the ground has been laid for constitutional review. At the core of the objection lies the argument that paragraphs 1 and 2 of Article 27 of Law No. 5718 conflict with the principles of the social state in Article 2 and the right to work in Article 49 of the Constitution.

It may be said that the annulment decision of the Constitutional Court dated 2024 and the amendments introduced by Law No. 7550, which entered into force immediately thereafter, have ushered in a new era regarding the law applicable to employment contracts containing a foreign element.

Employment contracts containing a foreign element are, in the most general terms, described as employment relationships that concern more than one country from the perspective of either the employee or the employer. This may arise in various ways, such as the employee or employer being a national of a foreign country, the employer's place of business being located abroad, or the work being carried out in fact in another country. In a dispute arising from such a contract, the question of "which country's law will be applied" is resolved within the framework of conflict-of-laws rules. In our law, the specific provision on this matter is Article 27 of MÖHUK No. 5718. This article has a hybrid structure that determines the law applicable to employment contracts both according to the will of the parties, that is, the choice of law, and according to certain connecting factors.

By Article 18 of Law No. 7550, the legislature amended paragraphs one and four of Article 27 of the International Private and Civil Law as follows: "(1) Employment contracts shall be governed by the law determined by the parties in the contract, without prejudice to the minimum protection afforded to the employee by the mandatory provisions of the law of the habitual place of work." "(4) However, except for the provisions of the law of the place where the work is carried out which must be applied at the time the work is performed, if, in view of all the circumstances, there is a law that is more closely connected with the employment contract, that law shall apply to the contract instead of the provisions of paragraphs one, two and three."

The most important revision made to Article 27 of MÖHUK by Law No. 7550 has taken place in paragraph four of the article. With this amendment, the legislature has aimed to resolve the issue, highlighted by the Constitutional Court, of being able to apply the law more closely connected with the contract even where a choice of law has been made.

The new paragraph 27/4 has removed the possibility of applying the more closely connected law from being limited only to situations where no choice of law has been made, and has extended it to situations where a choice of law has been made.

A critical exception introduced by the new regulation is the exclusion of "the provisions of the law of the place where the work is carried out which must be applied at the time the work is performed". It may be said that this exception gives priority to rules such as working time, national holidays and general holidays, annual leave, overtime and rest breaks, which can be counted among the provisions that must be applied at the time the work is performed.

Under Article 27 of MÖHUK, the law applicable to an employment contract containing a foreign element is determined in general terms as follows:

• Choice of law by the parties: If the parties have expressly chosen a law in the contract, the employment contract is, as a rule, subject to the chosen law. However, the mandatory minimum protection afforded to the employee by the law of the habitual place of work is preserved. This means that, even if the parties choose a law, the minimum rights afforded by the mandatory labour law provisions of the country where the employee normally works cannot be removed. In other words, the chosen foreign law may be applied if it contains provisions more favourable than the minimum protection afforded to the employee by the law of the habitual place of work; otherwise, the employee's minimum rights will be preserved. In order to ensure this protection, a comparison of benefits must be made in the concrete case between the chosen law and the law of the habitual place of work. If the chosen law provides less protection than the employee's habitual place of work law, the chosen law will not be applied in this respect and the law of the habitual place of work will come into play.
• If the parties have not chosen a law: If no law has been determined by the will of the parties, the dispute relating to the employment contract will be resolved in stages according to Article 27 of MÖHUK as follows:
  1. The law of the country where the work is habitually carried out: Where no choice of law has been made, or where the choice made is invalid, the law of the place where the employee habitually and regularly performs his work is determined as the primary applicable law. Pursuant to the second sentence of Article 27/2 of MÖHUK, if the employee performs his work temporarily in another country, this place of work is not considered the habitual place of work.
  2. The law of the country where the employer's principal place of business is located: If there is no single country in which the employee works continuously and the employee's activities are spread continuously over more than one country, paragraph three comes into play. In this case, the law of the country where the employer's principal place of business is located is applied to the contract.
  3. The law more closely connected with the contract: If the parties have not made an express or implied choice of law, or if the choice they have made has become invalid, at the final stage the law of the country that is more closely connected with the employment contract may come into play. A closer connection refers to the law with which the contract has the strongest links when all the circumstances of the contract are evaluated. The new Article 27/4 of MÖHUK grants the judge discretion by providing that, if in view of all the circumstances a law that is more closely connected with the employment contract is found, that law may be applied instead of the provisions of Article 27/1, 2 and 3.

This concept of a "closer connection" refers to the law with which the contract has the strongest links when all the circumstances of the contract are evaluated. Criteria may include the nationality of the employee and the employer, the language of the contract, the place where it was signed, the place where the work is performed, the currency in which the remuneration is paid and social security ties.

At this point, it is useful to note that the determination of foreign law according to conflict-of-laws rules is subject to two fundamental limits on its application and, in this context, it is necessary to consider public policy and overriding mandatory rules, to which Turkish courts frequently resort when applying Turkish law. Pursuant to Article 5 of MÖHUK, if a provision of the applicable foreign law to be applied to a specific case is clearly contrary to Turkish public policy, that provision shall not be applied. By way of example, in employment relationships containing a foreign element, even if the applicable law is a foreign law as a result of the above rules, certain rules of Turkish law that concern the fundamental public interest may still be applied where necessary.

Indeed, in the past the Court of Cassation has held, even in cases where foreign law was applied, that certain rights such as severance pay are related to Turkish public policy and that Turkish law must therefore be applied. For example, in a 1992 Court of Cassation decision quoted by Yıldız, it was emphasized that, even though Libyan law should be applied to the employment contract of a Turkish worker working in Libya, Article 14 of Labour Law No. 1475 on severance pay concerns Turkish public policy; for this reason, it was stated that the dispute must be resolved according to Turkish law. However, can we say that the reasoning here is a sound reasoning in terms of MÖHUK? For instance, do the absence of severance pay and the existence of a lower amount of severance pay create the same problem in terms of legal protection? In other words, considering the mixed nature of labour law and the scope of its mandatory provisions, is there in fact any area that does not concern public policy?

When the practice of the Court of Cassation is examined, it is seen that courts are often inclined to apply Turkish law directly by treating situations such as the absence of severance pay or the absence of job security provisions as a violation of public policy, without examining the content of the foreign law. This practice is open to criticism; for public policy intervention must be exceptional and should only come into play where the application of foreign law would lead to a result that fundamentally undermines core constitutional values. This approach of the Court of Cassation causes employers to refrain from employing Turkish workers and increases legal uncertainty.

Overriding mandatory rules are norms that must be applied in any event, independently of the will of the parties or of conflict-of-laws rules, and which aim to realise the State's social, economic or political interests. Rules such as those relating to occupational health and safety and daily and weekly working hours generally have a territorial character and are therefore recognised as overriding mandatory rules. The fact that Article 27/4 of MÖHUK excludes "the provisions of the law of the place where the work is carried out which must be applied at the time the work is performed" even where the more closely connected law is applied means that the new provision confirms this territorial effect of overriding mandatory rules.

When we examine the grounds for the Constitutional Court's annulment of Article 27/1 of MÖHUK, we see that the emphasis on public policy is predominant.

The differing court decisions and interpretations that arose regarding the law applicable to employment contracts containing a foreign element led to the matter being brought before the Constitutional Court in 2023. The 27th Civil Chamber of the Istanbul Regional Court of Appeal and first instance labour courts applied for review by way of objection, alleging that, in particular, the first paragraph of Article 27 of MÖHUK was unconstitutional. In its decision dated 5 November 2024 (E.2023/158, K.2024/187), the Constitutional Court held that Article 27/1 of MÖHUK was unconstitutional and annulled it; the decision was published in the Official Gazette No. 32837 dated 10 March 2025. The Court provided the legislature with the opportunity to introduce new regulations within this period by stipulating that the annulment decision would enter into force six months later.

The fundamental issue in the Constitutional Court's review was whether the possibility granted to the parties to choose the applicable law in employment contracts was contrary to the principle of protection of employees set out in Article 49 of the Constitution. In its judgment, the Court stated that Article 49 of the Constitution imposes positive obligations on the State to protect employees and to support employment, and emphasized that, although the Court is bound by the discretion of the legislature, the rule determining the law applicable to employment contracts containing a foreign element must not conflict with this positive obligation.

The Constitutional Court found that such a safeguard was lacking in Article 27/1 of MÖHUK. For the fourth paragraph of Article 27 provided that, if the parties did not choose a law, the law more closely connected with the employment contract could be applied; however, if the parties had chosen a law, this closer connection rule was rendered inoperative. In other words, where a law was chosen in the contract, even if the contract in fact had stronger links with another country and that country's law afforded the employee greater protection, the former version of the provision did not allow the application of that law. In its judgment, the Constitutional Court stated that the law more closely connected with the contract is not necessarily the law of the same country as the habitual place of work and noted that this possibility was also mentioned in the reasoning of the article.

The Constitutional Court also underlined that the employee is in a weaker position compared to the employer and emphasized that, in practice, the employee's bargaining power is quite limited in relation to the choice of law. As a result, it was concluded that the rule was contrary to Article 49 of the Constitution concerning the right to work. In its decision adopted by a majority, the Constitutional Court annulled Article 27/1 on the ground that this unlawful situation needed to be remedied.

Following the annulment decision, new regulations were introduced by Law No. 7550. After the Constitutional Court's annulment decision, the legislature moved swiftly to fill the legal vacuum that had arisen and thus introduced new provisions regarding Article 27 of MÖHUK through Article 18 of Law No. 7550. This Law was published in the Official Gazette dated 4 June 2025 and entered into force – thereby bringing the new rules into effect before the six-month period granted by the Constitutional Court had expired.

However, following the annulment ruling, amendments were made by Law No. 7550 not only to the first paragraph of Article 27 of MÖHUK, but also to its fourth paragraph, while paragraphs 2 and 3 were preserved. When the substance of the new regulations is examined, it is seen that the legislature aimed to address the shortcomings identified by the Constitutional Court:

• Amendment to MÖHUK 27/1: The wording of the first paragraph has been partially revised, and the freedom of the parties to choose the applicable law has been preserved, provided that the minimum protection afforded by the mandatory provisions of the law of the habitual place of work is maintained. In fact, the old and new texts are, in substance, largely similar; in both, it is stated that the law determined by the parties in employment contracts shall be valid, but that this choice cannot remove the minimum rights afforded by the law of the habitual place of work. As the Constitutional Court also accepted, the principle of party autonomy in the choice of law is essentially preserved in substance.
• Amendment to MÖHUK 27/4: The fourth paragraph contains the most important revision. In its former version, Article 27/4 provided that "if, in view of all the circumstances, there is a law that is more closely connected with the employment contract, that law may be applied to the contract instead of the provisions of paragraphs two and three." This wording allowed recourse to the more closely connected law only in cases where the parties had not made a choice of law; if the parties had chosen a law, it did not permit this. The new regulation, however, has amended the fourth paragraph to read "... if, in view of all the circumstances, there is a law that is more closely connected with the employment contract, that law may be applied to the contract instead of the provisions of paragraphs one, two and three." Thus, it has now become possible to apply the more closely connected law even where the parties have made a choice of law. In this way, the problem highlighted by the Court – namely that a law which could be more favourable to the employee might be excluded where the contract stipulates otherwise – has been sought to be resolved. At the same time, an important addition has been made to the new text of Article 27/4 by inserting the phrase "however, except for the provisions of the law of the place where the work is carried out which must be applied at the time the work is performed". This clause preserves the mandatory rules of the country where the work is actually performed. The criterion established here – namely the mandatory rules of the country where the work is actually carried out abroad – has, in light of foreign rules, rendered open to debate, for example, the limits of the mandatory provisions of the foreign country regarding national holidays and general public holidays and overtime. In this respect, we see that in recent times the Court of Cassation has given priority, in terms of working hours, to countries such as Oman and Russia. Under this exception, when work on a holiday is in question, will the court take into account the closer connection or the place where the work is carried out?

Although it may be said that, with these new regulations, the courts have essentially been given broader authority to determine the closer connection, with the new provision it also emerges, on the wording of the law, that priority is given to the rule of another country without regard to whether it is in favour of the employee or not, and that, in this situation where purpose and result do not coincide, foreign law is given precedence due to the circumstances of the case, even if it is more closely connected.

Ultimately, although it may be said that the new regulation of Article 27/4 of MÖHUK has placed the constitutional obligation of protection on a statutory footing by granting courts discretion – instead of indirect and theoretical tools such as "public policy" or "organic link" previously used in judicial practice – to apply the law more closely connected with the contract and more favourable to the employee even where a choice of law has been made, it may also be said that, by excluding "the mandatory rules of the country where the work is actually carried out" from this mechanism, the provision has, in fact, introduced a change contrary to the very objective it seeks to achieve.

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