Common Mistakes And What To Consider In Release And Discharge Agreements, Mutual Termination Agreements, And Voluntary Mediation

1. INTRODUCTION

Resolving employee-employer disputes without resorting to litigation can provide significant advantages in terms of both time and cost. Consequently, there is a growing trend for parties to use certain mutually agreed-upon instruments when terminating or after terminating employment relationships.

In this context, three legal concepts frequently encountered in practice in relation to the termination of employment contracts and related disputes are: i) the release and discharge agreement (ibraname), ii) the mutual termination agreement (ikale), and iii) voluntary mediation. These three legal concepts are different in their legal nature; however, they are often used by employers for similar purposes or treated as alternatives to each other, which can lead to various errors in practice.

The purpose of this article is to provide practical guidance to employers on the correct and proper use of these legal concepts for the termination of an employment contract or the resolution of subsequent disputes. Therefore, the article provides a detailed evaluation of the different legal characteristics of these concepts and, in particular, the points that employers should pay attention to when using these methods.

2. RELEASE AND DISCHARGE AGREEMENT (İBRANAME)

1. Legal Nature

A release and discharge agreement (ibraname) is a contract aimed at releasing the debtor from a debt. With such an agreement, a debt can be partially or completely extinguished. In labor law, a release and discharge agreement is a simple written document that shows the employer has partially/completely fulfilled its debts to the employee and has no remaining debts.

A release and discharge agreement can extinguish existing and accrued debts. To terminate the entire debt relationship (the contract itself) between the parties, a mutual termination agreement (ikale) must be concluded. In this sense, a release and discharge agreement is different from a mutual termination agreement.

Furthermore, future rights cannot be waived with a release and discharge agreement; it only relates to accrued claims from a past period. Inalienable rights, such as social security entitlements (e.g., the right to be recognized as an insured employee), cannot be subject to a release. It is also not possible to waive the right to file a re-employment lawsuit through a release and discharge agreement, and if this is done, it will be considered legally invalid.

2. Conditions for Validity

This document, which is frequently used in practice, must meet a series of strict legal conditions to be considered legally valid. Article 420 of the Turkish Code of Obligations ("TCO") and the precedents of the Court of Cassation stipulate cumulative conditions for the validity of a release and discharge agreement signed between an employee and an employer. The absence of even one of these conditions invalidates the agreement:

• Must be in writing: The agreement must be in writing and bear the employee's signature. It is sufficient to be in a simple written form. It is not mandatory to have it notarized, but it is recommended as it will eliminate potential disputes regarding the date of execution.
• At least one month must have passed since the termination of the contract: The date of the agreement must be at least one month after the termination of the employment contract. Release and discharge agreements signed before or immediately after the termination are invalid.
• The type and amount of the receivables must be clearly specified: The agreement must separately state the type and amount of each receivable that has been paid. The use of vague or blanket statements such as "I have received all my receivables/entitlements" will not be deemed legally valid.

• Payment must be made in full and via bank transfer: Payments related to the receivables mentioned in the agreement must be made completely, in accordance with the amount of the entitlement, and via bank transfer. Therefore, the binding nature of the release and discharge agreement is generally limited to the actual payment made to the employee. Payments made in cash result in the invalidity of the release and discharge agreements. In cases of incomplete payment, the release document will not be regarded as a valid release but rather as a mere "receipt (makbuz)". Even in such cases, it is required that payments be made through a bank transfer.

3. Outcomes and Evaluation from an Employer's Perspective

Practical Impact:

• It declares that the debt has been fulfilled and extinguishes the debt.
• The employer holds written evidence indicating that the employee has received all due payments and acknowledges that no further obligations remain on the part of the employer. Such documentation may serve as strong evidence in favor of the employer in any future legal proceedings.

Points to Consider:

• It is subject to strict formal requirements. Any document that fails to meet these requirements will not be regarded as a valid release.

• It is based on rights. It only covers accrued and existing receivables; an employee cannot be asked to waive future rights.
• It should not be used as a termination tool. If the employment contract is terminated by the employer, the provisions of employment security and termination procedures in the relevant legislation must be meticulously followed.

3. MUTUAL TERMINATION AGREEMENT (İKALE)

1. Legal Nature

A mutual termination agreement (ikale) is an agreement where the parties mutually agree to terminate an existing employment contract with their reciprocal consent. It is not a unilateral termination by the employer or a resignation by the employee; but rather the liquidation of the contract by mutual will. There is no special regulation regarding mutual termination agreements in Turkish legislation; it is a result of the freedom of contract and is valid according to general provisions. It is considered a simple written document.

2. Conditions for Validity

There is no specific statutory regulation governing mutual termination agreements under Turkish law, their validity is subject to general provisions, while additional conditions have been shaped by the precedents of the Court of Cassation:

• Mutual and free will: A mutual termination agreement must reflect the genuine and mutual will of both parties. It is not considered a unilateral termination by the employer or a resignation by the employee, but rather a joint decision to end the employment contract. If the employee's consent is affected by the employer (through deception, coercion, or pressure), the agreement will not be valid. The Court of Cassation has previously ruled that agreements signed as part of standard exit procedures or presented as routine forms will be considered invalid. In such cases, the employee may request the annulment of the agreement, and the termination may be treated as a unilateral termination by the employer.
• Provision of reasonable benefit: The validity of a mutual termination agreement is evaluated in favor of the employee, and the condition of "reasonable benefit" is sought for its validity. This criterion is evaluated by considering the specific characteristics of each concrete case, including whether the offer to conclude a mutual termination agreement is initiated by the employee or the employer. For example, the Court of Cassation, which considered an additional payment corresponding to two months' salary to be sufficient in a case where the mutual termination offer was initiated by the employee, may find an additional payment corresponding to three months' salary to be insufficient in a dispute where the mutual termination offer was initiated by the employer. In its decisions, it also has been ruled that in cases where the employee has the right to benefit from employment security provisions, a portion or all of the severance pay, notice pay, employment security compensation, and salary for the idle period, as well as other rights, must be paid.
• Based on information and agreement on essential elements: In parallel with the above conditions, especially in cases where the offer was initiated by the employer, the employee must be informed about the mutual termination agreement and its consequences. It is important that the mutual termination agreement clearly and unequivocally states the matters the parties have agreed upon and which rights will be paid (severance pay, notice pay, annual leave, overtime, etc.).

3. Outcomes and Evaluation from an Employer's Perspective

Practical Impact:

• A valid mutual termination agreement, prepared in accordance with the conditions above, can prevent the employee's termination-related claims (such as a re-employment lawsuit), and even if a lawsuit is filed, it will result in the dismissal of the employee's lawsuits/claims.

Points to Consider:

• As is known, the right to benefit from employment security (filing a re-employment lawsuit), and the right to severance and notice pay are generally dependent on termination. However, when a mutual termination agreement is signed, there is no termination in legal sense; the employment contract is ended by mutual consent. Therefore, the employee, as a rule, cannot receive unemployment benefits either. For this reason, the Court of Cassation, interpreting in favor of the employee, requires the "reasonable benefit (additional benefit)" condition for the validity of the mutual termination agreement and deems the agreement invalid if this condition is not met. Particularly in cases of mutual termination initiated by the employer, if a reasonable benefit is not provided to the employee, it may be accepted that the contract was terminated by the employer, and the employee will be able to claim all termination-related entitlements against the employer.

4. VOLUNTARY MEDIATION

1. Legal Nature

Mediation is an alternative dispute resolution mechanism. Mediation is not an employment contract termination tool; it is a dispute resolution method that can be used to resolve an accrued dispute. According to the Law on Mediation in Civil Disputes No. 6325, parties can apply for voluntary mediation before or during a lawsuit.

When the employee and the employer agree on their rights and entitlements under the supervision of a mediator and a mediation settlement agreement is drawn up, the agreement gains the force of a court judgment when an enforcement annotation is obtained. If both parties are represented by their attorneys and the agreement is signed by the attorneys, it gains the force of a court judgment without the need for an enforcement annotation. Thus, the parties can resolve the dispute quickly and confidentially without going to court and obtain a document with the force of a judgment.

2. Conditions for Validity

The following conditions are required for a voluntary mediation agreement to be valid:

• An existing dispute: The employment contract cannot be terminated through mediation; the employment contract must have been terminated and a dispute must have arisen before the mediation process.
• Informing and properly inviting the employee: The employee must be properly invited to the mediation meeting with reasonable advance notice and must be given clear and complete information about the process. For example, arranging a mediation meeting on the same day or very shortly after the employment contract is terminated can be considered a reason for invalidity.

• The existence of negotiations: There must be a real mediation process involving actual negotiations. The employee's participation should not be limited to merely signing standard or pre-prepared documents.

• An impartial mediation process: No situation should be created that could cast a shadow on the impartiality of the mediator. The mediator must be at an equal distance from both parties and ensure the fair conduct of the process. For example, there are decisions where the mediator's impartiality was considered compromised in situations where the mediator's address was the same as the employer's attorney's address.
• Clear determination of agreed and unresolved issues: The settlement agreement must clearly, unequivocally, and without room for doubt specify the issues that have been agreed upon. For example, if the agreement only includes vague statements such as "the parties have reached an agreement on severance pay" the court may conclude that the process resulted in a disagreement.

• Existence of the employee's free will: In fact, all of the above conditions are closely linked to this one. If the employee is pressured or forced into a settlement during mediation, the resulting agreement may be deemed invalid. In situations where there is a large difference between the employee's actual entitlement and the agreed-upon amount, the employee who has worked for a long time declares without reason that they terminated the employment contract themselves and have no receivables, there are contradictions in the minutes, or the mediation meetings are held at the employer's address, it has been ruled that the employee's free will cannot be said to exist.

3. Outcomes and Evaluation from an Employer's Perspective

Practical Impact:

• The mediation settlement agreement (with an enforcement annotation) gains the force of a judgment. With the fulfillment of the performance stipulated in the agreement, it terminates the dispute.
• The mediation process is grounded in mutual benefit. In addition to employment receivables, it is possible for the employee to waive rights such as filing a re-employment lawsuit. Indeed, if an agreement is reached as a result of the mediation process, the parties cannot file a lawsuit on the agreed-upon issues.

Points to Consider:

• The employment contract must have been terminated before the mediation process. The voluntary mediation process should not be used as a termination tool.
• It should not be confused with a release and discharge agreement. As a rule, the mandatory rules regarding a release and discharge agreement do not apply to mediation processes. However, if it is determined that the mediation process had the purpose of a release and discharge agreement, the mediation documents can be evaluated as a release and discharge agreement, and their validity can be assessed within the scope of the mandatory provisions regarding release and discharge agreements.
• Since the parties cannot file a lawsuit on the issues agreed upon in the mediation process, the courts meticulously scrutinize the settlement documents, taking into account the fact that the employee is in a weaker position.
• Although the mediator's fee in the mediation process creates an additional cost item, bearing this cost is considered a more reasonable and preferable option in most cases, given that the judicial process is much more burdensome in terms of time and cost.

5. Conclusion

The termination of an employment contract is not just the end of the employment relationship for the parties; it is a critical stage where the foundations of future disputes are laid, affecting the parties' mutual rights and obligations, and can have long-lasting legal consequences.

In this process or afterward, the instruments used by employers to eliminate or limit their responsibilities, namely the release and discharge agreement, mutual termination agreement, and mediation, differ in form, content, and most importantly, in nature. When incorrectly applied, they lose their effect of eliminating legal and financial risks.

Therefore, employers must meticulously evaluate the specific conditions of these methods according to the characteristics of each concrete case. Conscious planning of these processes plays a critical role for employers in reducing legal uncertainties and preventing future disputes, while for employees, it is important for the protection of acquired rights and a secure separation period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.