Mutual Termination of Employment Through a Rescission Agreement

Ikale is not directly regulated by statute; it is an institution shaped by legal doctrine and Court of Cassation precedent, resting on the principle of freedom of contract. An employment contract may end not only through unilateral termination by the employer or resignation by the employee, but also through the parties' joint intent, expressed in a rescission agreement.

The key difference between ikale and termination is that the process proceeds through mutual negotiation and agreement rather than a one-sided declaration of intent. As a result, ikale follows a more controlled and pre-planned process than termination.

For a rescission agreement to be considered valid, the parties' intent must, under general principles of contract law, have been formed soundly and free from pressure. In Court of Cassation precedent, texts unilaterally drafted by the employer and presented to the employee for signature are scrutinized closely to determine whether they truly constitute a genuine rescission agreement, since the employee's weaker economic position raises the question of whether their consent was actually given freely.

Under settled Court of Cassation precedent, for a rescission agreement to be considered valid, the employee must be granted a reasonable benefit beyond their statutory entitlements, such as severance and notice pay. This benefit may take the form of additional compensation, an extra payment, or another form of performance in the employee's favor.

The Court of Cassation assesses the reasonable benefit according to who proposed the ikale: where the proposal came from the employer, a concrete payment on top of severance and notice pay is required (in practice, usually an "ikale payment" in the region of a few months' wages); where the proposal came from the employee, the payment of severance alone may suffice as a reasonable benefit. Where the employer made the proposal and the text was signed solely in exchange for severance and notice pay, with no additional benefit to the employee, it is usually treated not as a genuine rescission agreement but as a unilateral termination by the employer. This classification directly affects the employee's right to file a reinstatement lawsuit and any claims arising after the ikale.

Because an ikale is legally a termination by mutual agreement rather than a unilateral termination, it does not, as a rule, automatically trigger the severance and notice pay entitlements the law attaches to termination. In practice, however, the parties may expressly agree in the rescission agreement that these amounts will be paid; in that case, the payment arises as a contractual obligation.

Including a reasonable benefit in addition to severance and notice pay within the rescission agreement matters both for the agreement's validity and for protecting the employee's rights.

Where a genuine rescission agreement has been validly formed, the employment contract is considered to have ended through the parties' joint intent, and, as a rule, no possibility exists to file a reinstatement lawsuit, since such a lawsuit is a legal remedy available against an employer's invalid termination. However, if it is established that the signed text lacked a reasonable benefit and the contract effectively ended through the employer's unilateral intent, a court may classify the transaction not as an ikale but as a termination, in which case the conditions for a reinstatement lawsuit are assessed separately.

Before signing a rescission agreement, an employee is advised to carefully assess the nature of any additional benefit included in the agreement, whether severance and notice pay are expressly specified, and the scope of any release provisions. Employers, for their part, should ensure the agreement is prepared through genuine negotiation and includes a reasonable benefit, in order to avoid a future dispute over whether the transaction was truly a rescission agreement or a termination in disguise.

The remedies available to an employee where an ikale is reclassified as a termination are covered separately in our articles on the rights of a dismissed employee and the conditions for a reinstatement lawsuit.

Can an employee who leaves through an ikale receive unemployment benefit? As a rule, no. Article 51 of Law No. 4447 grants unemployment benefit to those who lose their job through no wish or fault of their own; since an ikale is a mutual agreement, it is reported to SGK under exit code "22 - other reasons," which does not qualify for unemployment benefit. This loss should be taken into account when negotiating the additional benefit.

Is the ikale payment subject to income tax? Under Article 25/7-b of the Income Tax Law, payments made under a rescission agreement are exempt from income tax up to the severance pay ceiling per year of service; any amount above the ceiling is taxed. Entitlements the employee has already earned, such as accrued annual leave pay, are payable in any event, independently of the ikale.

Where are ikale disputes resolved in İzmir? Reinstatement or compensation claims based on the invalidity of an ikale first require an application to the İzmir Mediation Bureau at the İzmir Courthouse in Bayraklı; if no agreement is reached, the lawsuit is filed with the labour courts at the same courthouse. Anyone seeking information on preparing or assessing a rescission agreement may review our İzmir employment lawyer page; our office in Konak provides support across İzmir on both the employee and the employer side.

Av. Mehmet Yücesoy

İzmir Attorney & Legal Consultancy