Not every mistake made by finance and accounting staff directly leads to serious legal consequences; breaches such as abuse of trust, however, may constitute just cause for termination under Art. 25/II of Labor Law No. 4857.
Inquiries made during hiring are conducted with due regard to Law No. 6698 on the Protection of Personal Data; attaching the job description to the contract in writing and the probationary period are protective tools for the employer.
In disputes over termination and compensation, the conduct, the fault and the damage must be established with concrete evidence; under Art. 400 of the Turkish Code of Obligations (TBK), the fact that the company has suffered damage does not mean that the damage is automatically recovered from the employee.
The article discusses confidentiality arrangements with proportionate penalty clauses, authorization subject to dual control, transaction records and regular internal audits as measures that both reduce financial loss and strengthen proof.
In commercial life, a company’s ability to run its operations soundly and to remain competitive depends largely on its financial processes being carried out in an orderly, transparent and reliable way. At the center of these processes are finance and accounting employees, who, by virtue of their duties, have access to a wide range of important data and transactions, from the company’s bank accounts to its cash flow and from its financial records to customer and supplier information. This access makes the duty of care and duty of loyalty of finance and accounting staff particularly important. The employee must not only perform the work assigned to them but also, in carrying out their duties, look after the employer’s legitimate interests, protect the company’s assets and commercial information, and use the powers granted to them in line with the purpose of their duties.
Nevertheless, it cannot be said that every mistake or omission by staff working in finance or accounting directly leads to serious legal consequences. In assessing the employee’s liability, the scope of their duties and powers, their professional knowledge and experience, the degree of their fault and the link between their conduct and the resulting damage must be considered together. Indeed, under Art. 400 of the Turkish Code of Obligations (TBK), the nature of the work and the employee’s knowledge, abilities and qualities are also important in determining the employee’s liability. On the other hand, more serious breaches, such as the use of company assets for personal purposes, abuse of trust or the sharing of commercial and financial information with unauthorized persons, may, depending on the circumstances of the specific case, give rise not only to liability for compensation but also to termination for just cause under Art. 25/II of Labor Law No. 4857.
For this reason, it is not enough to assess the legal risks that may arise from finance and accounting staff only after a dispute has arisen. Clearly defining duties and powers from the hiring stage onward, establishing the necessary confidentiality and oversight mechanisms, and keeping, in an orderly manner, records that can be used in possible disputes will help create a safer working arrangement for both the employer and the employee.
• Legal Points to Consider in the Hiring Process
Finance and accounting staff are employees who can access the company’s bank accounts, payment processes, financial statements, commercial records and, in some cases, its cash assets directly. For this reason, hiring for these positions matters not only for selecting the right staff but also for protecting the company’s financial security.
The first step at this point is to assess the candidate’s professional competence and past work experience correctly. Carrying out reference checks, particularly for staff who will exercise authority over money transfers, banking transactions, cash desk management or the company’s financial records, may help reduce risks that could arise in the future.
However, the employer’s ability to make inquiries about the candidate is not unlimited. The provisions of Law No. 6698 on the Protection of Personal Data must be observed with respect to reference inquiries, requests for criminal record information and other personal data to be obtained about the candidate. It is important that only information connected with and necessary for the purpose of hiring is requested from the candidate, that the purpose for which personal data are processed is clearly set out, and that, where the specific situation requires, the necessary legal conditions are met.
Once hiring has been completed, the boundaries of the relationship between the parties should, as far as possible, be determined from the outset. Particularly for finance and accounting employees, settling for a standard employment contract containing only general provisions may later give rise to disputes along the lines of “This transaction was not my job” or “I had no authority in this matter.” For this reason, it will be useful to set out clearly the employee’s duties and responsibilities, the limits of their authority in banking and payment transactions, the invoice approval and control processes, their responsibilities regarding the cash desk and cash management, their reporting obligation and to whom they are accountable. Preparing a separate job description, making it an annex to the employment contract and notifying the employee of it both clarifies the employee’s area of responsibility and may constitute an important means of proof in disputes that may arise in the future.
Another protective tool for the employer is the probationary period. Under Article 15 of Labor Law No. 4857, the parties may, as a rule, include a probationary period of up to two months in the employment contract; this period may be extended to up to four months by collective bargaining agreements. In positions such as finance and accounting, where the relationship of trust is particularly important, the probationary period makes it possible to assess not only the employee’s professional competence but also their compliance with work discipline and company procedures. Indeed, in the practice of the Court of Cassation (Yargıtay), too, the job description and the organizational structure are important in determining the employee’s area of duty and responsibility. For this reason, instead of leaving the powers of finance and accounting staff to oral arrangements or custom, establishing a written and auditable system will create a safer legal basis for both the employee and the employer.
• Procedural Consequences and Effects on Litigation Strategy
In disputes arising from finance and accounting staff, the process of proof and gathering evidence is of great importance alongside substantive law. The fact that the employer has identified an erroneous or unlawful act by the employee does not, on its own, mean that any lawsuit filed will be won or that the termination carried out will be considered lawful. The alleged conduct, the employee’s fault and the resulting damage must be established with concrete evidence.
Where termination for just cause is effected under Art. 25/II of Labor Law No. 4857 on the grounds that a finance or accounting employee acted in breach of the duty of loyalty, abused the employer’s trust or caused the company to suffer damage, proving the events on which the termination is based is of great importance.
For example, an employee sending a payment to the wrong account or missing the deadline for a tax return may not, on its own, be sufficient for termination for just cause in every case. The employee’s job description, how the mistake occurred, the seriousness of the fault, whether the incident has been repeated and its effect on the relationship of trust must be assessed together. For this reason, rather than the employer trying to gather evidence after a dispute has arisen, it would be sounder to set up, from the start of the employment relationship, an organizational structure that lends itself to proof. Written job descriptions, authorization matrices, payment approval records, corporate emails, bank transaction records and internal audit reports may become important evidence in a possible dispute.
If the company suffers pecuniary damage as a result of the employee’s culpable conduct, the employee’s liability under TBK Art. 400 may come into play. However, the fact that the company has suffered damage does not mean that the damage can automatically be recovered from the employee. First, it must be shown that actual damage has occurred, that this damage resulted from the employee’s culpable conduct and that there is an adequate causal link between the damage and the conduct. Particularly in disputes arising from accounting and finance transactions, examination by a court-appointed expert may become important. It may be necessary to assess technically whether a tax penalty actually resulted from the employee’s gross negligence, from organizational shortcomings within the company or from some other cause.
The Court of Cassation, 9th Civil Chamber, Docket No. 2023/14532, Decision No. 2023/20147, 20.12.2023 decision also emphasizes that, in determining the employee’s liability under TBK Art. 400, the employee’s education, proficiency, abilities and other characteristics must be taken into account in addition to the nature of the work. For this reason, in a claim for compensation, it is not enough merely to draw a connection of the kind “the employee made a mistake and the company suffered damage.” It must be specified which obligation the employee breached and what damage this breach caused.
Since finance and accounting employees can access the company’s most sensitive commercial and financial information, it will be useful not to leave the confidentiality obligation solely to the general provisions of the employment contract. An annex to the employment contract or a separate Confidentiality Agreement can clearly set out which information is confidential, for what purposes this information may be used, whether it is prohibited to take it outside the company or transfer it to personal devices, and which obligations will continue after the employment relationship ends. These arrangements do not merely have a deterrent effect on the employee. In a possible dispute, they also help to show that the employee knew which information was confidential and had been clearly informed on this matter. Providing for a penalty clause in the contract in the event of a breach of the confidentiality or secrecy obligation is also one of the methods frequently used in practice. However, trying to achieve deterrence merely by setting a high amount when determining the penalty clause is not the right approach. It is important that the penalty clause be proportionate to the nature of the contract, the employee’s wage, the damage the breach may cause and the circumstances of the specific case. Otherwise, in the event of a dispute, the penalty may be reduced by the judge. The aim, therefore, is not to create a sanction so severe that it is difficult to enforce, but to establish a contractual system that is legally defensible and, at the same time, deterrent for the employee.
Many disputes that arise in finance departments can in fact be prevented, before any legal process begins, by a proper authorization system. Particularly in bank transactions involving large amounts, a single employee initiating, approving and completing a transaction may pose a significant risk for the company. For this reason, setting authorization limits according to the transaction amount and requiring the approval of a second manager or authorized person for transactions above a certain amount may be considered. Similarly, the preparation of a payment order, its review and its approval via the bank may, as far as possible, be divided among different persons or authority levels. These systems are not aimed solely at preventing abuse. They also make it possible to detect human error at an early stage.
Inadequate oversight mechanisms at the company do not in every case cancel out the employee’s intentional or culpable conduct. Indeed, in the Court of Cassation, 9th Civil Chamber, Docket No. 2023/10193, Decision No. 2023/15686, 23.10.2023 decision, the Court found it incorrect to attribute 25% contributory fault to the employer, on the ground of the employer’s duty of supervision and oversight, with respect to damage arising from the offense of embezzlement, and held that, in view of the circumstances of the specific case, the employee should be held liable for the entire damage. That said, this decision should not be interpreted as meaning that companies can dispense with their oversight systems. An effective oversight mechanism is necessary first and foremost to prevent damage from occurring. It also makes it easier, in the event of a dispute, to establish which transaction was carried out by whom and within the scope of which authority.
For employees who manage the company’s bank accounts, carry out cash transactions directly or are responsible for a physical cash desk, additional safeguards against the financial risks the company may face may also be considered.
Depending on the nature of the specific duties, obtaining a suretyship or making use of suitable professional liability/fidelity insurance products may come into consideration, provided that the conditions of legal validity and the statutory limitations are observed. However, these methods should not be seen as an alternative to the job description and internal control mechanisms. The main aim should be to prevent damage from occurring; insurance or other safeguards, in turn, should serve to limit the financial consequences of risks that cannot be prevented.
In disputes concerning finance and accounting staff, one of the most important measures for companies is ensuring that the transaction history can be audited afterwards. It should be recorded who prepared which payment on which date, who approved the transaction, what powers the employee had over which bank accounts, and when these powers were removed upon changes of duties. In particular, when staff leave the company, closing access to corporate systems, revoking bank authorizations, taking back devices and documents belonging to the company and preparing the necessary handover reports should not be neglected. Records of this kind are not only a security measure. They form a significant part of the evidentiary infrastructure that can prove the events in a possible action concerning termination or compensation.
In conclusion, the most effective method against the legal risks that may arise from finance and accounting staff is not to file a lawsuit after a dispute has arisen, but to set up the system of duties, powers, oversight and evidence correctly from the beginning of the employment relationship. When clear job descriptions, proportionate authorization, dual control mechanisms, confidentiality arrangements and regular internal audits are applied together, the risk of financial loss will decrease and the company’s ability to prove its case in a possible legal dispute will increase significantly.
Att. Ömer Çebi
Ömer Korak
This article is a general assessment prepared in accordance with the legislation in force on its date of publication; it does not constitute a legal opinion. This English text is a translation of the Turkish original; in case of any discrepancy, the Turkish version prevails.