Council of State Decision on SGK Termination Codes and a New Era in Service Record Application
Introduction
Social security records have evolved beyond being merely technical data containing insurance periods and premium information, becoming documents that may indirectly play a role in assessments regarding employees' professional history. Questions have arisen regarding whether the termination reasons included in the employment termination notifications submitted by employers to the Social Security Institution (SGK) constitute personal data and under what safeguards such information should be processed.
Indeed, in the decision of the Tenth Chamber of the Council of State numbered 2020/2598 E., 2024/3991 K. and dated 14.10.2024 (the Council of State Decision), code number 29, which is one of the termination codes contained in the Social Insurance Transactions Regulation and includes the explanation "termination by the employer due to the employee's conduct contrary to morality and good faith," was evaluated in terms of the protection of personal data and the right to work, and an annulment decision was rendered regarding the said provision.
In this article, the current system and legal framework regarding termination codes will first be briefly explained; subsequently, the Council of State Decision will be examined along with its reflections on current practice.
Employment Termination Declaration and Termination Code
Under Law No. 5510 on Social Insurance and General Health Insurance (Law No. 5510), the termination of an employment contract does not merely signify the end of the employment relationship between the parties; it also constitutes a legal process that creates a change in the insured status and gives rise to a notification obligation to the SGK. Pursuant to Article 9 of Law No. 5510, employers are obligated to notify the SGK of the employee's termination within specified periods. This notification obligation is a technical social security procedure that covers all termination and cessation cases, regardless of the reason for the termination of the employment contract.
Accordingly, within the scope of the Social Insurance Transactions Regulation issued pursuant to Law No. 5510, Annex-5 "Insured Employment Termination Declaration" is prepared in cases of termination of insured status, and the reason for termination is reported to the SGK system through specific codes. The field “15-Reason for the insured's termination (code)” in this declaration contains information regarding the employees' termination grounds. This coding system was essentially established for the purpose of conducting social security transactions, determining rights dependent on insured status, and operating internal technical processes. However, in recruitment processes, the visibility of the termination reason to prospective employers through employment service records or termination notifications requested from candidates may cause this information to become a decisive factor in candidate evaluations and may give rise to incomplete or misleading inferences about the individual. This situation has, in turn, sparked various debates from a personal data protection law perspective.
These debates have particularly intensified around "code number 29," which is used in terminations carried out due to conduct contrary to morality and good faith under Article 25/II of Labor Law No. 4857 (the Labor Law). The fact that this code groups different types of just cause termination reasons under a single heading and creates a broad scope for interpretation has been subject to criticism regarding its effects on employees' professional reputation and working life. In line with these criticisms, SGK Circular No. 2013/11 was updated by Circular No. 2021/9; the controversial code number 29 was removed from practice, and new codes numbered 42 through 50 were introduced to enable more detailed classification of terminations under Article 25/II of the Labor Law.
The Council of State's Assessment
In the case subject to the Council of State Decision, the claimant’s employment contract was terminated under Article 25/II of the Labor Law, and this situation was reported to the SGK by the employer using code number 29 in the declaration. The claimant alleged that due to the visibility of this record through the service record, they encountered negative outcomes in job applications; that the termination reason was not based on a final court judgment, and that its recording in official records based solely on the employer's unilateral declaration violated fundamental rights and freedoms protected under the Constitution and the European Convention on Human Rights, such as the presumption of innocence, the right to respect for private life, freedom to work and contract, and the right to protection of personal data, and requested the annulment of the relevant provision of the Social Insurance Transactions Regulation.
The defendant administration argued that termination codes are mandatory under Law No. 5510 for making notifications regarding the termination of insured status, determining rights such as unemployment benefits, severance pay, and notice pay, and conducting social security transactions, and stated that the accurate reporting of the termination reason provides legal certainty for both the employer and the insured.
The Tenth Chamber of the Council of State, while accepting that notifications regarding the termination of insured status may be made by the employer and that termination information may be processed by the SGK, assessed that the dispute centered on the scope and safeguards under which information regarding the reason for termination would be processed. The Court determined that the reason for termination constitutes information relating to an identifiable person, stated that such information has the nature of personal data, and expressed that it should be evaluated within the framework of the principles set forth in Article 4 of the Personal Data Protection Law No. 6698 (KVKK).
It was assessed in the Council of State Decision, particularly that;
- Code number 29, being based solely on the employer's unilateral declaration, may create disputes regarding the accuracy and currency of personal data,
- The grouping of different just cause termination reasons under Article 25/II of the Labor Law under a single code makes it difficult to understand which specific act the employee is associated with,
- This situation may create results that could associate the employee with behaviors they do not possess and create stigmatization risks for the employee.
The Council of State further noted that the Social Insurance Transactions Regulation does not contain explicit provisions regarding the safeguards under which such information would be processed, how its accuracy would be ensured, or within what limits it would be used, and concluded that the current regulation does not provide an adequate legal framework in terms of data processing principles; that such data based on the employer's unilateral declaration and not subject to any verification mechanism is contrary to the principle of proportionality and violates the freedom to work and personal data.
The decision additionally referred to Circular No. 2021/9 dated 01.04.2021, which removed code number 29 from practice, and stated that the removal of code number 29 did not eliminate the Regulation provision or render the dispute moot. The Council of State further stated that, even though it was not reflected in the Regulation, this amendment demonstrated that the SGK itself acknowledged that code number 29 was not connected to the processing purpose, limited, and proportionate.
On these grounds, the Council of State decided to annul the relevant provision in Annex-5 of the Social Insurance Transactions Regulation with respect to the explanation "29-Termination by the employer due to the employee's conduct contrary to morality and good faith."
Changes in SGK Practice Following the Decision
Following the Council of State Decision, a significant practice change was implemented by the SGK, and with the system update, a practice was adopted whereby termination codes are no longer displayed on the service record screen. With this change, termination reason and termination code information in service records obtained through e-Government are no longer shown in documents accessible to employers.
On the other hand, the termination reason continues to appear in the employment termination declaration. In this regard, it is not possible to say that the concern regarding the sharing of termination reasons with third parties has been fully addressed by the SGK update. This is because, in cases where the new employer requests the employment termination declaration during the hiring process, the employee will often be compelled to submit this document, and thus the termination reason may again become accessible to third parties. This situation demonstrates that the concerns regarding the "stigmatization" risk particularly highlighted in the Council of State Decision and the non-compliance of the current personal data processing activity with the principles regulated under Article 4 of the KVKK have not been eliminated in practice. Therefore, while limiting the visibility on the service record screen is an important step, it may be assessed that if the employment termination declaration continues to be requested during recruitment processes, the risks identified by the Council of State regarding fundamental rights and personal data protection may continue to exist in practice.
Conclusion
The Council of State Decision demonstrates that termination codes, particularly with respect to data categories containing broad and generalizing expressions, should be addressed from both the perspective of personal data protection and freedom to work. It is understood that data based on the employer's unilateral declaration and capable of being reflected in official records without a final judicial determination regarding the employee should be carefully evaluated within the framework of data accuracy and proportionality principles. In this context, the visibility of termination codes that may associate the employee with certain behaviors to third parties, such as different employers may create results that could pose stigmatization risks for the employee.
Although the technical change made on the SGK service record screen following the decision has limited the visibility of information regarding termination reasons, this does not mean that termination codes have become entirely exempt from debate in terms of personal data protection law. This is because such codes retain their nature as personal data since they contain information that directly or indirectly makes a person identifiable. In light of the approach set forth by the decision, in cases where the employment termination declaration is requested by new employers during recruitment processes, since information regarding the termination reason will again be shared with third parties, it is difficult to say that the risks indicated in the Council of State Decision have been completely eliminated in practice. At this point, although the Council of State Decision was essentially rendered regarding SGK's data processing practice, it may be assessed that the proportionality and data minimization approach emphasized by the decision also has implications for employers who request employment termination declarations from candidates during recruitment processes. The legal basis on which such requests would be grounded and their compliance with KVKK principles may be subject to separate debate on a case-by-case basis.
Therefore, requesting documents containing termination codes, such as employment termination declarations, from candidates during recruitment processes may create risks in terms of data minimization and proportionality principles depending on the specific circumstances of the case. Rather than generalizing approaches based on codes in evaluating candidates, basing assessments on objective criteria such as professional competence, interview performance, legally compliant reference checks, and the certificate of employment regulated under Article 28 of the Labor Law will constitute a more appropriate and legally compliant approach in terms of both data protection principles and fair evaluation in working life.
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