Israel: Employment & Labour Law

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This country-specific Q&A provides an overview to employment and labour law in Israel.

It will cover termination of employment, procedures, protection for workers, compensation as well as insight and opinion on the most common difficulties employers face and any upcoming legal changes planned..

This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/

  1. Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?

    As a general rule, an employer is entitled to terminate an employee's employment for legitimate reasons, which are not in breach of any laws (such as anti-discrimination laws), collective agreements (if applicable), workplace practices and policies, etc. The following reasons may be classified as legitimate reasons for termination of employment: poor performance, poor skills, poor attitude, redundancies as a result of a financial situation or restructuring, business closure, etc. An employer's right to terminate an employee's employment is also subject to the employer performing a hearing procedure, providing prior written notice and exercising good faith when making the final decision to dismiss an employee.

  2. What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?

    Termination of employment within the framework of collective dismissals is subject to the same rules of termination of individuals, i.e. the termination process should be carried out in good faith and subject to the employer performing a hearing procedure and providing prior written notice for termination. In addition, where there is an existing trade union or employee representative body, they must be informed and consulted with. In the event some employees are terminated while the employment of others who carry out similar positions is retained, the employer should have valid reasons/explanations with respect to the selection process. Additionally, an employer who terminates the employment of 10 employees or more is required to send a notification in this regard to the Israeli Employment Service.

  3. What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?

    Termination of employment within the framework of collective dismissals is subject to the same rules of termination of individuals, i.e. the termination process should be carried out in good faith and subject to the employer performing a hearing procedure and providing prior written notice for termination. In addition, where there is an existing trade union or employee representative body, they must be informed and consulted with. In the event some employees are terminated while the employment of others who carry out similar positions is retained, the employer should have valid reasons/explanations with respect to the selection process. Additionally, an employer who terminates the employment of 10 employees or more is required to send a notification in this regard to the Israeli Employment Service.

  4. What, if any, is the minimum notice period to terminate employment?

    The minimum notice period is set out in the Prior Notice before Termination and Resignation Law - 2001, which stipulates that the minimum statutory notice of termination that must be provided to a monthly employee (salaried employees) is one day’s notice for each month during the first six months of employment, and two and a half days for every additional month. A monthly employee who has worked for a year or more is entitled to one month’s prior notice. “Non-monthly employees” are entitled to prior notice according to a different calculation, according to their years of seniority at the workplace.

    Other minimum notice periods may be set out in collective agreements or in personal employment agreements.

  5. Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

    Generally, and unless any agreement between the parties states otherwise, an employer has two options with regard to the prior notice period:

    • To end the employment relationship after the completion of the prior notice period. In the framework of this option, the employer may choose whether or not to require the employee to attend work during all or part of the notice period.
    • To end the employment relationship immediately or at any time prior to the completion of the prior notice period, and grant the employee payment in lieu of all or the remainder of the notice period, as applicable. Payment in lieu of the employee's notice period under general law is calculated based only on the employee's salary (without any fringe benefits). A more beneficial calculation may stem from any other binding source applicable to the parties.
  6. Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?

    Yes, unless otherwise was agreed between the parties, an employer may require an employee to be on a garden leave.

  7. Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.

    According to case law, employers are required to hold a hearing with their employees, prior to making a final decision regarding the termination of their employment.

    The purpose of the hearing procedure is to inform the employees of the reasons for which the employer is considering the termination of their employment, and to give the employees the opportunity to respond to the employer's proposed reasons. The hearing must be carried out in good faith, with a sincere and fair willingness to listen and consider the views of the employees.

    Such a hearing is required in all circumstances, regardless of whether the dismissal is based on grounds of redundancy, misconduct or poor performance.

    The employees should be notified of the hearing in advance, in order to allow them to prepare themselves and their arguments ahead of time. In addition, the hearing procedure should be documented.

    Upon decision to terminate an employee's employment, the employer is required to provide the employee with a written notification which must state its date, as well as the date upon which the termination will become effective. In addition, upon termination of employment, the employer is required to provide the employee with a statement of service letter which should set out the dates on which the employee’s employment with the employer commenced and terminated.

  8. If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?

    In general, if termination of employment is not made in good faith or for valid reasons, or if the employer does not meet all of the relevant requirements or process for such termination as set out above, the labor courts may decide that the termination is unlawful.

    Wrongful dismissal may result in monetary compensation (usually several monthly salaries depending on the circumstances), which shall be payable by the employer. Theoretically, reinstatement of the employee is also an option (although this is rarely the primary remedy).

  9. How, if at all, are collective agreements relevant to the termination of employment?

    Employers who are subject to collective agreements are required to comply with the terms of the applicable collective agreement, including with respect to any provisions related to termination of employment. In the event of collective relations in the workplace without a collective agreement or in the event the applicable collective agreement does not refer to the issue of termination of employment, then the employer will be subject to the regular information and consultation obligation before termination of employment.

  10. Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?

    Other than with respect to protected groups of employees (see below), there is not a requirement to obtain the permission of any third party for the termination of employment. However, employers who terminate the employment of 10 employees or more, are required to send a notification in this regard to the Israeli Employment Service.

  11. What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?

    The Employment (Equal Opportunities) Law-1988 prohibits any discrimination in respect of employment (including termination of employment) which is based on the following grounds: gender; sexual tendencies; marital status; pregnancy, the undergoing of fertility or in vitro fertility treatment; parenthood; age; race; religion; nationality; country of origin; place of residence; views; party affiliation; the performance of reserve duty, or the duration or frequency of such reserve duty; and employees who are employed by manpower agencies. According to case law, the above is not a "closed" list. This law also provides that an employer shall not prejudice an employee where the source of such prejudice is sexual harassment of the employee or the applicant for employment, committed by the employer, by an appointee on its behalf or by another employee.

    According to the Equal Rights of Disabled People Law-1998, discrimination in the workplace on the basis of disability is prohibited, where a person with a disability is defined as a person with a permanent or temporary physical, mental or intellectual (including a cognitive) impairment, due to which his or her functions are substantially restricted in one or more main spheres of life.

    The Protection of Employees (Exposure of Offences of Unethical Conduct and Improper Administration) Law -1997 stipulates that an employer must not harm an employee’s terms of employment and must not dismiss an employee who submitted a complaint against the employer or against any other employee of that employer, or who assisted another employee in submitting a complaint as aforesaid.

    In addition to the above, according to the Wage Protection Law – 1958 an employer is not allowed to terminate an employee's employment because of a lawsuit filed by said employee for late payment of salary or delayed compensation for such late payment.

  12. What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?

    N/A

  13. Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?

    Israeli law provides protection from termination of employment for certain groups of employees. The main protected groups of employees are:

    Pregnant Employees - Where a pregnant woman has worked for the same employer or at the same workplace for at least 6 consecutive months, she cannot be dismissed, her job description cannot be changed and her income or scope of employment cannot be reduced without a permit from the Ministry of Economy and Industry ("Ministry").

    Employees on either paid or unpaid Statutory Maternity or Paternity Leave - An employer cannot dismiss an employee on either paid or unpaid statutory parental leave. An employer is also prohibited from dismissing an employee who has returned from either paid or unpaid statutory parental leave during the first 60 days after their return, unless a permit has been given from the Ministry.

    Employees undergoing Fertility Treatments – Under certain terms, an employer cannot dismiss an employee, who is undergoing fertility treatments for his/her first or second birth with respect to the period he/she is employed with the same employer or in the same workplace.

    Employees on Reserve Duty - An employer cannot dismiss an employee during his/her reserve duty or during the 30 days following his/her return from reserve duty, unless a permit has been given from an Employment Committee established by applicable law.

    Employees on Sick leave – An employer is prohibited from terminating the employment of an employee who is absent from work due to an illness during the period for which the employee is utilizing his or her accumulated sick leave pursuant to the Sick Pay Law-1976 or a collective bargaining agreement, until the employee has utilized his or her maximum sick pay entitlement under the law (i.e., 90 days).

  14. Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?

    Yes, please see Section ‎11 above.

  15. What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?

    According to the Severance Pay Law – 1963, an employee who has been dismissed after completing at least one year of service with a particular employer or in a particular workplace, is entitled to statutory severance pay in an amount equal to one month’s salary (as in effect at the time of termination), multiplied by the number of years' service (prorated in the case of part of a year). Greater entitlements may, of course, be set out by any additional binding source applicable between the parties, such as employment agreements (whether written or oral).

    Please note however, that the amounts accrued in the employee's severance fund (which is part of the employee's pension arrangement) are on account of the employer's liability to pay the severance, such that at the time of termination the employer is only required to pay the shortfall between the statutory entitlement set out above and amount accrued in the fund. Sometimes and subject to the application of a special arrangement between the parties, the amounts accrued in the severance fund are in lieu of the employer's liability to pay severance pay.

  16. Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.

    It is quite common in Israel that upon termination of employment and the carrying out of a final settlement of accounts, an employee is requested to sign a letter of receipt and release of claims towards the employer (“Release”).

    According to Israeli case law, such a Release does not constitute a formal bar to future claims by employees. However, a Release may be enforced if the following conditions are met: (1) the employee was aware and had knowledge of the rights that he or she waived; (2) the employee was presented with a clear and comprehensible account of the sums he or she received prior to signing the Release; (3) the Release is clear and unambiguous; and (4) the employee signed the Release of his or her own free will and not due to coercion caused by the employer.

    We note that an employee cannot be forced to sign a Release. On the other hand, if the employer decides to pay the employee an ex gratia (voluntary) payment or benefit over and above what it is legally required to pay, the employer may condition such payment upon the signing of a Release.

  17. Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.

    Covenants not to compete are rarely enforced in Israel. In general, Israeli law prefers, prima facie, the employee’s freedom of occupation over the employer’s right that a former employee will not compete with it. Accordingly, an employee is prohibited from competing with a former employer only if such competition may harm a legitimate interest of the employer (such as the breach of a trade secret).

    According to case law, non-compete covenants that are incurred by employees will not be enforced unless there are specific circumstances, such as the following: (1) the former employer owns a trade secret that is unlawfully used by the employee; (2) the former employer has invested unique and valuable resources in the employee’s training; (3) upon termination of the employee’s employment with the former employer, the employee received special consideration in return for his or her non-compete undertaking; and (4) when a balance between the extent of the employee’s good faith in taking the new position and the employee’s obligation of fidelity towards his or her former employer indicates that the enforcement of the employee’s non-compete covenant can be justified. In this respect the courts will also consider the position of the employee and the field in which the employer operates.

  18. Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?

    Yes, including confidentiality undertakings within the framework of employment agreements/separation agreements which apply following termination of employment is very common.

  19. Are employers obliged to provide references to new employers if these are requested?

    There is no statutory legal requirement in this regard.

  20. What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?

    In our view the most common difficulties are as follows: (a) termination of protected group of employees (mainly pregnant employees, employees on maternity leave and employees who undergone fertility treatments) on grounds of poor performance/redundancy; (b) termination of employees with disabilities/health problems; and (c) managing a correct termination process where an employee raises claims of wrongful dismissal, discrimination, retaliation, etc.

    In order to mitigate the above difficulties we usually recommend employers who would like to terminate an employee's employment on grounds of poor performance, to properly document the performance of the employee during the employment period, such that upon the employer's decision to initiate a termination process it will be more difficult for the employee to establish claims of discrimination/retaliation. Likewise proper documentation of poor performance may increase the likelihood of obtaining a permit from the Ministry, in case of a protected employee.

    With respect to the termination of employment of disabled employees/employees with health problems, this is a very sensitive issue as the law requires the employer to make necessary accommodations due to the special requirements of the disabled person, which would enable the disabled person to perform the employment (unless such accommodations impose an excessively heavy burden on the employer). We therefore recommend employers to properly document the attempts made in order to accommodate the employee's employment, and initiate a termination process only after all attempts have been exhausted.

  21. Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?

    Currently there are no planned changes in legislation which are likely to have an impact on termination of employment.