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Introduction to Israeli Labor Laws General Principles
A. PREFACE
The purpose of this article is to provide the reader with a brief description and a general overview of Israeli labor laws and principles, which are quite often very different from the principles governing labor relationships in other countries. Israeli labor laws are a unique mixture of social laws, religious laws and laws emanating from the continuous security problems facing Israel throughout the years. Israeli labor laws will govern the employment in Israel of an employee, whether the employer is an Israeli or foreign person or entity.

Employer-employee relationships

In order to determine the applicability of the various labor laws to the relationship between two individuals (and/or corporations), one has to conclude that indeed an `employment relationship` subsists between them. The effect of such relationship is to afford the employee the protection of the "protective labor laws", which entitle him to various social rights provided by law or collective agreements.

Such relationship may have additional implications: it may impose on the employer a duty to provide the employee with sufficient protective means to perform the work, it may cause the employer to be held responsible for damages caused by and to the employee during the performance of the work (the legal principle of vicarious liability), it will require the employer to deduct Income Tax and National Security levies ("Bituach Leumi") at source and it will cause copyrighted works and patents made by the employee to be assigned to the employer.

Israeli Labor Courts have ruled that being an employee is a status which the parties are not at liberty to opt out of, the status is intended to serve a social goal by providing the employee with the protection of labor laws. During the years, Israeli Labor Courts identified several criterion for the existence of employment relationship: the amount of control and authority the employer has, the level of integration between the work performed by the employee and the employers` business, the existence of personal commitment by both parties, the payment method, the way taxes are deducted, etc.

To follow is a short summary of the main legislation in Israel concerning employee rights.

B. LABOR LAWS

1. Minimum Wage Law, 1987.

The purpose of this law is to enable the employee to live in a dignified manner. The law provides that the salary of any employee shall not be lower than the minimum wage (which equals 47.5% of the average salary of all employees in Israel). Currently the minimum monthly wage in Israel is approx $1,000.

2. Salary Protection Law, 1958.

The purpose of this law is to ensure the timely payment of salary by employers. The law provides that late payment of a salary by the employer, i.e. a default of more than 9 days in payment, shall entitle the employee to compensation calculated by the number of days of delay. The law also includes other provisions dealing with salary payment arrangements, allowable deductions form the salary and restrictions on imposition of a lien thereon.

3. Work Hours and Rest Law, 1951.

3.1 This law limits the amount of working hours the employee should perform each working day and each week (8.75 hours per day and 43 hours per week - in accordance with the Collective Agreement that shortened the working week to 5 days and an Expansion Order ("Zav Harhava") issued by the Minister of Work and Welfare dated 1.12.1996). "Working Hours" are defined as the number of hours in which the employee made himself available for the employer, including breaks for rest. Although the law actually forbids working overtime, certain permits were issued by the Ministry of Work and Welfare allowing this to happen, subject to payment of overtime compensation by the employer.

3.2 The law entitles each employee to a weekly rest of at least 36 hours.
 
3.3 The law does not apply to certain types of employees, among them are police officers, sailors, pilots, employees in managerial positions, employees in a position requiring a high degree of `personal trust` and employees whose nature of employment does not enable supervision of their working hours. Such employees may be employed under global salary, without the necessity to compensate them for overtime.

4. Annual Vacation Law, 1996.

The purpose of the law is to enable the employee to have an annual vacation in order to re-gather physical and mental strength. The length of the annual vacation is determined based on the number of working years the employee accrued. In certain cases the employee may also accrue vacation days or request the redemption thereof by cash payment. Under the law each employee is entitled to 14 vacation days each year for the first four years of employment, 16 vacation days for the fifth year, 18 days for the sixth year, 21 days for the seventh year, and then for each additional year thereafter, an employee is allowed another day, up to a maximum of 28 days.

5. Severance Payment Law, 1963.

Each employee working more than one year is entitled to severance compensation in case of termination of his employment by the employer, calculated by multiplying the last monthly salary of the employee by the number of working years, including fractional parts of the year (provided, of course, that employment exceeded one year).

5.1 The employee shall also be entitled to severance compensation in case of resignation or termination of employment due to the following reasons: death or insolvency of the employer, death of the employee, disability of the employee, resignation following the birth of a child, resignation following relocation.

5.2 The employee shall also be entitled to severance payment in case of resignation due to "sever deterioration" in his working conditions caused by the employer.

5.3 The components of salary included in the calculation of the last salary for the purpose of severance payment are: basic salary, any increase made due to changes in the Cost-of-Living index, seniority increments, family increments, department or professional increments and any other part of the salary which is payable on a regular basis once a month and which is not conditioned upon the existence of any other condition.

6. Sick Pay Law, 1976.

The purpose of the law is to enable the employee to live in dignified manner while he is unable to work due to illness or injury.

6.1 The employee is not entitled to any payment for the first day of absence due to illness, but is entitled to 37.5% of his regular daily salary for the next two days and 75% of his regular daily salary for each day commencing on the fourth day.

6.2 Each employee is entitled to a maximum of 18 sick days per annum (1.5 sick days per month) and may accrue up to 90 days in the aggregate.

6.3 The Sick Pay Law (Absence Due to Parent`s Illness), 1993 entitles an employee to be absent from work for a period of up to 6 days per year (out of his accrued sick days) in case of illness of his parents.

6.4 The Sick Pay Law (Absence Due to Illness of a Child), 1993 entitles an employee who has a working spouse, to be absent from work for a period of up to 8 days per year (out of his accrued sick days), and a single parent employee to be absent for a period of up to 16 days per year (out of his accrued sick days), in case of illness of his children.

7. Women Employment Law, 1954.

The purpose of this law is to regulate women`s employment.

7.1 The law protects pregnant women, who were employed by the same employer for a period of at least 6 months, from termination of their employment during their pregnancy. The law also forbids employee dismissal when the employee is in the process of fertility treatments, and the dismissal is related to this cause.
 
7.2 The law entitles an employee who gave birth, a 14 weeks maternity leave (and an option to extend it for an additional period without pay).

7.3 The law protects pregnant women from termination of their employment for 60 days after the end of their maternity leave. At the end of the maternity leave, every employer is obliged to accept an employee back to his former position, and give her a real and honest opportunity to integrate back to the workforce.

7.4 The law also entitles women to be absent for an hour a day during a period of four months following the birth of their child. The law forbids the overtime employment of pregnant women.

8. The Discharched Soldiers (Return to Work) Law, 1949.
 
Under this law an employer may not terminate the employment of an employee because of his military reserve duty, its extent or frequency. The employer may not terminate the employment because of an expected military reserve duty of the employee or due to the fact that the employee was called up for active duty.

9. National Security Law (Integrated Version), 1995.
 
An employer must deduct from the salaries of its employees and pay to the National Security Institute ("Bituach Leumi") the National Security levies and Health Insurance charges required to provide the employee with basic health insurance with one of the 4 sick funds in Israel, a salary during periods of unemployment, disability, pregnancy, army reserve duties, retirement payments and payments in case of insolvency of the employer.

10. Advance Notice for Termination Law, 2001.

Under this law, employers and employees must provide an advanced notice to the other party in case of termination of employment. The advance period is calculated as follows: 1 day for each of the first six months of employment, 2.5 days in advance for each of the seventh to twelfth months of employment and 30 days after expiration of the first year of employment. The employer may elect to pay the employee an amount equal to the salary in such period and dismiss the employee with immediate effect.

11. Notice to the Employee Law (Employment Terms), 2002.

Under this law an employer must provide the employee, within 30 days from the commencement of employment, a written notice specifying the general terms of employment.

12. Prevention of Sexual Harassment Law, 1998.

The purpose of this law is to prohibit sexual harassment in order to defend human dignity, liberty and privacy and to achieve promotion of equality between the sexes. According to this law, an employer must take steps that are reasonable under the circumstances, in order to prevent sexual harassment and provide an effective method for the submission of complaints of sexual harassment and for the investigation of such complaints. Employers should also take effective action in cases of sexual harassment. Where an employer employs more than 25 employees he must publish rules that encompass the main provisions of the law.

C. COLLECTIVE AGREEMENT / EXPANSION ORDERS

The parties to a Collective Agreement are employees` unions/organizations and employers` organizations. Under the Collective Agreement Law, 1957, a Specific Collective Agreement is intended to regulate working conditions in a specific factory/employer and a General Collective Agreement regulates the working conditions for all employers and employees in a certain field of employment. A Collective Agreement is deemed to include terms and conditions which are supplementary to the rights of the employee set forth in the employment laws and can not derogate therefrom. Similar to the rule regarding protective laws, employees may not waive their rights under a Collective Agreement.

Whenever an Expansion Order ("Zav Harhava") is issued by the Minister of Work and Welfare, with respect to a certain right or provision in a Collective Agreement, such right/provision governs the employment of all employees working for employers who are subject to the expansion order.

13. Convalescence Allowance/ Replenishing Pay ("Dmei Havraha").

In accordance with a General Collective Agreement, each employee is entitled to be paid a "Convalescence Allowance" which is calculated based on the seniority of the employee. Each employee is entitled to a Convalescence Allowance equal to 5 "Convalescence Days" in the first four year of employment, 6 "Convalescence Days" days for the second and third years, 7 "Convalescence Days" days for the fourth to the tenth year, 8 "Convalescence Days" days for the eleventh to the fifteenth year, 9 "Convalescence Days" days for the sixteenth year to the nineteenth year and 10 "Convalescence Days" days for each year commencing on the twentieth year of employment. (Currently 1 "Convalescence Day" is equal to approx NIS 318 (US$80).

14. Transportation Expenses

In accordance with a General Collective Agreement, which was expanded by an expansion order, every employee is entitled to receive from his employer transportation expenses for traveling to work and back home. Transportation expenses are paid according to public transportation costs, number of monthly working days, or the price of a monthly travel ticket. The transportation expenses rate is the maximum of NIS 21.14 for a working day (starting from 1.7.2004). This rate may be amended from time to time, in relation to the change in public transportation expenses.

15. Pension rights

From January 1st 2008 an expansion order to a General Collective Pension Agreement provides that there is a mandatory requirement in the private sector to pay employees, (male employees over 21, and female employees over 20) pension payments, until their retirement The expansion order concerns employees who are not entitled to receive better pension conditions. Therefore, in cases where employees’ employment conditions include pension deductions or managers’ insurance, above the rate stated by the expansion order, the order will not apply. According to the order from 1.1.2008, employees who worked more than nine months are entitled to pension payments starting at the end of a working period of nine months. Following 1.1.2009, employees will be entitled to pension payments, at the end of a working period of six months.

Starting from the employee` entitlement date, the employer and employee must gradually deduct the payments to a pension fund, up to a rate of 15%, during five years. During the first year, the employee and employer must deduct 2.5% each month, and for every additional year 2.5% are added, up to a maximum of 15% in 2013. The accumulative employers` deductions should constitute up to 10%, and the employees` deductions should constitute up to 5%.

D. ANTI COMPETITION RESTRICTIONS

This issue was raised and discussed in several Labor Court and Supreme Court rulings. The leading cases are Civil Appeal (Supreme Court Jerusalem) 6601/96 AES Systems Inc. v. Moshe Sa`ar and Labor Appeal 164/99 (National Labor Court) Dan Froomer and Checkpoint Technologies v. Rad-Guard Ltd. In both cases it was held that an anti-competition provision inserted in an employment agreement can be cancelled and annulled by a court in case it contradicts public policy. An anti-competition provision will be enforced only if the limitation on employment is reasonable and only if there is a "legitimate interest" of the employer (commercial secrets, customers` lists, business plans, etc.) that such provision aims to protect. Employers can not request the enforcement of an anti-competition provision if there is no such legitimate interest to protect and where the anti-competition restriction merely prevents the employee from utilizing his general working skills and expertise.






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