Termination of employment, unfortunately, is always relevant. While this article obviously cannot cover all aspects of this complex issue, it will hopefully provide you with some important insights and tips on how termination works under Israeli law.
The concept of employment at-will does not exist under Israeli law. However, as a general rule, employers may terminate their employees’ employment at any time, if they have a legitimate reason and after conducting a due process. Termination should also be compliant with general principles such as good faith and equality, any applicable laws and other binding legal sources, whether written or oral, including employment agreements, customary workplace practices, and collective bargaining agreements, if applicable.
There is no set list of grounds for termination. Any rational, legal reason can be sufficient.
The hearing procedure is intended to inform the employee that the employer is considering terminating their employment, to specify the reason(s) for this, to provide any relevant background information, and to give the employee the opportunity to share their views before the employer makes a decision. It is a three stage process consisting of an invitation to the hearing, the hearing (meeting) itself and, finally, the notification of the decision following consideration of all relevant information.
The hearing process was put into place by court rulings and not by legislation. Therefore, it is important to keep updated on all relevant rulings.
The hearing process is compulsory for all employers, in all cases of termination, even in cases of redundancy or termination for cause.
If a decision to terminate is reached, the employer is obliged to provide the employee with notice. Israeli law provides for a minimum notice period for both termination and resignation, which ranges, for monthly employees, from one day to one month, depending on each employee’s length of service. The parties may, of course, contractually agree to longer notice periods.
Generally, an employer is free to choose between giving prior notice, ‘gardening leave’ (a non-working period), or payment in lieu of notice, so long as the agreement between the parties does not state otherwise.
Employees whose employment is terminated after the completion of a full year of employment are generally entitled to statutory severance pay in the amount of one month’s salary multiplied by the number of years of service (pro-rated where applicable).
There is no specific severance entitlement that must be given in cases of redundancy. However, in many companies it is customary to pay extra benefits in such cases.
In Israel, it is generally compulsory to contribute to pension and severance funds for all employees. Most of the statutory severance entitlement, and in some cases all of the severance entitlement, is accrued in the severance component of the employee’s mandatory pension arrangement. Accordingly, sometimes it is sufficient to release the accrued severance fund in order to satisfy the statutory severance pay requirement. If a ‘Section 14 Arrangement’ is mentioned, employers should generally be relieved.
As in many jurisdictions, Israeli law prohibits or restricts the termination of certain groups of employees, such as pregnant employees.
There are two unique protected groups in Israel. The first includes employees undergoing fertility treatment. We should also add that fertility treatments are generally covered by local state health insurance, and that unlike in some other jurisdictions, a low birth rate is not much of an issue in Israel. The second group includes employees on army reserve duty (and thirty days thereafter). We remind you that this is compulsory in Israel.
Specific ministerial approvals for the termination of protected employees may be obtained under certain circumstances, if the employer demonstrates that the termination is not due to those special circumstances of the employee (e.g. pregnancy).
Upon termination, the parties should settle all of the employee’s outstanding entitlements, such as salary up to the termination date and the redemption of any accrued and unused annual leave entitlement. It is quite common to request that employees execute a letter of waiver and release of claims.
Employees cannot be forced to sign waivers. However, any ex-gratia benefits can be made conditional upon a waiver being signed. We remind you that statutory severance pay is generally mandatory and not a benefit that can be made conditional upon signing a waiver.
It is especially important to consult with local lawyers on termination issues. In addition to the unique aspects of the law, terminations will frequently require an understanding of the local culture and benchmarks.
Israelis are generally warm, open, and informal. Israeli employees will therefore usually choose to share their views in the course of the hearing procedure. Furthermore, it is quite common to negotiate in local culture, another detail of which employers should be aware.
Employers should make sure they are clear about their reasons, act in good faith, and follow the proper procedures when it comes to dismissal decisions. They should be aware of local culture, and take legal advice when in doubt.
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