Israeli Law Series 5 – Labour Law
May 24, 2018
Israel’s labour law is governed by many individual legislations according to the topics rather than consolidated together like some countries, as well as case law rulings, collective agreements and extension orders. There is a progressive development in this area of law especially matters such as hours of work, minimum wages and leave entitlements are common matters under discussion. It should be noted that foreign workers in Israel are entitled to no lessor rights and benefits given to local employees. In addition, they are entitled to special benefits under foreign workers legislation. This article aims to provide an overview of the employment relationship in chronological order. As this is a complex and large area of law, the article only mentions the main aspects and legislations.
Difference between an employee and contractor
Classification is determined by the actual status of the relationship rather than how the parties choose.
Major considerations include the following:
- •whether the worker’s work is integral and regular to the business;
- •extent of control the employer has on the worker;
- •whether the worker is independent of the employer; has his own business, takes economic risks, hires employees or maintains a list of clients;
- •extent financial dependence on the employer;
- •whether the employer or the worker supplies the means to work (equipment, vehicles, materials and tools);
- •length of engagement
- •parties’ intentions and how the relationship is presented to third parties.
Contractors’ rights are generally limited to what is agreed between the parties, whereas employees have a range of rights and entitlements provided under law. Please aware of the reclassification risk of a contractor being reclassified as an employee. There are possible ways for employers to reduce their risks. Employment within certain industries such as cleaning and guarding are heavily regulated. Please contact us to find out more. This article focuses on the employer-employee relationship.
Advertising a Job Position & the Hiring Process – The Employment Equal Opportunities Law
Employers are prohibited from inquiring as to the following information when advertising and hiring:
- •Gender discrimination or listing other discriminatory requirements (eg. age, race, disability, sexual orientation, religion, place of residence, views)
- •Criminal check of the candidate (exceptions under law for government security employers and employers providing services to children and the disabled or mentally ill)
- •Credit check of the candidate
- •Request candidate to supply military medical classifications or any genetic information
The following are permissible for an employer to seek when appropriate:
- •Work and educational background
- •Medical history if mandated by law or relevant to the position and subject to the employee’s consent
- •Immigration check
- •Drug screening if relevant to the position and subject to the employee’s consent
Candidates are to be notified of their progress in the screening process.
Negotiation of Employment Terms
There are many mandatory employment covers and minimum standards that cannot be contracted out or waived by the employee.
Legislations such as the following stipulate the general rules concerning employees’ rights:
- •Minimum Wage Law
- •Hours of Work and Rest Law
- •Annual Leave Law
- •Sick Pay Law
- •Severance Pay Law
- •Advance Notice for Dismissal and Resignation Law
- •Extension Orders regarding pension entitlement
- •Extension Order regarding recuperation entitlement
Forming the Employment Relationship
In general, oral employment agreements are legally binding. However, according to the Notice to Employee and Job Candidate (Terms of Employment and Screening and Recruitment Process) Law, the employer must provide a notice listing main employment terms using a stipulated form to each employee, within 30 days of the commencement of employment. The form may be waived if all of the required details are included within the employees’ employment agreements.
For Foreign employees, the Foreign Employees Law mandates that the agreement be in writing, in a language understandable by the employee and include specific terms and conditions.
Statutory rights and benefits and relevant collective bargaining agreement or extension order are implied into the employment agreement.
Minimum Wage – Minimum Wage Law
The minimum wage standard is an area often reviewed so one should check with the National Insurance Institute of Israel. As of December 1, 2017 the minimum wages are as follow:
- •Daily wage for workers employed 5 days a week: NIS 212.00
- •Daily wage for workers employed 6 days a week: NIS 244.62
- •Hourly wage: NIS 28.49
- •Monthly wage: NIS 5,300.00
Specific industries may have additional rules regarding deductions and allowances. For example, the new Minimum Wage for Caregivers Law (effective January 2018).
Commute Reimbursement – Employers’ participation in Travel Expenses to and from Work Extension Order
An employee is entitled to reimbursement of transport fee to and from work capped to a maximum daily rate which is updated from time to time. As at 2016, the maximum is NIS 22.60. The employer can pay more, although not obliged to. Generally, a receipt is not needed and the reimbursement amount is calculated based on whatever discounted public transport is available. In reality, the employee may commute however he/she wishes. If the employee has access to a company car, employer arranged transport (Hasa’ot) or the employment contract explicitly says transportation is included in the salary then the employee is not entitled to the reimbursement.
Workdays – Work and Rest Hours Law
The law prescribes a minimum of 36 consecutive hours rest or 25 consecutive hours rest (for certain industries) per week. Practically speaking, one rest day per week. The day of rest is Saturday for Jewish employees. For non-Jewish employees, the day of rest can be decided according to the employee’s religion, between Friday, Saturday or Sunday.
If an employer would like to have an employee work on the weekly rest day, the employer must obtain a permit from the Ministry of Economy for such.
Due to the restrictions on work hours, it is common for employees to work five days a week (Sunday to Thursday).
Work Hours and Overtime – Work and Rest Hours Law
The working week has been shortened to 42 hours pursuant to an extension ordered issued in March 2018. Work in excess of the prescribed hours is considered overtime.
Overtime is generally prohibited unless a permit is obtained from the Ministry of Labour. Overtime rate for the first two hours is 1.25 of the hourly wage. For every hour after it is 1.5 of the hourly wage.
Maximum overtime for employees working a six-day week is four hours per day and 12 hours per week. For employees working a five day week, it is four hours per day and 16 hours per week.
There are some limited exceptions to the above rules for employees in managerial positions and positions which require a special degree of personal loyalty.
Breaks and Rests – Work and Rest Hours Law
The general rule is that where the employee works for 6 hours or more, the employer must give at least 45 minutes break time (including one continuous break of no less than 30 minutes).
However, various permits from the Labour Ministry allow alterations to the general rule. One permit allows no break for non-manual work of eight to nine hours. Another permit shortens the general break time to 30-minute continuous break when the work is conducted in a three-shift pattern.
Employees are entitled to pray during the working day according to their religious beliefs. Employers are required to establish prayer time taking work requirements and the employees’ religions.
Rules regarding the practical details of breaks between work days, and between night shifts should also be obeyed. Please contact us to learn more.
Employers should be aware of their duties under the law in providing a fair workplace. For example, the Prevention of Sexual Harassment Law requires employers to set up internal policies and take steps to actively prevent sexual harassment.
The Employment Equal Opportunities Law seeks to protect workers from discrimination and retribution caused by whistleblowing. The Equal Rights of Person with Disability Law provides extra provision concerning the handicapped.
Welfare and other Employee Entitlements
Mandatory pension scheme requires both the employee and employer to contribute a percentage of the employee’s salary towards the employee’s pension. In 2017, the minimum contribution rates have been increased to
6.5% for employers and the minimum 6% for employees (both applied to capped pay). The pension arrangement also includes a severance component, to which employers contribute 6%, or at times 8.33% of the employee’s salary, which is thereafter released to the employee upon termination.
Employers are to make a mandatory deduction to national health insurance, and pay health insurance for foreign employees, however, other than these entitlements, there is no general entitlement to private health insurance.
The minimum vacation day entitlement for full-time employees in their first five years of employment has been increased to 12 working days since 2017. The vacation day entitlement increases according to how long the employee has been employed by the same workplace.
Israel also has nine national holidays and the employees are entitled to paid holidays on those days.
Sick Days and Sick Pay
If within the period of eligibility, an employee is entitled to a sick pay of 50% of usual salary for the second and third day of absence, the sick pay is increased to 100% for subsequent days. The period of eligibility is accumulated continuously at the rate of 1.5 sick days per month for every full month where the employee worked for the same employer or at the same place of employment. The period of eligibility is capped to 90 days. An employee is not eligible for sick pay if the absence has gone beyond the period of eligibility.
Some extension orders have allowed for exceptions to the general rule. The period of eligibility is calculated differently for contract workers in the private sector; security guards and workers; halls and event gardens worker; and employees in the hotel industry.
Employees are also entitled to use sick days and receive sick pay for an illness of a child, parent, in-law or spouse, under certain circumstances. These entitlements may be increased due to the severity of the relations illness.
Dismissal – Advance Notice for Dismissal and Resignation Law
Before a dismissal, the employer must organize a “hearing” with the employee to discuss claims against the employee. The employee must be given the opportunity to answer the claims with enough advance notice to prepare for the hearing. After the hearing, the employer may still dismiss the employee but must follow rules governing dismissal notice period and severance pay.
The dismissal notice period (up to one month, but can be longer if contractually agreed) is determined according to the duration of the employment. The employer must still pay the employee during the notice period even if the employer does not require the employee to work.
Employees are also required under law to give the same notice to the employer in the case of resignation.
There are legal limitations in dismissing certain people, namely the following:
- •pregnant women;
- •employees on maternity leave or 60 days thereafter;
- •women staying in protected shelters due to abuse;
- •employees selected for military and/or reserve service;
- •employees on sick leave;
- •employees undergoing fertility treatment; and
- •bereaved families.
Employers should be aware of any relevant collective bargaining agreement in operation.
According to the Employment Service Law, the employer is to notify the Employment Service Bureau when dismissing more than 10 employees at once or in the same month.
Severance pay is payable when the employee has been hired for a year or more and the leave was involuntary. However, if the employer deliberately dismisses the employee just before the one year mark, the employer may be ordered by regulators to pay severance pay nevertheless. The pay is calculated based on the employee’s current salary. Each year employed equates to one month’s wage based on the average wages of the last year of employment.
Although severance pay is not payable to employees who resign voluntarily, the Severance Pay Law provides a different scheme commonly referred to as the Section 14 Arrangement, according to which the employee will receive that amount regardless of whether the leave is voluntary or not. The contribution amount is fixed to the initial salary and does not increase even if the employee receives a raise in the future. The agreement is of little benefit to the employer if it is expected that the employee will not be with the workplace for long because the salary of the employee at time of resignation would likely be similar to the initial salary. The ordinary scheme is calculating severance payment from the current salary so the employer pays less under the Section 14 Arrangement if an employee has a big difference between the initial salary and current salary. Please contact us to discuss more about the potential scenarios under Section 14 Arrangement.
National Insurance Institute provides some remedies to the employee when the employer owes severance pay.
Employment disputes can be brought to the labor court at the regional level and appealed to the National Labour Court. Some procedures such as granting of permits are brought before the Labour Ministry. Court actions can take several years to resolve.
The article provides a simple overview of the employment law in Israel. Please do not hesitate to consult us if we may assist. We thank the contributions and support of Herzog Fox & Neeman (www.hfn.co.il) in the creation of this article.