The Employment Law Review: Israel

Introduction

The employment law framework in Israel is derived from the following sources:

  1. legislation: statutes and regulations providing employees with certain minimal rights. Israel lacks a constitution and has basic laws instead, which are superior to regular laws, including the Human Dignity and Liberty and Freedom of Occupation Law;
  2. collective bargaining agreements (CBAs), either specific or general: the latter may be extended by an order of the Minister of Economy to additional groups of employers and employees, or to all employers in the economy; and
  3. employment contracts: provisions of employment contracts will not be enforceable if they are inferior to those prescribed by law. If several legal sources apply to an employee, the one that is most beneficial governs.

The primary means for resolving employment disputes are the labour courts, parity committees (mostly established by CBAs), internal courts that exist in several fields, arbitration and mediation.

The enforcement of employment laws may be conducted by several organisations and mechanisms, such as the Enforcement Unit of the Ministry of Economy, specific legislative authorities, state authorities and the courts.

Year in review

i Amendment to the Equal Pay for Male and Female Employees Law, 1996

Reporting obligations

The Equal Pay for Male and Female Employees Law, 1996 (the Equal Pay Law) establishes an obligation of gender equality with respect to wages and other work-related compensation. Until recently, the Law only imposed an obligation on certain employers to report gender data regarding employee wages (mainly those that are budgeted by state and public entities). However, on 25 August 2020, the government published a significant amendment to the Law (the Amendment), imposing a duty on all employers with more than 518 employees to publish information about the average wage differentials between male and female employees. The first reports should be published by 1 June 2022, in relation to 2021.

In 2014, the legislature amended the Equal Pay Law and required certain employers that are lawfully required to publish information about, or report wages of, their employees and officers (as noted, mainly employers that are budgeted by state or public entities) to include information about gender. The current Amendment significantly expands the obligation to collect and publish data regarding salary gaps to all employers with more than 518 employees (hereinafter an employer with reporting obligations, both prior to the Amendment and under the Amendment, are referred to as an 'employer obliged to report').

The Amendment also states that, as from 1 June 2022, the Minister of Labour, Welfare and Social Services may – with the consent of the Minister of Finance and with the approval of the Knesset's Health and Welfare Committee – extend the Amendment's requirements to cover employers with 518 or fewer employees as well.

Even before the Amendment, employers were required to provide employees, at their request, with information about their employees' wage levels (subject to certain lawful limitations); however, the Amendment requires employer-initiated disclosure.

An employer obliged to report must meet certain requirements. The first is to prepare an internal report, once a year, based on data it collects, in which the employer will detail its employees' average wages, for each employee segment, while detailing the average wage differentials between male and female employees, in percentages, for each group of employees at the workplace (the internal report).

In its Second Appendix, the Amendment describes a list of data points that the internal report should include: for example, the division of employees into groups based on employee classification, position or rank; average wage and wage differentials (as percentages), by groups of employees, and by the scope of their employment, and with reference to their gender; and the rate of employees whose wages are lower than the average wage at the workplace, with reference to their gender.

A second new requirement is to provide each employee with information about the employee group to which he or she belongs, the employee segment, employee classification, positions or ranks in the group and the wage differentials in that group, in percentages. This disclosure should take place annually with (and based on) the internal report, provided the disclosure does not violate any other legal requirement.

Finally, an employer obliged to report must publish a public report (the public report) – including on its website, if applicable. The public report must include, among other things, data (in percentages) regarding the average wage differentials among the employer's employees, by employee segment and scope of employment, with reference to gender, as well as data (in percentages) regarding the rate of employees whose wages are lower than the average wage at the workplace, with reference to gender, all as specified in the Amendment's Third Appendix. The public report must be published once each year, in conjunction with (and based on) the internal report.

According to the Amendment, the public report will present the data without revealing the names of the groups of employees at the workplace and in a manner that does not enable the identification of a particular employee, or reveal other sensitive information, as defined by the Amendment. An employer obliged to report may offer additional information explaining the differentials in each employee group, provided that this data appears under a separate heading and does not include information enabling the identification of a specific employee.

An employer obliged to report that reports to the Supervisor of Wages at the Ministry of Finance in accordance with the Budgetary Principles Law, 1985, fulfils its obligation to publish a public report under the Amendment by providing the above detailed information to the Supervisor of Wages at the Ministry of Finance, in a manner and time frame as required by the Supervisor.

Significant cases

i Protection during fertility treatment

The National Labour Court has ruled2 in the matter of the scope of protection against termination of employment afforded to employees undergoing fertility treatment, but who are not absent from work for that reason.

The law grants protection from dismissal to employees who are absent because of the treatment, during the period of absence and for 150 days after that absence; however, this protection is limited and does not apply once two years have elapsed since the first absence for fertility treatment.

The protection for employees who are not absent from work because of the fertility treatment was only enacted at a later stage, and at first these employees were not protected under law. Case law has addressed the question of the limitation applicable in this case.

The state has specified that the intention of the legislator, in relation to the scope of protection, was to limit the period of protection for employees who were not absent from work to 150 days from the commencement of the treatment (fertility treatment or IVF treatment, the later of the two). According to the state's position, this period is shorter than that afforded to employees who are absent because of the treatment, since when employees are absent, there is a real risk that the absence will cause the employer to consider terminating their employment. This risk does not exist when the employee is not absent from work and the employer is not aware of the treatment.

The National Labour Court rejected the state's position, ruling that the provision in law reflects protection for employees undergoing fertility treatment who are not absent from work, during the entire period of the treatment, however long that may. Thus, employers who wish to terminate the employment of an employee undergoing fertility treatment must obtain a permit for the termination, at all times during the period of treatment and for 150 days thereafter. The Labour Court recognised that this ruling leads to inequality between employees undergoing fertility treatment, with greater protection for those undergoing treatment without being absent from work than those who are absent from work for this purpose. However, according to the ruling, the inequality derives from the letter of the law and, therefore, the matter should be amended in legislation.

The result is that employers who wish to terminate the employment of an employee undergoing fertility treatment, who is not absent from work, are required to obtain a permit for termination during the period of treatment – regardless of its length – and for 150 days thereafter, whether it is fertility treatment or IVF treatment. In respect of employers who wish to terminate the employment of an employee undergoing fertility treatment who is not absent from work, the requirement to obtain a permit applies only for two years from the first date of absence for the treatments.

ii Hearing obligation for contractors' personnel

On 5 July 2020, the National Labour Court issued a fundamental ruling3 regarding the duty of the user of contracted services to conduct a hearing for the contractor's employees, especially when the user of the services (the user) wishes to end the placement of a service contractor's employee at its premises.

The ruling revolved around a claim by an employee of a cleaning services company. The employee was placed at the premises of the user for many years, and his employer – the service contractor – changed from time to time, depending on the identity of the winner of tenders for the provision of cleaning services, which the user published from time to time.

The user began to suspect that the service contractor employee was involved in stamping other employees' attendance cards. Accordingly, it approached the service contractor and demanded to terminate the employee's placement with the user. The service contractor summoned the employee and notified him that he would be transferred to provide services for another client. Following this notification, the employee filed a claim with the labour court.

The Regional Labour Court in Haifa rejected the employee's claim on the basis that the user was his joint employer, with the service contractor. However, the Court required the user and the service contractor to compensate the employee, since a hearing did not take place prior to making the decision to end his placement at the user's premises. The service contractor appealed that ruling. During the appeal, the National Labour Court discussed the fundamental question of whether a user is required to conduct a hearing for a service contractor employee and the scope of that requirement.

According to the ruling, the nature and purpose of the hearing meeting leads to the conclusion that both the user and the service contractor should be required to conduct a hearing for the contractor's employee prior to making a decision about the employee, especially if the decision concerns the termination of his or her placement at the user's premises. According to the ruling, the scope of the requirement to conduct a hearing will derive from the relevant circumstances, which would include the service contractor employee's performance; the length of his or her placement at the user's premises; the reasons for ending the placement and its consequences; and the possibility that the termination of the employee's placement at the user's premises will lead to the termination of his or her employment by the service contractor.

According to the National Labour Court, the correct way to conduct the hearing in these circumstances is jointly, by both the user and the service contractor.

The National Labour Court clarified that imposing the duty to conduct a hearing on the user does not exempt the service contractor from fulfilling its duties. Those duties include the requirement to assist the employee in exhausting his or her right to raise claims before the user and the requirement to conduct a hearing in relation to relevant aspects of the relationship between the service contractor and the employee, such as placing the employee at an alternative workplace.

The National Labour Court did not detail the scope of the requirement imposed on the user in cases in which the user's decision is broader and does not relate to a specific employee. Those circumstances may include cutbacks to the scope of services provided by the service contractor, or the possibility of ending the engagement with the service contractor before expiry of the agreed term.

Basics of entering into an employment relationship

i Employment relationship

Generally, Israeli law does not require a written employment contract, though there are some exceptions. However, employers are required to provide new employees (and existing employees at their request) with a written notification form regarding certain employment terms and to update them in writing regarding any changes to those terms, as detailed in the Notice to Employee and Job Candidate Law (Employment Conditions and Candidate Screening and Selection) 5762-2002 and the relevant regulations.

An employer is not obliged to provide this type of notification if the employee is provided with a written employment agreement that includes all the required details.

Employment contracts may be for a fixed term or an indefinite term, at the parties' discretion. The termination of a fixed-term contract prior to its expiry by one party (the employer) may entitle the other party (the employee) to damages in the amount of the salary for the remaining term.

ii Probationary periods

Probationary periods are permitted by Israeli law, but during such a period, an employee would still be considered a regular employee for all intents and purposes. The minimum statutory written prior notice for a monthly employee4 is one day 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 notice.

According to a labour court ruling, during a probationary period, the reasons for termination of an employment agreement may be examined in a more lenient manner.5

iii Establishing a presence

In general, a foreign company can hire employees directly in Israel without being required to officially register a subsidiary company or have a registered branch in Israel. However, it will be required to be registered with the tax authorities as an employer.

A foreign company can also engage individuals as independent contractors or as service providers through manpower companies or service contractors. In principle, a foreign employer who employs individuals directly is required to comply with local employment legislation. In addition, the foreign company has withholding obligations to the tax authorities as the employment income is subject to income tax, social security contributions and health tax.

Generally, the engagement of individuals by a foreign company (whether as independent contractors or as employees) may expose that company to the risk of being regarded as a permanent establishment in Israel. The main outcome of this would be that general income attributed to an Israeli permanent establishment will be subject to Israeli corporate tax.

Restrictive covenants

Non-compete restrictions during and after a employment relationship are a common feature of employment agreements.

During the employment period, limitations imposed by an employer on an employee's freedom of work are likely to be enforced, if the employee is in a full-time position. However, post-termination non-compete restrictions are rarely enforced. An employee would be prohibited from competing with a former employer only if it may harm a legitimate interest of the employer.6 According to case law, non-compete covenants will not be enforced except in the following circumstances:

  1. the former employer owns a trade secret that is unlawfully used by the employee;
  2. the former employer invested unique and valuable resources in the employee's training;
  3. on termination of the employment, the employee received special consideration in return for his or her non-compete undertaking; or
  4. when balancing the employee's conduct and good faith in taking the new position and his or her obligation of fidelity towards the former employer, the non-compete covenant can be justified.7

Even if a court decides to enforce a non-compete covenant, the enforcement would only be with respect to an obligation that can be considered reasonable given the scope of the employee's position, the period of the restriction, the field in which the employer operates and the relevant geographical limitation. Accordingly, the court can redraft the non-compete obligation to make it reasonable.8

Wages

i Working time

The issue of working hours and overtime is governed by the Hours of Work and Rest Law and additional legislative sources, such as extension orders.

The Hours of Work and Rest Law was amended in April 2018, the effect of which was to shorten the working day, which now consists of 8.6 hours per day on four weekdays and 7.6 hours a day on one working day of the employer's choice (which should take into account the employee's request), amounting to 42 hours per week and 182 hours per month.

According to this Law, night work is defined as a minimum of two hours' work between 10pm and 6am. Night work must not exceed seven hours per day (not including overtime) and an employee must not carry out night work for more than one week in every two.

ii Overtime

There are limits to the amount of overtime that may be performed in a given period, other than for employees who are excluded from the Hours of Work and Rest Law (under exceptional circumstances).

Overtime compensation must be paid after working 8.6 hours per day (or 7.6 hours on the relevant shortened day) or 42 hours per week. For the first two hours of overtime, an additional 25 per cent is paid per hour, and for the third hour of overtime and thereafter, an additional 50 per cent per hour.

Employees may generally work up to 12 hours in total, per day, and up to 16 hours of overtime per week.

Foreign workers

An Israeli employer may employ a foreign employee in Israel provided that:

  1. the employee has an unrestricted visa allowing him or her to work in Israel regardless of the employer's identity; or
  2. the employer has a permit to employ a foreign employee who has a visa based on this permit.

The permit is usually issued for 12 months and can be extended, subject to the discretion of the relevant authorities, for additional 12-month periods, up to a maximum of five years and three months. Permits can also be issued for periods of up to 45 days, three months or two years.

In general, permits are granted in five sectors: construction, agriculture, nursing, services and industry. A common type of B-1 permit is a permit to employ 'foreign experts' in which:

  1. the foreign expert must demonstrate a high degree of expertise or unique and essential knowledge to the service provided by the employer, which is absent in Israel; and
  2. his or her monthly salary shall not be less than twice the average salary in Israel (for 2020, 20,856 shekels).9

An employer may employ an unrestricted number of foreign employees who do not require a permit. There is no limit on the number of permits for which an employer can apply. However, the authorities will take into consideration the number of foreign employees an employer has, compared with the total number of its employees.

Employment of foreign employees in Israel is subject to local labour legislation, including CBAs (when applicable) and extension orders.

The duties of enterprises employing foreign workers include providing medical insurance and, in some cases, accommodation. In addition, the employment can be subject to a special tax in which the employer should pay up to 20 per cent tax in addition to the taxes that apply to any employee, except in certain situations, such as when the employee earns more than twice the average salary in Israel.

Global policies

There is no mandatory requirement for applying disciplinary rules. However, these types of rules are quite common in unionised workplaces (as part of a CBA with the employees' representative committee) and in companies that are subject to global policies in light of being part of a group of companies. Disciplinary rules are regarded as part of an employee's terms of employment.

There are mandatory rules and policies that an employer is required to adopt, such as the model rules for the prevention of sexual harassment according to the Prevention of Sexual Harassment Regulations 5758-1998.

In general, disciplinary rules are not required to be filed with or approved by any government authorities, but they should comply with applicable law and general legal principles.

Generally, for disciplinary rules to be applicable to them, employees should consent to the rules, either explicitly or implicitly. It is recommended that the employer's rules be accessible to the employees (such as on a bulletin board or intranet site) to reduce claims that the employees were not aware of them (or any amendment to them).

Disciplinary rules are not required to be written in the local language. However, they should be in a language that the employees understand.

Parental leave

The Employment of Women Law 5714-1954 and its regulations set out the rights of women and their partners in the workplace, including during fertility treatment, pregnancy and after giving birth.

Employees are entitled to statutory maternity leave (now known as birth and parenting leave (BPL)), which may be taken by the mother or shared between both parents.

In general, payment is for 15 weeks of BPL, made by the National Insurance Institute (NII), subject to certain entitlement criteria, as determined by the National Insurance Law [consolidated version], 1995. The rest of the BPL (i.e., 11 weeks) is unpaid.

An employee is entitled to 26 weeks of BPL if she has worked for the same employer or at the same workplace for at least 12 months (otherwise, the entitlement is 15 weeks). The BPL may be extended in certain circumstances, such as hospitalisation of the employee or the child, or a multiple birth.

According to law, an employee whose partner has given birth is entitled to BPL, to be paid by the NII, as of the end of the first six weeks following the delivery, so long as certain conditions are met. These include that he has provided a written waiver from his partner of her entitlement to the remainder of her BPL, and that she returns to work for the remainder of this time. In certain cases, usually when the employee has sole custody of the child or is the sole carer (e.g., because of the mother's medical condition), he will be entitled to the entire BPL.

An employee or, in certain circumstances, her partner may be entitled to statutory unpaid leave after the completion of BPL, which may equate to a quarter of the employee's length of service (less the period of the maternity leave exceeding 15 weeks that was actually taken by the employee), though in no case longer than a year following the birth.

There are a number of other employee entitlements in this area, such as time off for antenatal appointments, the right to work one hour less per day (without reduction in pay) for a limited period after returning from BPL, and time off for fathers around the time of birth, all of which are subject to requirements and conditions.

Pregnant employees, those undergoing fertility treatment and employees on BPL, statutory unpaid leave and for a certain period thereafter, are all protected from dismissal (subject to conditions). Note that specific ministerial approval may be obtained to allow such a termination in certain circumstances if the employer can show that it is not occasioned by the special circumstances of the employee (for example, the employee being pregnant). See also Section XIII.i for further discussion on this point.

Translation

There is no requirement that employment contracts be written in any specific language, as long as the employee understands the language (except with regard to foreign employees, for whom the Foreign Employees Law 5751-1991 expressly provides that the employment contract should be written in a language the employee can understand). In this respect, it is common for global companies to provide employment-related documents (including employment contracts and confidentiality agreements) in English, mainly for them to be understood by the company's management abroad.

There is no clear recommendation as to whether to provide employment documents in Hebrew, and the decision usually depends on the employees in the company and the extent of their knowledge of the foreign language.

Providing employees with employment-related documents in a language they do not understand may result in employees claiming that they are not subject to their terms (as they did not understand them), and may affect the employer's ability to enforce them.

Employee representation

Employees are permitted, but not required, to establish a union if none exists. The right of unionisation is regarded as a fundamental right of employees.

For the purpose of defining the representative organisation in the workplace, the general rule is that, in a specific workplace, there should be one bargaining unit, meaning that at least one-third of the total employees are members of the union. Splitting the natural bargaining unit can be done consensually by the bargaining parties – namely, the union and the employer.

The election procedures for representatives are set out in the articles of association of each union or employee committee. The length of the term of the representative committee may change from one committee to another, in accordance with its articles of association.

Employees have a general right to enrol as members of a trade union and to authorise the union to act on their behalf. The law defends this right by prohibiting the employer from preventing any trade union representative from entering the workplace to organise the employees and advance their interests, and revoking or reducing any employee rights, including terminating employment, on the ground of an employee's membership or activity within a trade union or on the grounds of his or her activity in establishing a representative body in the workplace.

The National Labour Court has also ruled that, during initial unionisation, the presumption is that the expression of the employer's opinion could exert pressure that may constitute an unjustified influence on the employees. Therefore, an employer is not allowed to publicly express its views against the organisation of its employees, let alone take any action in an attempt to avert it.10 In recent years, the regional labour courts have imposed significant compensation on employers that have acted to thwart initial unionisations by various means (such as putting pressure on employees to abolish their union membership, giving legitimacy to actions against the unionisation, discriminating against unionised employees, and acute expressions of opinion against the unionisation made by senior managers).11 In this regard, the National Labour Court has pointed out that attempts by employers to harm initial unionisation has become a common phenomenon, justifying increasing compensation in the future.12 However, the Regional Labour Court in Tel Aviv ruled in the McDonald's case13 that if, during the unionisation process, representatives of the workers union deliver deceptive or misleading information that gives rise to false allegations, the employer will have a right to respond to those allegations in good faith.14

For the first time, a regional labour court has stipulated that in an initial unionisation, a workerss union has an obligation to act towards the employer with complete decency and transparency, and must avoid any action that may harm or damage the employer's assets or property.15

The law stipulates that an employer has an obligation to negotiate with the union in the initial stages of its formation in the workplace, with respect to any of the following: hiring and firing; termination of employment; employment terms and conditions; and the rights and obligations of the trade union. However, the law emphasises that this does not require the employer to sign a CBA with the trade union, but rather only requires the employer to negotiate with the union.

In workplaces in which collective relationships are already established, the employer is obliged to negotiate with the representative trade union with respect to various specific employment matters, including engagement, dismissal and terms of employment. To the extent that the employer does not respond to the employees' demands and refuses to sign a CBA, the trade union can potentially declare a work dispute and initiate a strike.

Data protection

i Requirements for registration

The Protection of Privacy Law 5741-1981 regulates the matter of databases and their registration. It defines 'database' as 'a collection of data, maintained by magnetic or optical means and intended for computer processing'.

'Data' is defined under the Protection of Privacy Law as 'information about an individual's personality, personal status, intimate affairs, health condition, financial condition, professional qualifications, opinions or beliefs'.

Under the Protection of Privacy Law, it is necessary to register a database (in the databases' registry maintained by the Israeli Registrar of Databases) if, inter alia, it:

  1. contains data about more than 10,000 individuals;
  2. contains sensitive data (see Section XII.iii);
  3. contains data about persons that was not provided by them, on their behalf or with their consent; or
  4. is used for direct mailing services. Under the Protection of Privacy Law, 'direct mailing' is defined as 'approaching a specific person based on his/her belonging to a group of the population that is determined by one or more characteristics of persons whose names are included in a database', and 'direct mailing services' is defined as 'providing services of direct mailing to others by way of transferring lists, labels, or data by any means'.

Human resource databases in workplaces are generally considered to include sensitive data and, consequently, should be registered according to the Protection of Privacy Law. In addition, no person may use the data included in a registered database except for the purposes for which it was established.

On 23 July 2020, the Ministry of Justice issued, for public comments, a memorandum of law to amend the Protection of Privacy Law, which seeks, inter alia, to reduce the scope of the obligation to register databases and apply it only to databases that contain data on 100,000 data subjects or more, that in addition meet at least one of the following criteria: (1) the main purpose of the database is to collect data for the purpose of providing it to others, as a way of doing business, including direct mailing services; (2) the database includes data of special sensitivity; (3) the database includes data about data subjects not provided by them, on their behalf or with their consent; or (4) the database is owned by a government ministry or other state institution, local authority or other body that performs public functions under law.

ii Data security

Under the Protection of Privacy Law, the owner, the holder and the manager of a database are each individually responsible for the protection of the data held. The Protection of Privacy Law defines 'data protection' as 'protection of the integrity of the data, or protection of the data against exposure, use or copying, all when done without due permission'. It is customary to limit access to a database to individuals who have reasonable needs to use the information included in the database.

The Protection of Privacy Regulations (Data Security) 5777-2017 establish a broad and comprehensive arrangement regarding the physical and logical protection of databases and their management.

iii Notice and consent

Section 11 of the Protection of Privacy Privacy Law provides that any request for data made to a person, with the intention of keeping and using it in a database, shall be accompanied by a notice indicating (1) whether that person is under a legal obligation to deliver that data or whether its delivery depends on his or her decision and consent, (2) the purpose for which the data is requested, and (3) the person or entity to whom the data will be delivered and for what purpose. Based on case law, employees are required to provide their explicit consent to such a notice.

iv Cross-border data transfers

The export of data outside Israel from a database subject to the Privacy Law is regulated by the Protection of Privacy Regulations (Transfer of Data to a Database Outside the State Borders) 5761-2001. These Regulations prohibit the transfer of data from an Israeli database to a database located abroad, unless the receiving country ensures a level of protection of data that is not lower than the protection provided for under Israeli law.

In addition, the Regulations lay down conditions that enable the transfer of data from an Israeli database to a database abroad, even when the overseas law provides a level of protection that falls below that provided under Israeli law. These conditions include, for example, obtaining the individual's consent to the transfer of the data, the data is being transferred to a database in a country that receives data from Member States in the European Union, under the same conditions of receipt, and the data being transferred to someone who has agreed to fulfil the conditions laid down in Israel.

In addition to the fulfilment of any of the above-mentioned conditions, the Regulations state that the owner of the database must ensure (by way of written obligation) that the recipient takes steps to ensure the privacy of data subjects, and that the data shall not be transferred to any other person, whether that person be in the same country or not. Accordingly, onward transfer of data to a third party located outside Israel is not permitted, unless the owner of the database entered into a direct agreement with that third party, which includes, inter alia, the above requirements.

On 29 September 2020, the Israeli Privacy Protection Authority (PPA) issued a statement regarding the transfer of personal data from Israel to the United States, in light of the annulment of the EU–US Privacy Shield framework for the transfer of personal data from Europe to the United States by the European Court of Justice (ECJ) following the Schrems II case. With the annulment of the Privacy Shield framework by the ECJ, the PPA clarifies that the exception set forth under the Regulations with respect to the sharing of personal data with an organisation residing in a country that receives data from EU Member States, under the same conditions of receipt, can no longer be relied on as basis for transferring personal data from a database in Israel to US-based organisations, even if these organisations are bound by the principles of the Privacy Shield framework. Therefore, for the time being, Israeli companies are advised by the PPA to implement, to the extent applicable, other alternatives available under the Regulations for the purpose of transfer of personal data to the United States.

v Data subject rights

According to Section 13 of the Protection of Privacy Law, every person is entitled to inspect, either by himself or herself or through a representative authorised by him or her in writing or by his or her guardian, any data about him or her that is kept in a database. In addition, under Section 14 of the Protection of Privacy Privacy Law, when a person who, on inspecting any data about himself or herself, finds that it is incorrect, incomplete, not clear or not up to date, he or she may request that the owner of the database or, if the owner is a non-resident, the holder of the database, amend or delete the data.

vi Sensitive data

Under the Protection of Privacy Privacy Law, 'sensitive data' is defined as 'data on a person's personality, intimate (i.e., private) affairs, state of health, financial conditions, opinions and beliefs'. Sensitive data is interpreted very broadly by the Israeli courts and the Israeli Protection of Privacy Authority as encompassing types of personal information that are not specifically mentioned in the definition of sensitive data, all depending on the specific circumstances of the matter.

As stated above, if a company maintains sensitive data by electronic means for processing, it is required to register a database.

vii Outsourcing

Any owner of a database who outsources services that involve the processing of personal data by a third-party service provider, must enter into a written agreement with the third-party service provider, which will determine certain security measures and safeguards, such as the purpose of the processing, the return or destruction of data on termination of the services, supervision rights on the service provider's activities and a binding security document.

viii Background checks

Background checks on candidates must respect the individual's right to privacy, and be reasonable, relevant, proportionate and carried out in good faith.

In respect of publicly available information, there is no specific requirement to obtain an individual's consent. As regards non-public information, the need for prior written notice and informed consent depends on the circumstances.

Requesting information with respect to protected criteria under the Employment Equal Opportunities Law 5848-1988 (e.g., regarding race, gender, age or religion) will usually shift the burden of proof to the company in the event of a discrimination claim, to show that it did not unlawfully take into account any protected criteria in making the employment decision.

Criminal background checks are generally not permitted, other than in certain limited circumstances, where they are directly relevant to the position sought and where there are specific legal restrictions on hiring applicants with criminal convictions (e.g., positions at schools, day care centres and hospitals). Outside these parameters, an employer may not ask applicants to provide a criminal record certificate and must avoid enquiring into an applicant's criminal history. It is further prohibited to ask a person to provide criminal information, whether directly or indirectly by way of a statement or questionnaire, including for the purposes of employment.

As of April 2019, a new Credit Data Law came into force (the New Credit Law). This Law completely prohibits an employer from requesting or obtaining information regarding an individual's credit data and credit rating for the purposes of employment, including through a questionnaire or declaration from the candidate (with an exception regarding credit data published in public databases according to law). The New Credit Law also provides that the courts have the power to oblige a person who has requested or received credit data information, in violation of the provisions, to pay the candidate compensation without proof of damage.

It is forbidden to request information regarding military and genetic profiles.

ix Covid-19 and employees – privacy implications

In combating the rapid proliferation of the coronavirus, the Israeli government has implemented a series of restrictive measures with the purpose of controlling and limiting its spread. These measures include restrictions on travel, closure of businesses and public transport shutdowns. These measures also present privacy challenges, mainly focusing on the right balance between the protection of employees' constitutional right to privacy and the need to prevent the spread of the coronavirus. The major issues employers are facing in this regard are distance or remote working, sharing covid-19-related data pertaining to employees and conducting epidemiological investigations in the workplace.

Since the outbreak of the coronavirus, many workplaces equipped with the technological and business capabilities have directed their employees to work from home. Shifting from working from a centralised offices to working remotely requires attention to cybersecurity and privacy risks associated with a teleworking scheme.

The PPA has published guidelines referring to the major risks associated with distance or remote working and the prudent organisational and technological tools and steps that the PPA recommends to implement to reduce such security risks.

The PPA has also issued guidance according to which employers may be entitled to share personal data with co-workers or others regarding an employee whom they know, or reasonably suspect, has been infected or is ill with the coronavirus, even without the individual's consent. Such a disclosure may be defensible from a privacy law perspectives, for example in circumstances where sharing the information is vital for the protection of the health of those who have been in contact with the employee and it is done in good faith.

Finally, a publication issued by the PPA sets out recommendations for the protection of privacy of individuals participating in epidemiological investigations, which are being conducted for the purposes of containing the spread of the coronavirus, including in the private sector. This publication describes risks in respect of privacy while conducting such investigations and offers various recommendations in this regard, including, inter alia, with respect to training and supervision of investigators, disclosure of information to the employees, sharing of epidemiological data, data security and retention, and data subject rights in connection with the information.

Discontinuing employment

i Dismissal

As a general rule, employers must exercise their right to terminate an employee's employment in good faith, for valid reasons16 and in compliance with applicable laws, any written employment contracts, workplace customs and CBAs or extension orders, if applicable.

In addition, according to court decisions, all employers are required to hold a hearing prior to making a decision regarding a termination of employment. The purpose of the hearing is to inform the employee of the employer's reason and give him or her the opportunity to respond. A hearing is required in all circumstances, regardless of whether the dismissal is based on redundancy, poor performance or misconduct.

In certain circumstances, terminating employment may be prohibited or subject to obtaining ministerial approval.17 Israeli law prohibits the termination of employment for certain groups of employees, such as pregnant women, employees expecting to adopt children, become foster parents or become parents with the assistance of surrogacy, employees undergoing fertility treatment, employees on maternity or paternity leave and for 60 days thereafter,18 employees on army reserve duty19 and employees on sick leave.20

In workplaces where a collective relationship exist, or a CBA or extension order applies, the process of termination, which is often included therein, usually involves the participation of employee representatives.

In general, employees are not entitled by law to a social plan or the right to be rehired.

According to some court decisions, in certain circumstances, prior to making a decision regarding termination of employment, employers are required to consider whether they can offer the employee an alternative position within the undertaking.

Under Prior Notice Before Termination Law 5761-2001, employers must provide the employee with prior written notice when ending the employment relationship. An employer may choose to pay the employee in lieu of notice. Payment in lieu is equal to the salary the employee would have received had the employee continued to work throughout the notice period.

Under the Severance Pay Law 5723-1963, an employee who is dismissed after completing at least one year's service is entitled to statutory severance pay. This is calculated based on the employee's monthly base salary multiplied by the number of years of service.

In general, employees can negotiate contractual payments or benefits, or reach a compromise, only if these entitlements are over and above statutory entitlements.

Furthermore, it is common for employers to ask employees to sign a letter of receipt of their final payments and a release of claims against the employer. According to case law, a release does not constitute a formal bar to future claims by employees. However, it may be enforced if certain conditions are met, such as:

  1. the employee was aware 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 before 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 as a result of coercion by the employer.

ii Redundancies

As a general rule, Israeli case law requires an employer to inform and consult employees with respect to redundancies. However, the law does not specify the form, timetable or content of these obligations. If a CBA, or any other binding legal document, applies to the affected employees, it may set out specific procedures for redundancies, including the bodies the employer must consult.

In the absence of specific provisions, there is a general duty to carry out consultation in good faith before any final decisions are made. In general, the employees should be provided with relevant information regarding the anticipated dismissals, such as general information regarding the financial situation of the employer, when the redundancies need to take place owing to lack of profit.

In practice, the obligation to inform and consult employees is only practical when an employee representative body exists and can therefore be consulted.

The obligation to inform and consult employees does not detract from an employer's general obligations with respect to the termination of employment, including holding personal hearings with each employee (see Section XIII.i). Thus, employees whose contracts are terminated by reason of redundancy have the same personal rights as any other employee whose employment is terminated.

Transfer of business

There are no regulations in Israel in the style of the UK's Transfer of Undertakings (Protection of Employment) Regulations 2006 (referred to as TUPE). In principle, an employee cannot be transferred to another employer without his or her consent. Therefore, if an employee does not consent to the transfer, the seller would either continue the employment of that employee or terminate the employment relationship.

In practice, there are two methods of transferring employees, for example, on the sale of a business:

  1. fire and rehire, in which the original employer terminates the employees' employment and the new employer rehires them; and
  2. continuity of rights, in which the buyer steps into the seller's position as employer for all intents and purposes. In these circumstances, subject to the employees' consent to the transfer, the buyer assumes all the seller's obligations towards the employees while maintaining their rights and entitlements.

When there is an active union or works council at the workplace, employers need to inform employees about the forthcoming change, and consult and negotiate with regard to their employment terms after the change.

The National Labour Court issued an important ruling in 2015, in which it stated that the original employer is required to provide its employees with prior notice of termination (or pay in lieu of notice), even if the new employer is willing to hire the employees and continue their employment immediately following the termination.21

Outlook

Like employers all around the world, the Israeli workforce has had to adapt quickly and implement many lessons during and resulting from the covid-19 pandemic.

Although many employers had not previously enabled working from home (WFH), or enabled it to a minimal extent in specific and special circumstances, covid-19 has put WFH to the test on a very broad scale, as a measure to achieve social distancing. This has required employers to organise the necessary infrastructure to enable effective and efficient fulfilment of duties by a large percentage of the workforce, at very short notice. It has also forced employers to address many issues, such as how they can supervise their employees' work, provide internet coverage and other technology support, ensure data protection and confidentiality, oversee dress code (e.g., for video meetings), supervise attendance at work and the length of the working day, among other things. We expect that, going forward, this experience will cause many undertakings to be more open to implementing more flexible WFH arrangements, and improve the availability of WFH to employees, in an efficient and effective manner, while forcing employers to adopt policies and practices with respect to the aforementioned topics.

We also anticipate further development of the various management tools used throughout the covid-19 pandemic, such as unpaid leave, which were previously rather marginal to employment relationships but have been brought centre stage as employers faced the effects of the pandemic and government restrictions on their workplaces.

Footnotes

1 Orly Gerbi is a senior partner, Maayan Hammer-Tzeelon, Nir Gal and Ohad Elkeslassy are partners, and Keren Assaf is a senior associate at Herzog Fox & Neeman.

2 Labour Appeal 4333-11-19, State of Israel v. Natalie Gutman (29 March 2020).

3 Labour Appeal 47271-06-18, Hat'ama – Placement and Information (1995) Ltd v. (1) Sami Hapota; (2) The Israel Electric Company Ltd (5 July 2020).

4 Under the Prior Notice of Termination Law 5761-2001, a monthly employee is an employee whose remuneration for work is mainly paid once a month.

5 See, for example, ASK 56412-01-17, Kobi Shimoni v. Israel Railways Ltd (6 September 2017).

6 LA 164/99, Frumer v. Radguard Ltd PDA 34, 294 (1999); CA 6601/96, AES Sys Inc v. Saar PDI 54 (3), 85 (2000).

7 LA 164/99, Frumer v. Radguard Ltd PDA 34, 294 (1999).

8 CA 6601/96, AES Sys Inc v. Saar PDI 54 (3), 85 (2000).

9 This amount is updated annually.

10 Pelephone decision: New General Workers' Union v. Pelephone Communications Ltd (2 January 2013) 25476-09-12. A motion to the High Court of Justice was rejected.

11 SK 49105-08-16, New General Workers' Union v. The Medical Rehabilitation Centre 'Ba'it Balev' Bat-Yam; ASK 61532-12-16, The Medical Rehabilitation Centre 'Ba'it Balev' Bat-Yam v. New General Workers' Union; SK 29252-04-18, New General Workers' Union v. Neto Melinda Trade Ltd; SK 52024-03-16, New General Workers' Union v. S. Shlomo Insurance Company Ltd.

12 ASK 11460-10-14, Hot Mobile Ltd v. The New General Workers' Union.

13 McDonald's decision; New General Workers' Union and other v. Alonyal Ltd and other – 31826-10-14 – 6 May 2015.

14 An appeal on the McDonald's decision served by the workers union was removed without prejudice, and without the National Labour Court expressing its opinion on the Regional Labour Court's decision (ASK 40548-05-15, New General Workers' Organization v. Alonyal Ltd (24 November 2015).

15 SK 43286-09-17 New General Workers' Union v. Soda Stream Industries Ltd. An appeal was served by the workers (ASK 30235-09-20).

16 Valid reasons for dismissal may include poor performance, redundancy and disciplinary action.

17 Ministerial approvals for the termination of employment may be obtained in certain circumstances if the employer demonstrates that it is not the result of the special circumstances of the employee (such as the employee being pregnant).

18 Employment of Women Law 5714-1954; ministerial approval is required for all the aforementioned groups.

19 The Discharged Soldiers (Reinstatement in Employment) Law 5709-1949. In general, unless a ministerial permit is granted in advance, the termination of employment during military reserve service is prohibited, as is termination within 30 days of reserve service lasting longer than two days.

20 Under Sick Pay Law 5736-1976, employers are prohibited from terminating the employment of an employee who is absent from work owing to an illness during the period in which the employee is using his or her accumulated sick leave.

21 LA 28597-03-11 Dabush v. Yardeni Locks Holdings (2005) Ltd (11 February 2015).

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