Employer Beware – The Labor Court Is Watching!

In the framework of the labor law association run by the Israel Center for Management (MIL), labor law expert Prof. Moti Meroni brings up a series of new decisions in the field of labor law. We compiled some of the main points related to workers’ rights and employers’ obligations. It turns out that today more than ever employers should consider consequences that could be very significant for them if they don’t honor labor laws. In many cases the employer unintentionally fails to uphold the law.

Employing freelance workers:

In many cases freelance workers may be employed for an extended period of time. Both sides consider it an arrangement without an employer-employee relationship, so this type of worker does not benefit from a series of rights employees are entitled to by labor laws. Employers must realize mutual consent that there is no employer-employee relationship is not enough to establish the absence of an employer-employee relationship in practice. If it eventually turns out such a relationship did in fact exist between the two sides, not only is there a chance the employer will get sued for not following the dictates of the law, but he will also have to pay back wages assuming he has not yet paid them, e.g. retroactive pay for overtime.
Therefore the employer must carefully assess the various employment arrangements made with the various types of employees who receive wages.


Consulting with employees when companies are sold or

Today this type of consultation has been established through legal rulings and it applies primarily to collective work relations at highly organized workplaces. Prof. Meroni holds that under Israeli law the arguments at the basis of the obligation to consult with the employees are leading us toward the European model, where dialogue with employees is mandatory prior to a sale or merger, because it has a significant impact on their future employment prospects. This applies even if there are collective work relations at the organization. In cases where there is no workers’ organization employees select ad hoc representatives to attend to the dialogue.
Meroni also touches on the question of whom the employees speak with – with the owners or the management? Logic dictates talks with employees in generally should be held by the management, but in cases of a merger or sale sometimes the management and the employees are on the same side of the divide. Furthermore, says Meroni, the management may be at even higher risk of losing their jobs. There may be two companies coming together, each with a finance manager, a human resources manager or a vehicle manager, and after the merger only one will be needed. Meroni says the question of whom the employees should speak with has yet to be adequately resolved.
He notes the problem exists at both organizations – the purchasing firm and the acquired firm. The employees and managers at both firms will be affected by the process


The obligation to provide every employee an itemized salary slip:
According to Meroni the legal record is full of examples where employers don’t always provide salary slips, and in other cases, even when they are issued, they don’t include all of the items they are required to show. He says this is a legal violation that can carry individual fines, which means if the employer has 30 employees and did not issue salary slips as required for a certain month, he pays 30 separate fines.


What does a pay slip have to include?
The Pay Protection Law contains an amendment requiring the slip to include the identity of the employer, which is not always clear, particularly in the case of third-party employment. The slip must state the minimum wage level for the month it was issued to allow the employee to compare between his actual pay and the minimum level. Meroni notes this law was primarily intended to defend workers from the weaker classes.
The salary slip must include data on vacation and sick days. These rights are accrued to the employee and the pay slip must list a “balance sheet” showing how many he has used and how many remain.


Eligibility for overtime hours:
Meroni notes that the worker is entitled to receive pay for overtime hours, except for cases established by law, such as trust positions, a worker whose work hours cannot be tracked or a board member. When the employment agreement is signed it should be noted whether the employee is included in one of these frameworks. (Even so, if the matter goes to court, an assessment of the type of employment in practice might reveal that the agreement was improper and the employer will have to pay overtime hours retroactively.)

Meroni says while the onus of proof of overtime hours used to be on the worker (e.g. by producing records he kept), today, following the amendment to the law, a “revolution” has taken place. If it is found the employee is entitled to overtime pay, the employer must prove how many overtime hours the employee actually worked. If the employer did not keep records he must pay the petitioner up to 15 overtime hours per week or 60 per month, without the employee having to prove he worked all those hours. If the worker wants to receive additional payment, in that case he is required to demonstrate he is entitled to it.


Flexible hours and payment for overtime:
The Work and Rest Hours Law requires the employer to pay eligible employees for overtime hours. According to this directive, if a worker asks to leave work early on a certain day and in exchange promises to make up the missing time another day, according to the law the employer would be required to pay him overtime for these hours. This system created a sense of unfairness because the employer essentially paid (or should have paid) a sort of “fine” for agreeing to the worker’s request, but that’s what the law says.
According to Prof. Meroni the Labor Court’s approach to this matter has changed because changing work patterns and the trend toward flexible hours cannot be overlooked. This creates long and short workdays, which are often more convenient for the employer. The court realizes an additional financial burden should not be placed on the employer and altered its position accordingly.
However, Prof. Meroni says this will not apply without an explicit agreement between the employer and the employee. He cites as an example from the ruling hotline workers who manned a reception counter at an organization and the employer allowed them to select their work hours based on their convenience. In such a case, if a worker is assigned to a long shift rather than a regular work day, the court found him to be eligible to receive overtime pay even though the assignment was part of an internal arrangement among the workers and was free for them to choose.


Redeeming Vacation Time:
The Annual Vacation Law does not allow you to convert the annual vacation into money during a period with an employer-employee relationship. The intention of the legislation was for the vacation to be used for rest and refreshment and not to raise the employee’s salary. An annual vacation can be redeemed only with the conclusion of employer-employee relations.
According to Meroni, if an employer nevertheless allows the employee to redeem his vacation during a period of employer-employee relations (e.g. instead of a one-week vacation an employee receives payment equivalent to a week’s work), if the employer might at a later time be sued for not giving the employee a vacation, he would be required to again pay for the vacation not granted in practice and would be considered to have violated the law.
Meroni says in his opinion a distinction must be made between a mandatory vacation, which is required by law, and a “consensual vacation.”
In many cases the employer and employee agree the number of vacation days will be greater than that determined by law. This is a consensual vacation. For instance: the law requires the employee receive two weeks of vacation time per year, but the job agreement entitles him to three weeks of vacation time per year. The extra year, then, is a “consensual vacation.”
According to Meroni the prohibition against redeeming vacation time does not apply to the “consensual” part of the vacation, i.e. it can be redeemed in exchange for money. Still, it should be kept in mind that the right to redeem exists only if it is noted in the agreement on the employee (whether it’s a personal agreement or a collective agreement), and if at that workplace the practice is to redeem consensual vacation time as well. Otherwise the matter depends on the goodwill of the employer, because it has no obligation to redeem the “consensual” part of the vacation. This means if not stated otherwise in the agreements a worker who does not use the “consensual” vacation loses it.


Illegal Dismissal:
Recently two rulings were issued that indicate a certain change in the Labor Court’s approach to reinstating an employee who was dismissed illegally.
In the past there were cases where under such circumstances the court reinstated the employee, but even such a decision followed extensive deliberation because  it was clear to the judges justice had been served, but on a day-to-day basis work relations would then be difficult for both sides. Therefore such cases occurred primarily in public service or bodies classified as dual entities where the workplace is perceived as public “property” rather than belonging to private individuals or bodies and as such norms of public law can be applied to them. The universities are a notable example of such bodies.
This approach by the Labor Court was led by Judge Elisheva Barak, the vice president of the court, who holds the employee as well, and not just the employer, has proprietary rights – although less – at the workplace.
Meroni recalls that after she stepped down from the bench the court’s tendency to reject this approach became apparent. Today the court tends to view reinstating an employee who was wrongfully fired as an extreme act. The natural tendency is to issue a ruling to compensate him for the wrong done to him.
One outstanding case of this type took place recently at Tel Aviv University. A worker who was unrightfully fired went to the Regional Labor Court, which ruled she must be reinstated and given generous compensation for the wrong done to her.
According to Meroni, this was an unusual decision because generally the employee is either reinstated or compensated, but not both.
The university appealed the decision and the National Labor Court decided to cancel her reinstatement, but kept intact the very exceptional compensation – 24 months worth of salary and benefits. The employee was also awarded NIS 30,000 ($8,400) for pain and suffering and NIS 50,000 ($14,000) for attorney’s fees.
The employee was unsatisfied with the decision so she appealed to the High Court, which has yet to hear the case.


How much is “pain and suffering” due to wrongful dismissal

Meroni says in Israel wrongful dismissal is perceived as an injustice that demands compensation, particularly for loss of earnings. He says the labor court rarely awards substantial compensation for pain and suffering and other damages caused to the worker as a result of wrongful dismissal. Therefore the amount awarded to the worker at Tel Aviv University, a sum of NIS 30,000, is considered high.
Meroni sees this decision as a shift. It is well known that dismissal has a significant impact on the dismissed worker. Sometimes the emotional blow and the harm to the ability to find another job can be worse than the immediately financial blow of the loss of income. Still, the Israeli legal system has not developed in this area. The courts focus on the financial damage to the dismissed worker and award him compensation amounting to a few months’ salary for unfair dismissal. Meroni predicts Israeli attorneys will follow the lead of their counterparts in other countries by learning to demonstrate the damage to the employee as a result of dismissal, and then the courts will start awarding much larger amounts in compensation. For instance, attorneys will present an expert witness regarding the difficulty a 50-year-old encounters in the job market or they will try to estimate the extent of damage to his reputation.

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