More on Dismissal and Severance Pay

 

The Knesset Labor Committee is expected to pass in a first reading two proposals designed to require employers to provide severance pay even if the worker leaves his job. The initiative is being widely opposed by employers (including the government, which is the largest employer in the market) and even by the Histadrut. Both sides, the Histadrut and the employers, prefer to reach agreements on the issue and object to legislation on labor issues.
We spoke with Avi Barak, who heads the Manufacturers Association's Department of Labor and Human Resources and is in charge of labor relations at the Employers Association, about the bill and its ramifications.

According to the viewpoint I presented recently, there is no reason to provide compensation unless damage was caused. If an employee leaves a job in favor of a better position elsewhere (and in some cases he even causes damage if he's a vital worker) why should he be compensated? If the legislative branch wants the employer to be obligated to provide severance pay to every worker who leaves, resigns or is fired, a law should be drafted to that effect. What does this have to do with compensation?
Avi Barak: I agree with you entirely. That's also the position of the Employers Association. Even on the bill known as Employee-Employer Parting Grant.

So why is it linked to the Severance Pay Law?
Because there is a full overlap between the grant sum and the amount allotted for severance pay. Employers' representatives were summoned to the Knesset for a meeting to discuss the bill and there I presented my stance, which is based on the following principles:
In the 1950s (when the Severance Pay Law was legislated) there were no unemployment payments, so an employee who was fired suddenly lost all of his monthly income. But don't despair – back in the 1940s there was a practice in Israel whereby employers would provide fired workers a lump sum in severance pay.
The practice became mandated by law. When it was legislated the idea was to give the dismissed employee a sum of money that would help him find alternative employment. It was a social benefits law in every respect.
Over the years there have been changes and rights have been expanded. For instance: legislation allowed employees who resigned to receive severance pay under certain circumstances, e.g. if the employee quits to sign up as a non-commissioned officer or moves to a development town, or in the case of a female employee who gives birth and wants to leave her job.

This also includes quitting when employment terms worsen.
Yes, and it's up to the courts to interpret what "worsen" means – and they tend to interpret it leniently. Also added to the list is resigning due to health reasons. It used to be that the employee had to bring certification from an occupational physician stating that he was truly unable to work for the employer. Over time this paragraph in the law also changed and today it's enough to bring certification from a family doctor stating that a close relative (e.g. a son or spouse) is sick and needs your help in order to quit and receive severance pay.

What does it mean that the court is lenient in interpreting the meaning of "worsened" employment terms?
The approach followed by the labor courts was that if a person wants to resign he should be given severance pay because otherwise it brings about a situation in which the employee who lies and says he's moving to a development town or an employee who makes trouble to get himself fired winds up receiving severance pay, while a straight and honest person who's simply fed up with his job or even one who gets a better job offer elsewhere or wants to advance in his career – doesn't get severance pay. He's the one who loses out.

This type of approach stems from viewing employee-employer relations as fundamentally in conflict and muscle-flexing. The dishonest worker is essentially telling his employer: If you don't give me what I want I'll deceive you or bother you until you pay up. Not that I really do deserve it, but because I flexed my muscles.  
We tried to explain to MKs that the real underlying goal of the law is that if I fire a worker I have to realize that there's a price to pay that advances social aims – the dismissed employee will have support until an alternative is found. By the same token the worker who quits also has to realize there's a price to pay – a possible loss of benefits.
I told the MKs another thing: Let's say despite everything I've said you still hold everybody who leaves a job deserves some sort of compensation. You have to be aware of what'll happen in another year or two. A liberal MK will come along and will try to pass a law granting the fired worker twice as much in benefits since the employee who resigns and the employee who was fired are not one and the same. One incurred a loss and the other didn't, so why should both receive the same benefits?

At the end of the day the comprehensive pension agreement signed recently takes most severance pay and turns it into the employee's money, so the only debate is over the remaining money. (It was agreed that 70% of severance pay is deposited in a pension fund and turns into pension money saved for the worker's retirement.)
That's if the employee cashes in the funds, which is on condition he leaves the money in the pension fund until he becomes eligible to receive pension payments after retiring from the workforce. That contradicts the original intention of the Severance Pay Law, which states fired workers should be given money to assistant them during the initial period following their dismissal. If the worker breaks into his pension fund the employer can ask for the money back.

That means the legislation brings about the forfeiture of a substantial portion of the severance pay. Now the worker can decide whether it remains in his hands (though only in the form of pension payments) or not.
Right. It's made possible in order to achieve the worthy goal of increasing the employee's pension payments.

How did the MK's react to your remarks?
Foremost among them is a very serious, highly regarded, astute MK, Chaim Oron. We told him there's no need for legislation and that the matter should be left up to agreements signed between the employers and the Histadrut. Because an agreement sets up a more balanced framework that's also easier to enforce than legislation, which is inflexible by definition.
Oron told us he's in favor of the agreement, but still he wants to bring the bill through a first reading so that there's continuity (that way if legislation does prove necessary they won't have to start over from scratch), then he'll wait until an agreement is signed, but he's not insisting on a law. He even said he's willing for this type of agreement to be in phases and for its implementation to be postponed until 2013, after the comprehensive pension agreement has gone into effect.

To the best of my knowledge, in practice a lot of employees leave their jobs and still receive severance pay.
That's true, but how often that takes place varies from one industry to the next.
For instance, at factories organized under the Manufacturers Association in 75%-80% of cases veteran workers who leave get severance pay based on their employer's good will, if they left in an orderly fashion, i.e. they gave sufficient notice, allowed a replacement to come in smoothly and didn't switch to a direct competitor.
On the other hand, in the security and cleaning industries and the Craftsmen's Union there was opposition to this approach. They said in the framework of the comprehensive pension agreement they already handed over a considerable portion of benefits and therefore now they can't ask for them to hand over more. They claim it increases labor costs and makes it harder to retain good employees, since in most cases the employer invested significant resources in their training.

How come?
They claim workers left their job just to get the severance pay. It could be that later some of them might even regret remaining without work. But in the meantime they caused the employer, and maybe themselves, damage.

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A previous discussion in this column dealt with the question of whether the employer should be required to provide the employee reasons for his dismissal. What's your opinion?
You have to draw a distinction between layoffs [either streamlining or as part of a recovery program] and individual firings [because the employee was unsuitable or because of disciplinary problems].
With layoffs you usual follow an agreement that's hammered out in advance at organized workplaces. The list of workers to be fired based on the factory's needs is raised for discussion. If a department closes down all of the department's staff members get laid off, and of course the reason then is the department's closure. In other cases management keeps those it feel are better suited. The employee's representatives have the right to submit a different list or request changes in the management's list.
In the case of layoffs individual workers do not get an explanation why they were no the list, but today there's a tendency to hold a sort of quick hearing in these cases, as well; the kind of case where the workers on the list of layoffs have an opportunity to raise personal problems.

Can you give us an example of such problems?
For instance, "my wife was also laid off and the family's entire income was cut off all at once," or "we just moved to a new apartment and I have big mortgage payments."
I recommend the management allow every employee this opportunity to be heard and reply to their arguments.

That's still not offering reasons for their dismissal, but rather taking individual exigencies into consideration.
According to the agreements reasons need not be provided. The list of dismissals is put together with the employee's committee, which means the worker's side of the story is addressed as well.

Do reasons have to be provided at the hearing?
Yes, because otherwise the employee can't defend himself and raise counterarguments. I think even if there was no law or obligation to give a hearing fairness demands the manager hold a heart-to-heart talk in order to reduce the anxiety level. He has to explain to the laid-off worker that he's not to blame, but rather the situation was the result of circumstances.
People come away from this process broken, especially if they were veteran, hardworking employees. It's a real blow to them. They feel they're being thrown out onto the streets after giving the factory their all. You have to operate this way in the case of layoffs and also in the case of individual dismissals due to unsuitability.
In the event a worker is discharged because of disciplinary problems I feel a lot less for him. The worker was fired because he didn't conduct himself properly, so I only extend to him what the law requires.

In the past I clearly voiced my opinion that the direct supervisor should be the one who has to notify the employee of his dismissal. The employee was recruited by the manager to help him execute the unit's tasks and therefore it's incumbent on him to be the one who brings the matter full circle. I claim sometimes direct supervisors avoid this very unpleasant duty and leave it to the human resources manager.
What's your position as someone who was vice president of human resources at a textile company and had to lay off hundreds of workers?

I have no problem with this argument. It's correct, in principle. But it's complicated to carry out in practice because in many cases the direct supervisors don't really know how to cope with difficult situations and have a hard time looking the dismissed worker in the eyes. Therefore in such cases it's best for both the manager and the employee if the dismissal talk is handled by an experienced human resources manager together with the direct supervisor. This also tempers the blow to the employee.
There's another point to consider. Sometimes the direct supervisor, because of a lack of knowledge, might say something that constitutes a legal error. For instance, saying something like, "I can't keep you anymore because you're too old and you're no longer strong enough," could be grounds for a discrimination suit.

 

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