An employee's entitlement to prior notice in case of dismissal became a specific statutory entitlement with the enactment of the Prior Notice in Case of Dismissal and Resignation Law 2001. Prior notice is intended to enable the employee to seek alternative employment while receiving a salary from the employer that dismissed him or her. For this reason, it has been ruled that the employee who has been dismissed is entitled to take a reasonable amount of time off for the purpose of seeking alternative employment and – for the same reason – the employer is not entitled to send the employee on annual leave during the prior notice period.

In the case of an enterprise changing hands, the question arises as to the duty of the employer (the former employer) to provide prior notice to employees who continue to work for the employer that purchased the enterprise (the new employer): are the employees entitled to prior notice or payment in lieu of notice from their former employer?

There are two main paths of action in the case of an enterprise changing hands:

  • Dismissal of the employee by the former employer and a settling of accounts followed by re-employment with a clean slate of the employee by the new employer, subject to the preservation of seniority for the calculation of various entitlements.
  • An agreement with the employee as to his or her transfer to the new employer in conditions of continuity by way of the new employer undertaking all of the former employer's obligations and replacing the former employer.

In a recent case (Dabush v Yardeni), the former employer chose the first path.(1) However, the former employer did not provide the employees with prior notice regarding their dismissal and claimed that he was exempt from providing such notice because immediately after their dismissal, the employees were employed by the new employer. The former employer therefore contended that should he be obliged to pay the employees in lieu of notice, the result would be that the employees would receive double payment for the same unit of time.

This argument was rejected and the National Labour Court ruled that the employees were entitled to prior notice from their former employer for various reasons:

  • The obligation to provide prior notice for dismissal is absolute and is not dependent on whether the employee has found an alternative place of employment. The former employer had acted unlawfully in not providing his employees with prior notice of dismissal. Had the former employer provided his employees with actual notice as he was obliged to do, the question of whether the employees were entitled to payment in lieu of notice would not have arisen after they had commenced employment with the new employer nor would the question have arisen as to their entitlement to receive double payment for the same unit of time.
  • The decision whether to work for the new employer must be taken by the employees themselves. The former employer cannot force the employees to transfer to the new employer nor can he assume that this will be their decision.
  • Even when employees find alternative employment on their own, such alternative employment does not deprive them of the entitlement to receive prior notice of dismissal.

The National Labour Court also ruled that if employees are dismissed by the new employer, the new employer will be obliged to provide them with prior notice calculated according to the period of their actual employment with the new employer.

For further information on this topic please contact Shoshana Gavish at S Horowitz & Co by telephone (+972 3 567 0700) or email (shoshanag@s-horowitz.co.il). The S Horowitz & Co website can be accessed at www.s-horowitz.com.

Endnote

(1) Labour Appeal 28597-03-11, Dabush v Yardeni Locks Holdings (2005) Ltd (February 11 2015).

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