Introduction

A strike (full or partial) is a concerted action by employees to improve their employment conditions. If strike action is used lawfully, it has legal effect on a collective level. Strike action also affects individual employees, as it suspends individual employment relations so that employees are exempt from performing their regular duties and the employer is exempt from paying their regular salaries, without either party being in breach of contract.

Such a legal effect at a collective level exists only in employment law. Suspension of contract is not recognised in ordinary contract law or in commercial contract law in particular. A party to a contract must perform its obligations under the contract (subject to the terms and conditions of the contract and the exception of unusual circumstances which may cause disruption to the contract). A party which reneges on its contractual obligations is in breach of contract and the injured party may sue for remedies such as performance or compensation for damages.

Facts

Postal Agencies Organisation v the Israeli Postal Company Ltd highlights the significance of strike laws. Within the framework of a government decree intended to foster reform in the postal market in order to adapt it to global and technological changes, the postal authority announced its intention to reduce the number of postal agencies and introduce changes to the contracts with the remaining postal agencies. In reaction, the postal agencies initiated what they termed a "strike", which included the full and partial closure of postal agencies.

A prolonged and bitter battle ensued which also reached the courts. The postal agencies sued the Postal Company for damages caused by breach of the duty to act in good faith and the Postal Company sued the postal agencies for damages caused by breach of contract due to the closure of the agencies. In this context, the postal agencies argued that strike laws applicable under employment law were relevant to their actions.

Decision

The district court ruled that although the reform was severely injurious to the postal agencies and the families that had depended on them, the agencies were independent contractors and therefore employment law did not apply and they could not benefit from strike laws. As a result, the concerted closure of postal agencies amounted to a breach of contract, which entitled the Postal Company to terminate the existing contracts and sue for damages to be offset against part of the damages that the postal agencies were entitled to for the Postal Company's breach of its duty to act in good faith.

Comment

Independence has many advantages, but the right to strike without breach of contract is not one of them.

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.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.