Background
Decision


On 16 January 2023, the National Labour Court issued an important ruling that discussed the obligations of a "service orderer" according to the Law for Increased Enforcement of Labour Laws.(1) This case dealt with contractor workers in the field of cleaning who were placed in a supermarket chain.

Background

The Law for Increased Enforcement of Labour Laws came into force in June 2012, with the aim of increasing and streamlining the enforcement of labour laws. The law took effect against the background of:

  • increasing non-compliance with the provisions of the labour laws, including expansion orders;
  • the spread of indirect employment arrangements through service contractors, where the violation of workers' rights is more common.

The Law states, among other things, that a service orderer which orders a cleaning, catering or guarding service is also responsible at a civil level for the terms of employment of the contractor's employees working in their service, under certain conditions. If the rights of such employees have been violated by their employer (ie, the cleaning company, the guarding company or the catering company), the service orderer will be considered to have violated their terms, and will be exposed as if it were the employer of these employees directly.

Section 26 of the Law states that the service orderer must establish an "effective way" at its workplace for the contractor's employees to deliver a notice of violation of rights and inform the contractor's employees about it. Section 27(2) states that if the service orderer "relied in good faith" on periodic inspections conducted by a certified wage inspector and, upon discovering a violation, carried out its obligation to do "everything in his power to correct the violation by the contractor" (and, if it is not corrected, to cancel the contract with the contractor), this will be a good defence for the service contractor against the imposition of liability. Section 28 states that the contract between the person ordering the service and the contractor must be a "profit contract", meaning that the consideration paid to the contractor will cover the contractor's real salary expenses and more.

Decision

The National Labour Court discussed the provisions of the law and ruled that Shufersal, the company ordering the service, had a civil liability towards the workers who worked in its premises while employed by a contracting company in the field of cleaning, which had fallen into liquidation proceedings. With regard to section 26, the service orderer should have provided the employees with information on how to file a complaint. In this case, it did not even check whether the contractor company had provided the employees with the information.

The Court noted that the law does not stipulate that the ordering party must provide information to the contractor's employees in their own language. However, under the circumstances, a requirement that the information regarding how to file a complaint be given in a language that the employee understands is consistent with the requirement in the law to take reasonable measures to prevent infringement of rights. The Court held that it was doubtful whether referring an employee to a central contact centre which could only be contacted in writing via mail and not through digital means (eg, email or WhatsApp) was an "effective way" of delivering a message.

With reference to section 27(2) of the Law, the Court determined that although periodic inspections had been conducted by a salary inspector, the service orderer had not relied on them in good faith and had not done everything in its power to correct the violations or terminate the contract with the service contractor.

The Court determined that the service orderer had overlooked the service contractor's repeated violations. Its conduct indicated that, for the service orderer, the wage inspector's reports were a shield and not a platform for real and effective real-time criticism of the contractor. In light of this, it was determined that the company was not entitled to the protection of section 27 of the Law. The company claimed that, in the absence of regulations on inspections, there was no normative source to hold the ordering party responsible for the salary inspections that were performed (over 10 years have passed since the enactment of the Law and regulations regarding the manner of conducting the inspections have not yet been established). This claim was also rejected.

In relation to section 28 of the Law, it was determined that the engagement agreement for providing the services was a "loss contract" and not a "profit contract" since it did not specify the minimum wage cost or include the service contractor's statement on additional costs, including profit.

In light of all of the above, the service orderer was assigned the responsibility of paying the contractor's workers' rights that the contractor had not paid.

For further information on this topic please contact Sagi Asman at Efrat Deutsch & Co by telephone (+972-3-6096960‚Äč) or email ([email protected]). The Efrat Deutsch & Co website can be accessed at www.edz-law.co.il.

Endnotes

(1) 46450-01-21 Shufersal - ASMERET TEKABO BEYENE.