All questions

Discontinuing employment

i Dismissal

As a general rule, employers must exercise their right to terminate an employee's employment in good faith, for valid reasons, and in compliance with applicable laws, any written employment contracts, workplace customs, and collective bargaining agreements or extension orders, if applicable.

In addition, according to court decisions, all employers are required to hold a hearing prior to making a decision regarding the termination of employment. The purpose of the hearing is to inform the employee of the employer's reason and give him or her the opportunity to respond. A hearing is required in all circumstances, regardless of whether the dismissal is based on redundancy, poor performance or misconduct.

In certain circumstances, terminating employment may be prohibited or subject to obtaining ministerial approval. Israeli law prohibits the termination of certain groups of employees, such as pregnant employees; employees expecting to adopt, become foster parents or become parents with the assistance of surrogacy; employees undergoing fertility treatment; employees on maternity or paternity leave and for 60 days thereafter; employees on army reserve duty; and employees on sick leave.

In workplaces where collective relations exist, or a collective bargaining agreement or extension order applies, the process of termination, which is often included therein, usually involves the participation of employee representatives.

In general, employees are not entitled to a social plan or rehire rights by law.

According to some court decisions, in certain circumstances, prior to making a decision regarding termination of employment, employers are required to consider whether they can offer the employee an alternative position within the workplace.

Under Prior Notice Before Termination Law 5761-2001 employers must provide the employee with prior written notice when ending the employment relationship. An employer may choose to pay the employee in lieu of notice. Payment in lieu is equal to the salary the employee would have received, had the employee continued to work throughout the notice period.

Under the Severance Pay Law 5723-1963, an employee who is dismissed after completing at least one year's service is entitled to statutory severance pay. This is calculated based on the employee's monthly base salary multiplied by the number of years of service.

In general, employees can compromise contractual payments or benefits only if these entitlements are over and above statutory entitlements.

Furthermore, it is common for employers to request employees to sign a letter of receipt of their final payments and a release of claims against the employer. According to case law, a release does not constitute a formal bar to future claims by employees. However, it may be enforced if certain conditions are met, such as:

  1. the employee was aware of the rights that he or she waived;
  2. the employee was presented with a clear and comprehensible account of the sums he or she received before signing the release;
  3. the release is clear and unambiguous; and
  4. the employee signed the release of his or her own free will and not owing to coercion by the employer.
ii Redundancies

As a general rule, Israeli case law requires an employer to inform and consult with employees with respect to redundancies. However, the law does not specify the form, timetable or content of these obligations. If a collective bargaining agreement, or any other binding legal document, applies to the affected employees, it may set out specific procedures for redundancies, including the bodies the employer must consult.

In the absence of specific provisions, there is a general duty to carry out consultation in good faith before any final decisions are made. In general, the employees should be provided with relevant information regarding the anticipated dismissals, such as general information regarding the financial situation of the employer when the redundancies need to take place owing to lack of profit.

In practice, the obligation to inform and consult with employees is only practical where an employee representative body exists and can therefore be consulted.

The obligation to inform and consult with employees does not detract from the employer's general obligations with respect to the termination of employment, including holding personal hearings with each employee (see subsection i). Thus, employees whose contracts are terminated by reason of redundancy have the same personal rights as any other employee whose employment is terminated.