An extract from The Employment Law Review, 13th edition

Discontinuing employment

i Dismissal

As a general rule, employers must exercise their right to terminate an employee's employment in good faith, for valid reasons14 and in compliance with applicable laws, any written employment contracts, workplace customs and CBAs 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 a 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.15 Israeli law prohibits the termination of employment for certain groups of employees, such as pregnant women, employees expecting to adopt children, 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,16 employees on army reserve duty17 and employees on sick leave.18

In workplaces where a collective relationship exists, or a CBA 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 by law to a social plan or the right to be rehired.

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 undertaking.

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 negotiate contractual payments or benefits, or reach a compromise, only if these entitlements are over and above statutory entitlements.

Furthermore, it is common for employers to ask 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. employees being aware of the rights that he or she waived;
  2. employees being presented with a clear and comprehensible account of the sums they received before signing the release;
  3. the release being clear and unambiguous; and
  4. employees signing the release of their own free will and not as a result of coercion by the employer.
ii Redundancies

As a general rule, Israeli case law requires an employer to inform and consult employees with respect to redundancies. However, the law does not specify the form, timing or content of these obligations. If a CBA, 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, 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 employees is only practical when an employee representative body exists and can therefore be consulted.

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