On May 21, 2020, the Tel Aviv Regional Labor Court issued a ruling in the case of Bank Leumi v. the National Insurance Institute of Israel (51177-06-18). The case dealt with a claim of Bank Leumi (the "Bank") to revoke fines imposed by the National Insurance Institute of Israel (the "NII") with respect to additional insurance payments paid by the Bank following an assessment agreement between the Bank and the Israeli Tax Authority (the "ITA"). 

The Court accepted the claim of the Bank and ordered that the fines be revoked. The Court held that penalty for delayed payment cannot be imposed before the NII informs the employer of its liability to pay the additional insurance payments. In the case at hand, the Bank paid the additional insurance payments immediately after receiving the NII's demand to make those payments. Therefore, the payment cannot be considered late.

The Court also ruled that the NII must exercise its power to impose fines in a reasonable and proportionate manner, and that fines should not be imposed where the employer acted in good faith, as the Bank did. The Bank duly reported the national insurance payments. Only in retrospect, the Bank knew of the additional insurance liability. The Court ruled that the dispute regarding the liability to pay additional insurance payments was a genuine and legitimate dispute, which concerns legal issues that are in the "grey area" (such as national insurance payments on team-building activities, refreshments for employees, etc.). The ITA entered into numerous assessment agreements with the Bank regarding these issues, and did not impose penalties. The NII determined the additional insurance liability based on the assessment agreement with the ITA. The Bank paid the additional national insurance payments immediately. Accordingly, the Court ruled that no fines should have been imposed by the NII, and the Court revoked the fines.

The Bank was represented by Adv. Ofer Granot and Adv. Sophie Matatyaho (HFN Tax Department).