Updated: Apr 3, 2020
Rami Landa, Partner at Meitar
Lilach Shacham Kaneti, Partner at Meitar Hila Silverstein, Partner at Meitar
Hedvat Yanko Wollman, Partner at Meitar
In light of the economic situation caused by the spread of the coronavirus in Israel, many companies are being compelled to reduce their commercial activities and expenses, which is also reflected in layoffs. The article below is intended to provide you with an overview regarding the various options an employer in Israel has with respect to reduction in force and expenses, including with respect to unpaid leave, reduction in scope of position and salary and forced paid vacation and layoffs, as well as key points for implementation.
Unpaid leave is effected by way of agreement. Therefore, employees cannot be put on unpaid leave without their consent.
The employees should be asked to sign an appropriate unpaid leave agreement.
The unpaid leave agreement should regulate the continued possession of company equipment during the unpaid leave, as well as the issue of payment for use of a company car insofar as it is decided to allow the employees to use the car during the unpaid leave.
During the unpaid leave, the employment relations are suspended but not severed. Upon the start of the unpaid leave, the company is released at once of the employment costs of the relevant employees, but the duty of trust between the parties continues to exist (employees cannot work for a competing company).
It is advisable to recommend the employees to obtain pension advice so that their pension rights will not be harmed during the unpaid leave.
In light of the instructions of the National Insurance Institute, and for the employees to be eligible for unemployment benefits (insofar as they meet the qualification period), the length of the unpaid leave should be at least 30 days.
The level of unemployment benefits is derived from various factors including the age of the employee and the amount of his or her salary, subject to a ceiling of around NIS 10,500.
To the extent that the unpaid leave is shortened by mutual consent of the parties and becomes shorter than 30 days, the employee will not be entitled to unemployment benefits. It is possible to agree with the employee (preferably in advance) that in case the unpaid leave is shortened to less than 30 days, the days on which they did not work will be considered paid vacation days.
For "Protected Employees" (pregnant women; 60 days after return from maternity leave and women undergoing fertility treatments) – It is necessary to obtain the approval of the Commissioner for Women’s Labor, even if the relevant employees gave their consent. The unpaid leave agreement with the relevant employees should stipulate that the days until the commissioner’s approval is obtained shall be deducted from their vacation day quota.
If the employee refuses to agree to the unpaid leave, the employer has good grounds for dismissal, subject to a hearing (the need to cut costs, redundancy etc.). In this regard as well, it is required to make pertinent decisions and to attribute the necessary weight to special circumstances such as age or disability.
Reduction in scope of position and / or salary
Reduction in scope of position and / or salary constitutes a worsening in employment conditions. Therefore, no reduction in scope of position or salary should be effected without consent.
Employees should be asked to sign a letter of consent as to the change in their employment conditions, as stated.
Protected employees (pregnant women; 60 days after return from maternity leave and women undergoing fertility treatments) – It is necessary to obtain the approval of the Commissioner for Women’s Labor, even if the relevant employees gave their consent.
If the employee refuses to agree to the reduction in scope of position and / or salary, the employer has good grounds for dismissal, subject to a hearing (the need to cut costs, etc.) and making pertinent decisions and attributing the necessary weight to special circumstances such as age or disability.
Forced paid vacation
Employees may be forced to go on paid vacation, on account of their accumulated annual vacation quota.
Vacation of up to 7 calendar days can be imposed without any advance notice. Vacation of 7 calendar days or more requires 14 days’ advance notice.
If the employees will have a negative vacation balance as a result of the forced vacation, their prior approval must be obtained.
Termination of employment (dismissal)
Even during the pandemic, the termination process must be fully implemented, including a lawful hearing in accordance with all the rules (sufficient notice, possibility to receive legal advice, detailed notice for the hearing, etc.).
The current situation does not exempt employers from the duty to conduct a hearing.
The hearing can be held in writing or through conference call and there is no obligation to conduct a face-to-face meeting.
It is not possible to hold a “collective hearing”, even if all of the Company’s business activities are shut down.
The economic situation, which is a result of the pandemic, constitutes good reason for dismissal.
Except as otherwise provided in the employment agreement, the notice period may be converted into immediate termination of the employment relations and payment in lieu of notice period. This way of acting saves the company the need to make social contributions and continued accumulation of seniority-related rights (vacation days etc.).
Termination of protected employees (pregnant women; 60 days after return from maternity leave; reserve duty and one month thereafter) requires obtaining approval. It is not possible to receive approval for termination of employees during maternity leave.
In any termination process, the employer should make pertinent decisions and attribute the necessary weight to special circumstances such as age or disability.
The above guidelines are general and summarized.
In any case you wish to reduce the company's commercial activities and expenses, including reduction in force and expenses, unpaid leave, reduction in scope of position and salary and forced paid vacation and layoffs, we will be happy to provide you with individual legal advice before taking any of the above actions.