Adv. Moshe Kahn

In order to compel employers to fulfill the provisions of existing labor laws in Israel, the Law for Increased Enforcement of Labor Laws, 5772-2011 (hereinafter: “the Law”) came into effect on June 19, 2012, to enhance the enforcement of labor laws.

The Law authorizes inspectors appointed by the Israeli Ministry of Industry, Trade, and Labor, to impose high monetary sanctions on employers due to violation of provisions of most of the labor laws. 

According to the Law, the amount of the monetary sanction depends on the severity of the violation and ranges between NIS 5,000 and NIS 35,000 for a single, one-time offense. Thus, for example, an employer who employs 20 employees who have for one month failed to provide his employees with the payslips on the date prescribed by law, may be exposed to a monetary sanction in the sum of NIS 20,000 – NIS 400,000 per slip.

In addition, the Law prescribes that the details of employers on whom monetary sanctions have been imposed shall be published on the website of the Ministry of Industry, Trade, and Labor.

The Law also imposes personal liability on the general manager of a corporation that employs employees and obliges him to take all measures required in order to prevent the violation of the labor laws by the company managed by him. The Law enables inspectors of the Ministry of Industry, Trade, and Labor to impose monetary sanctions directly on the general manager and prohibits the company from indemnifying or insuring the general manager and from paying such monetary sanctions for him. 

In addition, the Law imposes liability upon the entity ordering services from a contractor and a comprehensive duty to inspect the fulfillment of the provisions of the labor laws with respect to the contractor employees. In certain cases, the Law also imposes on the entity ordering services, the civil, criminal, and administrative duties of the contractor towards his employees. Furthermore, the Law prescribes several provisions which must be included and several provisions which may not be included, in the agreement between the contractor and the entity ordering the services. At this stage, these provisions of the Law apply only to contractors engaged in guarding and security, cleaning, and catering.

The process of imposing monetary sanctions is quick and simple and takes place entirely at the Ministry of Industry, Trade, and Labor and not before any judicial instance. The ease of managing the new process and imposing monetary sanctions, together with the decision of the Ministry of Industry, Trade, and Labor to significantly increase the number of inspectors on its behalf, are expected to lead to a dramatic increase in the volume of enforcement activity performed by the Ministry of Industry, Trade, and Labor.

In light of the above, employers are advised to prepare for the expected increase in the enforcement activity of the Ministry of Industry, Trade, and Labor, where the Ministry’s inspectors shall continue to hold inspections at various companies.

In preparing for the above, we recommend performing due diligence with respect to the company’s compliance with labor laws. A broad range of issues shall be inspected within this framework.

For example:

Does the company comply with the requirements of Israeli law, the relevant collective agreements, and the extension orders applicable to its employees?

• Do the company’s agreements with the employees comply with the requirements of the law?
• Do the company’s agreements with the service contractors comply with the requirements of the law?
• Are independent contractors/freelancers employed by the company? What is their legal status and what is the company’s exposure to them?
• Are the employees that are legally working overtime, receiving overtime pay in accordance with the law?

• Do all the deductions made from the employees’ wages comply with the requirements of the law?
• Attitude to special employees, such as hourly employees, women, and youth.
• Does the company have written formalities (for example procedures for logging on to computers and email accounts of employees, hearing and dismissal procedure)? Are the formalities updated? Are the formalities implemented?

    And many more issues…

As mentioned, there are many issues to check and only comprehensive due diligence will enable the company’s management to determine whether there are shortcomings that need to be corrected and the appropriate manner to correct them, in order to comply with the requirements of Israeli law.

In addition, the possibility of implementing an internal enforcement plan should be considered in order to reduce the company’s future exposure to labor law violations.

June 2012

* Adv. Moshe Kahn specializes in Business Law. He is licensed to practice law both in Israel and in the U.S. and is the founder of the Moshe Kahn Advocates  law firm in Tel Aviv  

www.kahn.co.il