Hi-Tech and recent trends in labor law egistlation

Amitai Naveh, Adv

Start-ups and hi-tech Companies employ professional personnel on an outsourcing basis for many reasons such as ease of recruitment and staffing, access to highly trained personnel and lack of employer-employee relationship. However, recent trends in labor law legislation aim to increase the responsibility of the contracting party (a party that contracts a contractor for the provision of services) for the welfare of the contractor's personnel providing the services to the contracting party.  

On December 19, 2011 the Knesset (the Israeli legislator) enacted the Law for Enhanced Enforcement of Labor Law Legislation, 2011 (the "Law") that entered into effect on June 19, 2012.

The main objectives of the Law were to enhance and improve the enforcement of labor law legislation. The explanations by the legislator to the bill (proposed law) specified the means for achieving said objectives - by way of enacting procedures for monetary sanctions on employers and contracting parties and by means of imposing civil and/or criminal liability on contracting parties.

The Law establishes and further increases the liability of a contracting party towards contractor's employees for actions or omission to act by contractor and deemed violations of labor law legislation vis-à-vis contractor's employees. The Law applies only to limited a scope of services: (a) guarding and security; (b) sanitation; and (c) catering; however such liability may diffuse to additional scope of services.

The Law establishes four means intended to enhance the enforcement of labor laws: (a) monetary sanctions; (b) administrative notice; (c) civil liability; and (d) criminal liability. The Law grants to an authorized Labor Law Supervisor ("Supervisor") the authority to impose monetary sanctions of NIS 5,000 to NIS 35,000 on employers who violate Labor Law legislation. According to the Law the Supervisor is authorized to issue an administrative warning notice in circumstance that he/she reasonably believes that labor law legislation is violated by an employer. In the event that, notwithstanding such notice, the employer does not remedy the breach, said employer is exposed to increased monetary sanctions. In certain given circumstances, the Law establishes that contractor's duties to contractor's employees shall also apply on the contracting party that retains the contractor's services. In addition, the Law imposes criminal liability on contracting party that entered into an agreement with a contractor that does not contain certain provisions regarding the protection of contractor's employees; the Law also imposes criminal liability on the chief executive officer of such contracting party who did not pursue to terminate the agreement with a violating contractor.

In light of the above employers are urged to make certain arrangements and to adopt new procedures with respect to their employees and with respect to their contractors. Each employer has to initiate an internal review of its compliance with labor law legislation in order to avoid monetary sanctions and criminal liability. In addition, each employer has to review its contractual arrangements with its contractors to ensure compliance with the requirements of the Law.

This article summarizes, in a nutshell, the new measurements enacted to enhance the enforcement of Labor Law legislation. It is apparent that the Israeli legislator emphasizes the importance of Labor Law legislation's enforcement. Moreover, the legislator established a direct relationship between a contracting party and contractor's employees by compelling the contracting party to ensure that Contractor's employee's rights are maintained otherwise any violation by contractor may become contracting party's problem.


Written by Amitai Naveh, Adv *

* the author is a partner in the hi-tech department of Gideon Fisher, Law offices and Notary. The hi-tech department specializes in commercial and corporate law, representing entrepreneurs, joint ventures, hi-tech companies and start-ups, and private and institutional investors.

This article does not constitute and will not constitute a legal advice, but only an overall summary of the subject.

2013©  All rights reserved to the author.