Workers to Receive Severance Pay After Court Rules Funds Reclassified as Pension

Two employees who worked for the same employer for decades, one as a bookbinder since 1988 and the other as a printer since 1983, were left jobless and without severance pay in 2020. Six years after resigning, a regional labor court in Jerusalem has ruled they are entitled to approximately 400,000 shekels (about $107,000) in total, though not in the manner they initially expected.

The dispute began in March 2020 when their employer, Tzion Printing, placed them on unpaid leave due to the COVID-19 pandemic. Upon their requested return, the employees demanded an immediate raise of 2,000 shekels net per month. The employer refused, offering a different compromise which the employees also rejected, leading to their resignations effective June 30, 2020.

Initially, a labor court ruled the employees were not entitled to severance pay as they had resigned voluntarily. An appeal was withdrawn by agreement, and while some funds accrued from 2008 onwards were released, older funds held in a central severance pay fund remained pending. The employer had committed to filing a separate claim to recover these older funds, a commitment that was not fulfilled and led to the current legal proceedings.

The employees argued the employer failed to file the promised claim, leaving their funds, estimated at 200,000 shekels each, in limbo. The company cited operational difficulties, including the manager's health issues and the kidnapping of his nephew by Hamas, as reasons for the delay. They also contended that a previous ruling already established the employees' ineligibility for severance pay.

The court's decision hinged on a bureaucratic change: in January 2019, a central severance fund managed by the company was dissolved by order of the Capital Markets Authority, and the funds were transferred to individual pension accounts. This reclassification changed the funds' status from capital to pension. The court determined this change was not merely technical. Once classified as pension funds, Section 26 of the Severance Pay Law prohibits their return to the employer unless the employee's termination was due to misconduct, which the company failed to prove. The court noted that the previous ruling also found no evidence of direct income loss or reputational damage to the company.

Consequently, the court ruled that the funds, now held in pension accounts with the 'All' company, belong to the employees. They are entitled to withdraw these funds, estimated at 200,000 shekels each, subject to legal regulations. The company was also ordered to pay 20,000 shekels in legal costs.