Israeli Workers Risk Losing Thousands Over Dismissal vs. Resignation Rules

Israeli law distinguishes between resignation and dismissal, a distinction that can cost workers tens of thousands of shekels in severance pay and unemployment benefits. While both the National Insurance Institute and labor courts recognize "constructive dismissal", situations where an employee resigns for legally justifiable reasons, their criteria differ, potentially leaving employees unaware of their full entitlements.

For severance pay, "constructive dismissal" includes over a dozen reasons, such as significant worsening of working conditions (like a pay cut or demotion), health issues of the employee or a family member, resigning to care for a child within nine months of birth or adoption, relocation under specific circumstances, or reaching retirement age. The courts have also recognized sexual harassment and delayed salary payments as grounds for full severance. Employees generally need at least one year of service with the same employer to qualify.

However, the National Insurance Institute has a narrower list for immediate unemployment benefits, excluding the 90-day waiting period. This list includes significant worsening of conditions, health problems, sexual harassment, and relocation causing a commute over 60 km (or 40 km for a mother with a child under 7). Specific conditions apply for post-birth resignations, requiring employers to reinstate the employee in their previous role or avoid demanding long hours.

A 34-year-old worker earning 12,000 shekels gross with four years of service, who resigned due to his partner's illness, would be entitled to full severance of 48,000 shekels. His pension fund held about 34,600 shekels, requiring the employer to pay the remaining 13,426 shekels. If his resignation were recognized for immediate unemployment benefits, he would also receive approximately 21,300 shekels upfront, totaling nearly 34,700 shekels in immediate benefits. Resigning to care for a newborn would secure the severance top-up but delay unemployment benefits.

Workers who believe they have been constructively dismissed but not paid their full entitlements can file complaints with the Ministry of Labor or sue in regional labor courts. Employers are obligated to pay severance on the last day of employment or within 15 days, with penalties for late payment.