Employer Fined Nearly $250,000 for Pension Contribution Errors

A former employee who worked for a chemical services company for only two months in 2016 will receive 889,301 shekels (approximately $245,000) after the company failed to transfer his pension contributions. The money was deducted from his payslips for May and June 2016 but was never sent to his Menora Mivtachim pension fund. Four years later, this lapse in contributions led to the employee being denied disability benefits.

The regional labor court in Beersheba ruled that there was a "direct causal link" between the company's actions and the employee's loss of insurance coverage. The court found the company responsible for the damages, noting that it was aware of the employee's active pension fund and had deducted his share from his salary. The company had also committed in the contract to insure him from his first month of employment.

The employee's disability insurance required a continuous contribution history to avoid a 60-month waiting period for pre-existing conditions. When his employment ended, the continuity was broken. His joint condition worsened in October 2020, and Menora Mivtachim denied his claim because the five-year waiting period for pre-existing conditions had not yet passed since his contributions resumed with a new employer.

The employer had argued that the employee delayed pension arrangements, provided incomplete information, requested to cancel insurance in August 2016, and left before completing three months of work. They also claimed he provided a false health declaration upon hiring. While the court acknowledged the false health declaration and criticized the employee's conduct, it did not absolve the company of its obligation to transfer the funds.

The court awarded the employee the calculated amount based on the company's actuary's assessment, payable in a single lump sum. The claim for emotional distress was rejected, and legal costs were not awarded to the employee, partly due to the health declaration issue. The ruling highlights the legal requirement for employers to make pension contributions and the potential severe consequences for employees when these are mishandled.