Employer Must Pay NIS 193,000 to Employee Whose Salary Was Diverted to Ex-Husband

An Israeli labor court has ruled that a restaurant company must pay approximately NIS 193,000 (about $52,000) in damages and NIS 40,000 in expenses to a former employee. The employee, Elinor Chugi Dadon, had initiated divorce proceedings when her employer, A.R.H. Despite the employee's written requests on three separate occasions for her salary to be paid directly to her, the company instead sent it to an account designated by her husband. The court determined that this action, along with the company's subsequent handling of her departure, constituted grounds for her resignation to be recognized as a dismissal, entitling her to full severance pay.

The court also recognized her seniority across three related companies dating back to 2005. The company, a family business whose shares are held in trust by Reuven Chugi's daughter, Nicole Noia Chugi, with Reuven Chugi and his cousin Haim Chugi as beneficiaries, argued that the employee had resigned voluntarily due to personal reasons related to her divorce. They cited an email from her lawyer stating she wished to end her employment due to personal circumstances. The company even offered her reinstatement, which she refused, citing the ongoing issues with her salary.

However, the court found the company's actions to be a "one-sided, vengeful, and improper step." It stated the employer should have remained neutral and professional, rather than acting as an "executive arm" of the husband in the personal divorce dispute. The court emphasized that according to the Law for the Protection of Wages, salaries must be paid directly to the employee unless a written authorization is provided. No such authorization existed, and the employee had explicitly requested direct payment. The court also addressed other claims, including unpaid vacation days and severance pay calculations, ultimately awarding the employee significantly more than the company's initial settlement offer of NIS 34,977, which was conditional on her waiving all claims.

The ruling acknowledged the employee's work history, including a 17-month unpaid leave during the COVID-19 pandemic, and her prior roles at other airport-based eateries operated by related entities. The court calculated her seniority across these roles, applying precedents that consider related companies as a single workplace. The company's defense, including a request for employee phone tracking, was largely dismissed by the court. Both parties have 30 days to appeal the decision to the National Labor Court.