Israel Plans to Exempt Over 93% of Small Businesses from Class Action Lawsuits
The Israeli Ministry of Justice is advancing a legislative amendment that would exempt nearly all small businesses with an annual turnover of up to 9 million shekels from facing class action lawsuits. This change would affect approximately 660,000 businesses, representing at least 93% of all businesses in Israel, including licensed sole proprietors. Currently, about 700,000 businesses operate in Israel, with 85% classified as micro-businesses earning up to 2 million shekels annually, and 93% earning up to 5 million shekels.
The Knesset's Constitution, Law and Justice Committee is set to discuss the amendment next week during the election recess, following approval by the opposition in the committee of arrangements. The original bill, passed in first reading in 2024, limited exemptions to businesses with turnovers up to 2 million shekels or fewer than five employees. However, recent negotiations led by the Ministry of Justice have proposed raising the exemption threshold to 9 million shekels. Some lawmakers, including committee chairman Simcha Rothman and former MK Avir Kara, have advocated for an even higher threshold of up to 20 million shekels, while the Federation of Israeli Chambers of Commerce has pushed for tens of millions of shekels.
The Ministry of Justice argues that the economic burden of class actions on small businesses outweighs the benefits, as these businesses often lack legal resources and typically do not commit violations in bad faith. However, critics warn that exempting too many businesses could undermine the law's intent. The amendment also introduces a mandatory pre-litigation notice period for businesses with turnovers up to 50 million shekels, requiring them to correct certain minor violations before a class action can proceed.
Reactions vary: Avir Kara praised the move as a broad consensus to protect productive businesses, while Shahar Turgeman, president of the Chambers of Commerce, called for a higher exemption threshold of up to 100 million shekels to shield vulnerable medium-sized businesses. Doron Raday, head of the Central District Class Actions Committee at the Israel Bar Association, recommended maintaining the original 2 million shekel threshold to avoid extending protections to larger businesses and suggested a clear verification mechanism for business size in court.
This legislative effort is part of a broader reform of the class action law led by the Ministry of Justice's Civil Department, aiming to balance consumer protection with the sustainability of small and medium enterprises in Israel.
