Collective Agreement

The Supreme Court sitting as High Court of Justice

 

HCJ 1893/11

HCJ 1965/11

HCJ 9325/12

HCJ 7644/13

 

 

 

Before The Honorable Justice H. Melcer, The Honorable Justice Z. Zylbertal, The Honorable Justice D. Barak-Erez

 

 

The Petitioner in HCJ 1893/11

Respondent 3 in HCJ 1965/11

Respondent 9 in HCJ 9325/12

and Respondent 5 in HCJ 7644/13:                The Israel Security Association

 

 

The Petitioner in HCJ 1965/11

and Respondent 3 in HCJ 1893/11:                Tevel Security, Cleaning and Services Ltd.

 

The Petitioner in HCJ 9325/12:                      Amishav Services Ltd.

 

The Petitioner in HCJ 7644/13:                      Yashiev German

 

v.

 

Respondent 1 in HCJ 1893/11

Respondent 2 in HCJ 1965/11

Respondent 1 in HCJ 9325/12

Respondent 3 in HCJ 7644/13:                       The National Labor Court

 

Respondent 2 in HCJ 1893/11

and Respondent 1 in HCJ 1965/11:                Yigal Viron

 

Respondent 4 in HCJ 1893/11

and HCJ 1965/11

Respondent 5 in HCJ 9325/12

and Respondent 2 in HCJ 7644/13:                The New Histadrut General Labor Organization

 

Respondent 5 in HCJ 1893/11 and

in HCJ 1965/11 and

Respondent 4 in HCJ 7644/13:                       Kav La’oved Association

 

Respondent 6 in HCJ 1965/11:                       Employees of Tevel Security, Cleaning and Services Ltd.

 

Respondent 3 in HCJ 9325/12:                       Sergei Zandel

 

Respondent 4 in HCJ 9325/12:                       Vlad Konstantinovsky

 

Respondent 6 in HCJ 9325/12:                       Sa’ar Securuty

 

Respondent 7 in HCJ 9325/12:                       Gashash Ltd.

 

Respondent 1 in HCJ 7644/13:                       H.A.S. Systems and Services Ltd.

 

 

Petitions for Order Nisi

 

 

Dates of hearings:        7 Tammuz 5772 (27 June 2012)

 2 Nisan 5774 (2 April 2014)

 6 Adar 5777 (25 February 2015)

 

For the Petitioner in HCJ 1893/11

Respondent 3 in HCJ 1965/11

Respondent 8 in HCJ 9325/12

and Respondent 5 in HCJ 7644/13:                Shoshana Gavish, Adv., Odeliah Danoch-Shalom, Adv.

 

For the Petitioner in HCJ 1965/11

and Respondent 3 in HCJ 1893/11:                Shlomo Bechor, Adv.

 

For the Petitioner in HCJ 9325/12:                 Oded Gil, Adv., Adi Menachem, Adv.

 

For the Petitioner in HCJ 7644/13:                 Gai Avni. Adv.

 

For Respondent 2 in HCJ 1893/11

Respondents 1,6 in HCJ 1965/11

Respondents 2-4 in HCJ 9325/12:                  Gal Gorodisky, Adv., Avi Mor Yosef, Adv., Igor Glidar, Adv., Ortal Dai, Adv., Naama Vanunu, Adv.

 

For Respondent 7 in HCJ 9325/12:                Dalit Kislev-Spektor, Adv., Sharona Margi, Adv.

 

For Respondent 5 in HCJ 1893/11

And HCJ 1965/11

Respondent 4 in HCJ 7644/13 and

Respondent 7 in HCJ 9325/12:                       Eran Golan, Adv., Hagar Sussman, Adv.

 

 

For Respondent 4 in HCJ 1893/11,

1695/11 and Respondent 2 in

HCJ 9325/12:                                                  Boaz Ben Tzur, Adv., Elad Peled, Adv., Oren Shrem, Adv.

 

For Petitioner 6 in HCJ 9325/12:                    Ovadiah Cohen, Adv.

 

For Respondent 1 in HCJ 7644/13:                Saar Reshef, Adv., David Naftoliev, Adv.

 

For The Leumit Workers Organization:          Betty Metzer Levi, Adv., Ran Konfino, Adv., Maya Retig-Saba, Adv.

 

For the Attorney General

In HCJ 9325/12:                                             Michal Leiser, Adv.

 

 

 

Facts: The petitions concerned the interpretation of section 10 (3) of Schedule Two of the Class Actions Law, which restricts the possibility of instituting a class action in labor law in the case of a “suit by an worker who is subject to a collective agreement that regulates the terms of his employment, and the employer of that worker, or trade association of which it is a member, is a party to that collective agreement.” The petitions arose in light of decisions of the National Labor Court rendered in a number of cases litigated before it. The issue was whether this exception applied to every case in which a worker is subject to a collective agreement to which the employer, or the trade association, is a party, or whether it could be understood as not applying to such situations if neither collective nor legal action had been initiated to redress the breach of workers’ rights addressed by the class action.

 

Held: The High Court of Justice (per Justice D. Barak-Erez, Justices H. Melcer and Z. Zylbertal concurring) denied the petitions, holding that the National Labor Court had struck a proper balance among the relevant considerations in LabA 629/07 in re Viron, in LabA 132/10 in re Buskilla, and in LabA 53348-01-12 in re Yashiev. However, the Court decided to clarify the applicability of the exception under section 10 (3) of Schedule Two in regard to enforcement agreements, inter alia, in light of certain differences in their treatment in Buskilla and Yashiev.

 

Based upon the objectives of the specific law and considerations peculiar to the Israeli labor market, the Court held that the law does not categorically prevent every request to certify a class action by workers in a workplace subject to a collective agreement. In cases in which the collective agreement does not comprise a mechanism for the monitoring or enforcement of workers’ rights, and where the labor union is non-functional, i.e., is not an organization that takes practical steps for the enforcement of workers’ rights, then section 10 (3) will not bar a request to certify a class action. This conclusion approves the basic approach adopted in the Viron case, which has since served as the basis for the Labor Court’s decisions in other cases. In such cases, the Labor Court’s discretion does not extend to the question whether the exception under section 10 (3) is met, but only to the existence of the other conditions established under section 8 of the Class Actions Law for the purpose of certifying such a suit.

 

In light of the above, the Court held that when a request for the certification of a class action suit is submitted, the questions that the Labor Court will have to address will be whether the labor union is acting to advance the workers’ rights, and whether that action provides an effective means for the enforcement of the claimed rights. Such action need not be optimal, but it must be actual and not a mere “show”.

 

The Court then addressed, in greater detail, the cases in which the activity of a labor union would be deemed to constitute actual involvement in labor relations. Among other things, it was held that the Labor Court should consider the general circumstances of the case, inter alia, the defining characteristics of the relevant field; the existence or absence of systematic breaches of rights; the type of rights infringed; the conduct of the labor union (both in regard to the infringed rights and in general); the availability of the labor union for addressing individual complaints of workers; the general functioning of the labor union in protecting workers’ rights; the labor union’s ability to bring about the actual enforcement of workers’ rights, such that they receive what the employers owe them; as well as the labor union’s ability to redress past infringements of rights, and not act merely prospectively.

 

In a unionized workplace, a worker seeking to initiate a class action must show that he first sought the assistance of the labor union before seeking certification of the suit. In the opinion of Justice Barak-Erez, such a request for assistance must be for the enforcement of the personal rights of the worker. It must be a focused request for the enforcement of concrete rights, as opposed to some general request. Serving formal notice upon the labor union or informing it of the intent to initiate of a class action is not a precondition for filing a class action. The appropriate response time of the labor union can be considered by the labor court in accordance with the specific circumstances of each case.

 

 

Judgment

Justice D. Barak-Erez

1.         The Class Actions Law, 5766-2006 (hereinafter: the Class Actions Law or the Law) restricts the possibility of initiating a class action in the case of  a “suit by a worker who is subject to a collective agreement that regulates the terms of his employment, and the employer of that employee, or a trade association of which it is a member, is a party to that collective agreement” (as set out in section 10 (3) of Schedule Two of the Law, hereinafter: sec. 10 (3) or sec. 10 (3) of Schedule Two). The proper construction of this exception to the application of the Law is before this Court. More specifically, the question before us is whether this exception applies in every instance in which a worker is subject to a collective agreement to which the employer or the trade association is a party, or whether it should be understood such that it would not apply to such situations when neither collective nor legal action have been initiated for the enforcement of the violated rights addressed by the suit.

The Legal Question

2.         Section 3 of the Class Action Law defines the cases in which a class action may be filed, and restricts the right to initiate such a suit to “a suit as set forth in Schedule Two or in regard to a matter in which explicit statutory provisions establish the right to initiate a class action” (sec. 3 (A) of the Law). Reading Schedule Two of the Law reveals that it recognizes many cases in which a class action can be initiated for the infringement of workers’ rights. Section 8 of Schedule Two states that a class action can be initiated on a cause of discrimination under the Equality of Opportunities in Labor Law, 5748-1988, and upon a cause arising from the Male and Female Workers (Equal Pay) Law, 5756-1996. Section 10 (1) of Schedule Two establishes a wide range of additional causes of action rooted in labor law that may give rise to a class action.

3.         These broad provisions were restricted by sec. 10 (3) of Schedule Two, as follows:

                        “In this section –

‘Suit’—with the exception of a suit by a worker who is subject to a collective agreement that regulates the terms of his employment, and the employer of that worker, or a trade association of which it is a member, is a party to that collective agreement;

‘Collective Agreement – a collective agreement under the Collective Agreements Law, 5717-1957, or a written collective arrangement[1]”

 

            That is to say:  an employee cannot initiate a class action if he is subject to a collective agreement that regulates the terms of his employment, and to which his employer or its trade association is party. The question that arises in the petitions before the Court concerns the construction of this condition. In other words, the question arising in the appeal before us addresses the ambit of the restriction set forth in sec. 10 (3) of Schedule Two in a situation subject to a collective agreement.

 

Summary of the factual basis and the prior legal proceedings

 

4.         Despite the provisions of sec. 10 (3) of Schedule Two, requests to certify class actions have been submitted in the past even in regard to workplaces subject to collective agreements. The petitions before the Court revolve around several proceedings in which such class actions were initiated. In principle, the National Labor Court adopted the position that sec. 10 (3) of Schedule Two does not constitute an impregnable barrier to class actions, even in regard to workplaces subject to a collective agreement, but added the clarification that in such cases, it is necessary to examine whether or not the representative labor union was derelict in regard to the employees’ rights, and only is such circumstances could a class action be certified. The proceedings before the Court concern three petitions addressing decisions by the National Labor Court in regard to requests to certify class actions related to the rights of workers in the security field. As will be more fully explained below, the petitions before the Court represent three “generations” in the case law of the National Labor Court in the matter of class actions in labor law, in general, and specifically in regard to the infringement of workers’ rights in the security industry. These “generations” represent the periods in which the requests for certification of the class actions were submitted in reference to developments in regard to the activities of labor unions in relation to the protection of workers’ rights in the security industry. The “first generation” represents the period in which the class actions were filed the labor unions took action to enforce the rights of workers employed as security guards. The “second generation” represents the period in which labor unions began to act to enforce the workers’ rights.  That activity was expressed in the signing of a general collective agreement intended to enforce the rights of workers in the security industry by virtue of labor law, extension orders,[2] and various collective agreements (hereinafter: the General Enforcement Agreement). The General Enforcement Agreement applied to all of the employers who were members of the trade association in the security industry, and every employer who would join the association after the signing of the agreement, in regard to the workers of such firms working as guards or in security positions. In the “second generation”, the requests to certify class actions were submitted prior to the General Enforcement Agreement, but the decisions were handed down after it had entered into force. The “third generation” represents the period in which the requests were submitted after the General Enforcement Agreement had entered into force, but questions still remained as to its contribution to the enforcement of workers’ rights in practice.

 

5.         The collective agreements in the security field – As noted, the three proceedings before this Court concern the rights of workers employed in the security-guard industry. There is a trade association in this field – The Israel Security Association (hereinafter: the Trade Association). On July 12, 1972, the Trade Association signed a collective agreement with the Histadrut General Labor Organization (hereinafter: the General Collective Agreement of 1972 and the Histadrut, respectively). The General Collective Agreement of 1972 was extended to all workers in the security field on December 25, 1973 (hereinafter: the 1973 Extension Order). On November 2, 2008, a new collective agreement was signed in the security industry (hereinafter: the General Collective Agreement of 2008). That agreement applied to all employers who were members in the Trade Association, and to all workers employed as guards or in security. The provisions of that agreement were extended by an extension order on June 21, 2009 such that they applied to all employers in the guarding and security industry in Israel, as well as to their workers employed in guarding and security positions (hereinafter: the 2009 Extension Order). The result is that all workers in the security and guarding industry enjoy rights that are anchored in the said extension orders of 1973 and 2009 respectively. Nevertheless – and it would seem that this point is no longer contested – the workers in this industry did not always enjoy all of the rights to which they were entitled, and yet no collective enforcement actions were undertaken to defend them. It was against this background that requests to certify class actions were submitted in regard to those breaches, even in regard to workplaces that were subject to the General Collective Agreement by virtue of the employer’s membership in the Trade Association.

 

6.         The “first generation” of decisions of the National Labor Court – The possibility of certifying class actions of workers within the ambit of sec. 10 (3) of Schedule Two was first recognized in LabA 629/07 Viron v. Tevel Security, Cleaning and Services Ltd. (March 1, 2011) (hereinafter: the Viron case), after previous requests to certify class actions of workers were denied for various reasons (see: LabA 339/07 Oren v. Bank Hapoalim Ltd.) (January 18, 2009), regarding which the petition to the High Court of Justice was denied in limine in HCJ 9720/10 Oren v. National Labor Court (January 25, 2011); LabA 58039-11-11 Turgeman v. Shahak Security, Guarding and Office Services Ltd. (December 31, 2012), regarding which the petition to the High Court of Justice was denied in limine in HCJ 62/13 Turgeman v. National Labor Court (January 28, 2013)). The Viron case concerned a request (submitted in 2006) to certify a class action for the failure to make pension-fund contributions for workers in accordance with the provident fund and severance provisions of the 1973 Extension Order. The respondent in that case, Tevel Security, Cleaning and Services Ltd. (hereinafter: Tevel) argued that it was a member of the Trade Association, and that the workers were therefore covered by the General Collective Agreement of 1972 and the class action could not, therefore, be certified. The National Labor Court held that the class action met the various criteria of the Law, and that sec. 10 (3) of Schedule Two should be construed in a manner that does not preclude its submission. The reasoning grounding the decision (per Judge V. Viret-Livneh, Judge A. Rabinovich and Public Representative I. Segev concurring) was that the Labor Court is granted discretion to certify a class action even in regard to the infringement of rights in a unionized workplace, in view of the overall circumstances of the case and the purpose of the Class Action Law, for example, when the labor union does not act for the full enforcement of the workers’ rights. It was further held that the matter was one in which justification for certifying the class action could be found in the powerlessness of workers in the security-guarding industry and the ongoing infringement of their rights, such that their rights had effectively received no protection. In addition, the court found that Tevel had joined the Trade Association only after the suit had been filed, and inasmuch as its membership could not have retroactive effect, the restriction under sec. 10 (3) of Schedule Two was not applicable to the suit in any case. As opposed to that, President S. Adler dissented from the majority’s understanding of sec. 10 (3), arguing that the rule should bar class actions in unionized workplaces in all but exceptional, extreme and distinguished cases in which the labor union is a “puppet” or is not an authentic union or is entirely inactive. Nevertheless, President Adler concurred with the result under the circumstances of the case, inasmuch as Tevel was not a member of the Trade Association at the relevant time, but only joined after the submission of the request to certify the class action. Public Representative S. Habshush concurred in the opinion of President Adler.

 

7.         Petitions challenging the decision in the Viron case were submitted to this Court in 2011 by the Trade Association (HCJ 1893/11) and by the employer, Tevel, itself (HCJ 1965/11). The respondents in those proceedings were the plaintiff in the class action, the Histadrut and the Kav La’oved Association (hereinafter: Kav La’oved) which had presented itself in the proceedings before the National Labor Court (in addition to the National Labor Court itself, which is, by nature of the proceedings, a formal respondent in all of the petitions before us). The Attorney General, who was asked to submit his position in regard to the petitions, stated that he saw no reason to intervene in the decision of the National Labor Court, inasmuch as everything stated in regard to sec. 10 (3) of Schedule Two was obiter dicta in light of the finding that Tevel was not a member of the Trade Association at the time relevant to the suit. To complete the picture, it should be noted that in the course of the years following certification of the class action, the parties to the class action conducted negotiations towards a settlement, and the proceedings were therefore held in abeyance and left undecided. On January 5, 2015, the Tel Aviv District Labor Court ratified the settlement agreement between Viron, the plaintiff in the class action, and his employer, Tevel (LabC (T.A.) 6476/06 Deputy President S. Tenenbaum and Public Representatives M. Cohen and A. Kirshner). However, an appeal was entered against that decision, along with a request for a stay, by the Kav La’oved Association, which was of the opinion that the settlement did not adequately serve the interests of the workers due to the mechanism established for serving notices to the members of the group. The National Labor Court issued the requested stay on March 12, 2015 (LabA 14653-02-15, Judge A. Itach). The appeal was heard on June 22, 2015, and it remains in abeyance.

 

8.         Enforcement agreements made after the “first generation” of decisions – The certification of the class action in the Viron case, and the submission of additional requests for certification of class actions that followed, served as a catalyst for the signing of additional collective agreements that were defined from the outset as intended to advance the enforcement of workers’ rights in the security industry.

 

9.         In 2011, the Trade Association and the Histadrut signed the General Enforcement Agreement. As noted, the Agreement applies to every employer that was a member of the Trade Association at the time, or that became a member thereafter, as well as to every worker employed by a member in that association in the fields of guarding or security. According to that agreement, every employer that is a member of the Trade Association is required to submit an annual statement, certified by an accountant, to that association and to the Histadrut, in regard to the fulfillment of its obligations and payments required under labor law, extension orders and collective agreements. Additionally, the General Enforcement Agreement required the establishment of an enforcement committee composed of a representative of the Trade Association, a representative of the Histadrut, and an external accountant. Under the General Enforcement Agreement, the enforcement committee is required to perform annual sample audits of the members of the Trade Association in regard to the fulfillment of their obligations and payments as detailed above, including in regard to periods in the past. The General Enforcement Agreement further requires that the employers fully rectify any flaws that may be discovered, and the Histadrut is authorized to expand the audit of an employer and order him to redress flaws even if they are from periods that have expired due to limitation of actions. In addition, a worker who wishes to complain in regard to a breach of his rights may present his complaint through the representative of The Israel Security Association to the conflict resolution mechanism established by the General Collective Agreement of 2008. Under sec. 33 of that agreement, a joint review board composed of a representative of the employer and a representative of the Histadrut will first convene to examine and mediate the dispute between the parties to the agreement. If the review board is unable to resolve the matter by mutual agreement, the matter will be transferred to a superior joint review board composed of two representatives, one form each side (the Histadrut and the Trade Association). Under subsection (a) of sec. 33, if the superior joint review board is unable to reach an agreed resolution, the dispute will be transferred to an arbitrator chosen by the joint review board. Under subsection (b) of sec. 33, disputes between an employee and his employer, can be taken directly to an arbitrator, by mutual agreement, as stated in subsection (a).

 

10.       In 2014, a special collective agreement (hereinafter: the Special Enforcement Agreement) was signed between Amishav Services Ltd., the Petitioner in HCJ 9325/12 (hereinafter: Amishav) and the Leumit Labor Federation (hereinafter: the Leumit Federation). The Leumit Federation has been operating as a labor union in Amishav since 2013, although its status as the representative organization[3] in the company has not yet been decided, as shall be explained below. Practically speaking, the Special Enforcement Agreement is similar to the General Enforcement signed with the Histadrut, except that it applies exclusively to Amishav and its employees. The agreement provides for the establishment of an enforcement committee composed of a company representative, a representative of the Leumit Federation, and a certified wage examiner under the Law for the Increased Enforcement of Labor Laws, 5772-2011. The Special Collective Agreement requires that, once every quarter, Amishav will provide sample pay slips of employees in its various projects as requested by the Leumit Federation, which will examine them and verify their accuracy, as may be required. It further provides for a quarterly sample audit of all the obligations and payments of Amishav to its employees, including for prior periods, and that the enforcement committee will have the authority to order the rectifying of flaws that may be discovered, as well to expand the scope of the audit as it may deem necessary.

 

11.       The “second generation of National Labor Court decisions – the next stage of decisions in this area – its “intermediate generation” – comprises the cases in which requests for certification of class actions were submitted prior to the signing of the General Enforcement Agreement, but for which the decisions were rendered after it was signed. In two instances, the National Labor Court held that the General Enforcement Agreement was not relevant to requests submitted before it was signed, inasmuch as it was a prospective agreement that was not intended to redress past violations of employees’ rights. In LabA 67/10 Yivtach Ltd. V. Havusha (March 14, 2012) (hereinafter: the Havusha case), the National Labor Court pointed out that, under the agreement, the obligation to present proof of payments applied to the employers only as of 2010, whereas the request to certify the class action was submitted in 2006. Moreover, the National Labor Court noted that the request concerned rights from 1999 forward, and thus from years that preceded the signing of the Enforcement Agreement. That was also the holding in LabA 132/10 Buskilla v. Sa’ar Security Ltd. (Sept. 3, 2012) (hereinafter: the Buskilla case), which addressed three requests to certify class actions that were joined, and that had been submitted in 2006 and 2007. In the Havusha case, the National Labor Court reiterated its view that in addressing the question of whether the restriction established under sec. 10 (3) of Schedule Two, the court must consider whether the purpose of that restriction was achieved, and that the proper construction in each case must consider the characteristics of the industry in which the workers were employed, and whether there was a widespread phenomenon of systematic breach of the rights of workers in that field. The court further held that that the question of whether the collective agreement actually regulated work conditions must be examined, that is, did the employer apply it in practice. The proceedings in the Havusha case are not yet over, and are currently adjourned due to a winding-up order issued against the employer in that case (see the decision of Nov. 26, 2012 in NIA 4524/06, Judge H. Yahalom). Similarly, in the Buskilla case, the court held that the restriction established by sec. 10 (3) is not comprehensive, but rather creates a defense for which the burden of proof falls upon the party claiming it. It was further held that the restriction does not apply where the employer raises the claim of the existence of a collective agreement only in the course of the proceedings, in order to “evade” the class action, or where the employer does not deny the existence of a collective agreement, but refused to apply it over a period of years. It should be noted that the proceedings in regard to the request were remanded to the District Labor Court in Haifa for consideration of the other conditions for the certification of a class action, and it was indeed certified by that court on Sept. 17, 2013 (Labor Dispute Case 924/07, Judge A. Kogen and Public Representatives H. Dror and Y. Ron). Accordingly, the case remains before the District Labor Court.

 

12.       A petition against the District Labor Court’s decision in the Buskilla case was submitted to this Court by Amishav, the employer of one of the class action plaintiffs in that matter (HCJ 9325/12). Two of the respondents in this proceeding are the other security companies that were sued, Sa’ar Security Ltd. and Gashash (Z.A.) Ltd. (hereinafter: Sa’ar Security and Gashash, respectively), along with the class action plaintiffs in that matter, as well as the Histadrut and the Trade Association. The Attorney General informed the Court that he, too, would appear in this proceeding, and the Leumit Federation that, as noted, operates as a labor union in Amishav since 2013, asked to join the proceeding in regard to the Special Enforcement Agreement that it signed with Amishav (after Buskilla’s request to certify the class action, and after the hearing in the National Labor Court). The Trade Association, the petitioner in HCJ 1893/11, also asked to join. The Trade Association was joined to the proceeding on March 21, 2013 (Justice A. Arbel), and submitted its arguments. It should be noted that on the dates relevant to the suit, the General Collective Agreement applied to Amishav as a member of the Trade Association (as did the General Enforcement Agreement, for the same reason). Those agreements also applied for the same reason to Sa’ar Security and Gashash, the two other employers sued in the Buskilla case, who did not petition against the Labor Court’s decision but support petitioner Amishav’s position. We will add at this juncture that we have decided to join Kav La’oved and the Leumit Federation to this proceeding due to their relevance to the subjects at hand and their contribution to the proceedings as a whole.

 

13.       The “third generation” of decisions in the National Labor Court – Following the signing of the General Enforcement Agreement in the security industry and its application in practice, the question arose whether the interpretive rationale that grounded the possibility of class actions for infringements of workers’ rights in the security industry was still applicable. This question was addressed by the National Labor Court in LabA 53348-01-12 Yashiev v. H.A.S. Systems and Services Ltd. (June 3, 2013) (hereinafter: the Yashiev case). The Yashiev case concerned an additional request to certify a class action in the security industry, submitted in 2011, about two months after the signing of the General Enforcement Agreement, and addressed the infringement of workers’ rights (failure to set aside pension payments in the amount of 6% of wages) over the preceding seven years. The National Labor Court held that in view of the entry into force of the General Enforcement Agreement, the request to certify the class action should be denied (President N. Arad, Deputy President Y. Plitman, and Public Representative A. Weitz). Citing LabA 12842-07-10 Eyal v. Hot Communications Systems Ltd. (June 9, 2011) (hereinafter: the Eyal case), the court further held in the Yashiev case that the class-action plaintiff should have applied to his employer and to the labor union before submitting the class action, and that the plaintiff could only submit a request for certification if they failed to act. Judge Rabinovich noted that he agreed, under the circumstances, that implementing the General Enforcement Agreement would be the more just and efficient means for resolving the issue in the instant case (citing sec. 8 (a) (2) of the Class Actions Law that establishes such a condition for the certifying of a class action), but added that the implementation of the General Enforcement Agreement should be evaluated over time, in accordance with its results, and by a concrete evaluation of the agreement in each case. Public Representative D. Sharon concurred. To complete the picture, we would note that the approach by which Histadrut action in regard to workers’ rights under the General Enforcement Agreement bars the submission of class actions was adopted in subsequent cases (see: LabA 16808-06-12 Tauber v. Hashomrim Group Guarding and Security Ltd. (March 4, 2015); LabA 7229-05-12 Batya v. Mikud Israel Security, Services and Manpower Ltd. (March 4, 2015)).

 

14.       The class-action plaintiff in the Yashiev case also submitted a petition to this Court, arguing that his case should have been decided in the same manner as preceding cases in which the General Enforcement Agreement did not constitute a bar to a class action. The respondents in that proceeding are the Histadrut, the Kav La’oved Association, the Trade Association, and the plaintiff’s employer, H.A.S. Systems and Security Ltd. (hereinafter: H.A.S.) (HCJ 7644/13).

 

15.       The petitions before the Court were originally heard separately. In a hearing on June 27, 2012, on the petitions in the matter of Viron (HCJ 1893/11 and HCJ 1965/11), the parties agreed to conduct the proceedings as if an order nisi had been issued (A. Arbel, H. Melcer, D. Barak-Erez, JJ.). A hearing was held on April 2, 2014 in the Buskilla case (HCJ 9325/12, A. Grunis, CJ, Y. Danziger, Z. Zylbertal, JJ.), in which the parties updated the Court in regard to the developments in the various proceedings, including the settlement reached in the Viron case and the petition submitted in the matter of Yashiev. In addition, the response of the Attorney General was requested in the Buskilla proceeding (who, as noted, informed the Court of his intention to appear in these proceedings on March 7, 2014). Finally, a joint hearing was held in regard to all of the petitions on Feb. 25, 2015, in which the parties agreed that the hearing would be conducted as if orders nisi had been issued in regard to all of the proceedings.

 

Additional proceedings in the Labor Court

 

16.       To complete the picture, it should be noted that additional requests for certification of class actions have been submitted in parallel to these proceedings. Examples will be presented below in order to demonstrate that in proceedings such as this, fundamental questions with a common denominator arise, and they will be the focus of our deliberation.

 

17.       Another class action was submitted against Amishav, the respondent in the Buskilla case, by a woman who was employed by the firm as a cleaner, and by Kav La’oved. The hearing in that case was held in the National Labor Court after the Yashiev case was decided, and after the signing of the Special Enforcement Agreement between Amishav and the Leumit Federation. The National Labor Court held that, in light of the decision in the Yashiev case preferring enforcement of rights by means of the labor union, the case should be remanded to the District Labor Court for an examination of whether the Leumit Federation was actually taking collective action to enforce the workers’ rights. For the time being, it was decided that the case will not be joined with the proceedings in the matter of Buskilla (LabA 5268-01-11 Tagnia v. Amishav Services Ltd. (March 5, 2015)). That matter awaits the decision of the National Labor Court on the question of which labor union is the representative organization in Amishav (see: the decision of the Jerusalem District Labor Court in Judicial Appointment Hearing 5771/08, President D. Pruzinan, regarding Inter-Organization Suit 6759-12-14).

 

18.       Another request to certify a class action was submitted in 2009 against an additional security company, Hashomrim Association Ltd. The District Labor Court denied the request for various reasons, noting that sec. 10 (3) of Schedule Two bars class actions against union-organized workplaces. The National Labor Court denied the worker’s appeal against the decision not to certify the class action (and granted the company’s appeal to recoup costs assessed against it) (LabA 425/09 Goldberger v. Hashomrim Association Ltd. (Feb. 2, 2010)). A petition against that decision was submitted to this Court. In light of the decision that had been handed down in the interim in the Viron case, the parties agreed that the Court remand the case to the District Labor Court in regard to the cause of action concerning the failure to set aside pension contributions according to the pensions provision, without taking a stand on the merits (HCJ 2023/10 Goldberger v. National Labor Court (Feb. 14, 2011)). In the end, having been remanded to the District Labor Court (and joined with another class action submitted by another of the company’s workers in 2010), it was decided, in accordance with the Yashiev decision, that due to the existence of the General Enforcement Agreement, the class action should not be certified at this stage. The District Labor Court further noted that the plaintiffs had not approached the Histadrut, the Trade Association or the employer to request enforcement of their rights before instituting the suits (see Employee/Organization Case (BS) 15305-06-10 Goldberger v. Hashomrim Association Ltd. Jan. 1, 2014)). The appeal is now pending before the National Labor Court (LabA 21520-02-14).

 

19.       Another case worthy of mention in this context is a request to certify a class action submitted in 2006 by a worker in B.G. Moked Security Ltd. In that case, the District Labor Court certified the class action, holding that the employer had not shown that it was a member of the Trade Association and that its workers were therefore covered by a collective agreement. In the National Labor Court, the employer claimed that it had agreed to a “process for enforcing the rights of the company’s workers” with the Histadrut, and asked that the court approve the agreement that establishes the said process, under which the workers’ rights would be redressed retroactively for the seven preceding years, on the condition that the judgment of the District Court be set aside. The National Labor Court noted that the employer had chosen to claim the existence of a collective agreement only ex post facto, as a “shield” to the class action, and that it had not proven that it was a member of the Trade Association and thus subject to the original collective agreement. In any case, the National Labor Court further held that the agreement reached by the employer and the Histadrut in regard to an enforcement process for workers’ rights does not justify altering the result, and that the process is not preferable to certification of the class action. The National Labor Court added that the fact that the employer began to pay its workers for the claimed rights after the request for the class action is not a sufficient reason to deny certification in view of the clear importance of that class actions in encouraging enforcement and deterring breach of the law. The National Labor Court noted that the enforcement process was offered only at the appeal, such that it is not unreasonable to imagine that it was the class action that spurred the employer and the Histadrut to action, and that the process offered no recompense to the plaintiff in the class action. Moreover, the class action related to a period that predates the one addressed by the enforcement process, and the enforcement of a judgment has advantages over the “enforcement process” as proposed, which would require appealing to the Histadrut if it is not enforced in practice (see: LabA 454/09 Moked Security v. Ben Shlomo (March 23, 2011) (hereinafter: the Ben Shlomo case)). It should be noted that, in the end, the parties reached a court-approved settlement, and in the framework of the settlement, a special collective agreement was signed (with the Leumit Federation) that included compensation for the company’s workers for the cause of action claimed in the class action, including past workers of the company. It should also be noted that the settlement included an award to the plaintiff in the class action, and payment of her legal fees, and noted her contribution to the change in the employer’s policy (see: Employee/Organization Case (TA) 9528-07-07 Ben Shlomo v. B.G. Moked Security Ltd. (Feb. 15, 2015)).

 

20.       On July 7, 2015, after a hearing before this Court, the attorney for the class-action respondents filed a request to submit additional supporting material and to present protocols from ongoing proceedings. In light of the nature of the questions that we have been asked to decide, we did not see fit to grant the request.

 

Summary of the pleadings

 

21.       In general, the primary disagreement between the parties – the “first-order” question – centers on the very possibility of submitting a request to certify a class action when the employment of workers by the employer is subject to a collective agreement. Two primary positions were presented to the Court: One saw sec. 10 (3) of Schedule Two as posing an absolute bar to class actions in union-organized work places, while the other saw sec. 10 (3) as a relative bar that depended upon the question of whether workers’ rights were enforced in practice in the workplace. In addition, if the latter were the case, then as a “second order” question, the parties were divided on the question of the “threshold” for the certifying of such a class action as regards the conduct of the labor union. Lastly, a “third order question” arises that  also concerns situations in which the labor union has begun to act, but only after the submission of the class action.

 

The (“first order”) issue in regard to the very possibility of a class action where a collective agreement exists

 

22.       The position opposed to the submission of class actions was – for various reasons – that of the security companies whose workers were affected by the class actions – Tevel, Amishav, Gashash, Sa’ar Security and H.A.S. (hereinafter: the employers), the Trade Association, and the Histadrut. All of the above argued that sec. 10 (3) was intended to protect collective labor relations. In their view, the possibility for submitting a class action against an employer undermines the collective regime to which the employers and the labor union are parties.

 

23.       From the formal point of view, it was argued that the language of sec. 10 (3) of Schedule Two is clear and unambiguous.

 

24.       From the substantive point of view, it was argued that a class action is not a necessity in cases of inadequate protection of workers’ rights by a labor unions, in light of the availability of other avenues for seeking relief, such as individual lawsuits by the injured workers, lawsuits against the labor union for “inadequate representation”, or even the taking of steps to establish a competing labor union or organized defection to a competing union. It was further argued before us that the decision of this Court in HCJ 7029/95 Histadrut General Labor Organization v. National Labor Court, 51 (2) IsrSC 63 (1997) (hereinafter: the Amit case) demonstrates the importance of maintaining the collective framework in labor relations. This can be see, inter alia, from the fact that a union that ensures the wellbeing of workers but that does not address their working conditions and compensation from the point of view of collective labor relations cannot be deemed a “labor union” with all the significance that attends that recognition (ibid., at p. 131). The employers, the Trade Association, and even the Histadrut sought to employ this in the interpretation of sec. 10 (3) in regard to the importance of ensuring the primacy of collective labor law and that of labor unions within that framework. In furtherance of this point, it was argued that the possibility of initiating a class action in the presence of a collective agreement will result in harm to the labor unions, and will ultimately undermine the motivation of employers to join trade associations that are party to a collective agreement. Additionally, in regard to the “second order” issue that we will address more fully below, it was argued that such a “flexible” interpretation of sec. 10 (3) will lead to the need for a “voir dire” on the question of whether the labor union actually acts for the enforcement of workers’ rights in practice.

 

25.       For their part, the class-action plaintiffs rejected those arguments. Primarily, they argued that sec. 10 (3) should not be interpreted in a formal manner, without regard for its purpose, which is to deny class actions when there is a real alternative for protecting workers’ rights in a collective framework. They went on to argue that the alternatives suggested for the protection of workers’ rights were not real alternatives. Instituting a personal lawsuit, they argued, does not address the collective issue, and in any case, is not an effective path for unempowered workers. Additionally, it was argued that a suit for inadequate representation is subject to strict standards, such as “conspiracy”, and the alternative of organizing under a different union is neither practical nor achievable in many cases where we are concerned with a powerless and dispersed group of workers. Moreover, the class-action plaintiffs emphasized that sec. 10 (3) even applies in cases in which the relevant collective agreement is not the result of negotiations conducted by the union in regard to the specific workplace, and it is possible that the workers will not even be members of that union because the employer joined a trade association that is party to a general collective agreement. This, they believe, testifies to the danger inherent in the strict interpretation of sec. 10 (3), such that, in practice, the collective agreements will not result in the actual protection of workers.

 

26.       Kav La’oved supported the position of the class-action plaintiffs. Its attorney also pointed out that sec. 10 (3) was not even mentioned in the Class Actions Bill, 5765-2005, and was added to the proposed law only in the course of the debate, after it was explained that class actions should not be recognized where there is in fact a means for protecting workers (citing the protocol of meeting no. 667 of the Constitution, Law and Justice Committee of the 16^th Knesset, 18-21 (March 1, 2006)). Kav La’oved further pointed out that, in practice, collective organization had not been employed as a means for protecting the rights of workers in the security and cleaning industries, in which workers are employed through contracts with private manpower agencies, and the Histadrut does not defend their rights in practice. It was further emphasized that the application of the General Collective Agreement in the security industry to the workplaces relevant to these petitions derived solely from the respondent employers’ membership in the Trade Association, and not as the result of any real activity by labor unions on behalf of the workers.

 

27.       The Attorney General presented his position to the Court in his appearance in the hearing on the petition in the Buskilla case. In principle, the Attorney General supported the approach of the National Labor Court, according to which sec. 10 (3) of Schedule Two does not constitute an absolute bar to class actions. According to the position expressed to the Court, some solution should be provided for situations in which there is a disconnection between the workers and the union that purports to represent them. The Attorney General added that the case law of the National Labor Court developed tools for contending with such exceptional cases, without detracting from the purpose of unionized labor.

 

The (“second order”) issue regarding the “limits” of the scope of the exception set forth in sec. 10 (3)

 

28.       As earlier noted, the National Labor Court’s decisions in the Buskilla case and the Yashiev case added an additional aspect to the question of which class actions would be disallowed under sec. 10 (3).What arises from those decisions of the National Labor Court is that the enforcement of rights in practice, in the form of an enforcement agreement, may change the picture in regard to class actions. The decisions addressed the General Enforcement Agreement between the Histadrut and the Trade Association, which we described above. In the Yashiev case, the National Labor Court took the view that a class action that was initiated after the General Enforcement Agreement had come into force and after the Histadrut had begun to act upon it (including in regard to the rights of former workers) should not be certified. In that case, the petition against the decision of the National Labor Court was submitted by the class-action plaintiff, who was of the opinion that the General Enforcement Agreement should not constitute a bar to the certification of the suit as a class action.

 

29.       In essence, what the class-action plaintiff argued in the Yashiev case was that the mere existence of an enforcement agreement was insufficient, and that the court must ascertain whether the agreement was actually applied in practice. It was therefore argued that a decision not to certify the class action should be conditioned upon the implementation of the General Enforcement Agreement, which should be reviewed and monitored by the Labor Court. It was further argued that, in any case, the existence of the General Enforcement Agreement should not be taken into account in regard to breaches that preceded its signing. As opposed to that, the class-action plaintiff’s employer, H.A.S., and the Histadrut argued that even in such a case, and a fortiori, class actions should not be permitted.

 

30.       As opposed to that, the Kav La’oved Association sided with the class-action plaintiffs on the matter of enforcement agreements – emphasizing the history of signing enforcement agreements, which allegedly demonstrates that preventing class actions was the primary motive for their adoption. Kav La’oved further argued that there is a fear that such agreements will not live up to their promise (this view and the reasons grounding it are set out in detail in Eran Golan and Yael Plitman, “Class Actions and Collective Labor Law – the Good the Bad and the Ugly,” 6 Maasei Mishpat 177 (2014). It should be noted that the author Eran Golan is the attorney for Kav La’oved in the proceedings before this Court).

 

The (“third order”) issue regarding the date on which the labor union began to act relative to the date of the filing of the class action

 

31.       In the Buskilla case, the National Labor Court was of the opinion that the General Enforcement Agreement did not bar certification of the class action, inasmuch as the agreement was signed after the initiation of the class action.

 

32.       The parties to the Buskilla petition essentially reiterated the above arguments. Here, too, the employers, the Trade Association and the Histadrut argued that the class action should not have been certified because the workers of Amishav were subject to the General Collective Agreement of 2008, as well as to the General Enforcement Agreement signed in 2011. In their view, those collective agreements constitute an impenetrable barrier to class actions. In their opinion, the test is the applicability of a collective agreement and not whether it is actually enforced, and any other interpretation would harm the collective labor relations that sec. 10 (3) was intended to protect. The Histadrut argued that, at the very least, the respondent should have been required to turn to the labor union before submitting a class action, in order to give it the opportunity to act collectively.

 

33.       On their part, the class-action plaintiffs reiterated their stance that the existence of a collective agreement does not absolutely rule out the initiation of a class action. As regards the General Enforcement Agreement, which the plaintiffs referred to as the “breach agreement”, they noted that when a defendant pays the claim after the initiation of a class action, it encourages infringing the law and undermines compliance (citing, inter alia, CA 10262/05 Aviv Legal Services Ltd. V. Bank Hapoalim (Dec. 11, 2008)). The class-action plaintiffs agreed with the holding of the National Labor Court that the General Enforcement Agreement was not relevant to the rights at issue in the Buskilla case, and that in any event, the General Enforcement Agreement was merely a “purported” agreement that could not serve as a bar to a class action even if it were in force at the time of filing (as they also argued in the Yashiev case). Kav La’oved was also of the opinion that, in view of the circumstances of its signing and its actual effectiveness, the Enforcement Agreement was not sufficient.

 

34.       The arguments in regard to the conclusions to be drawn from the existence of an enforcement agreement, particularly one signed after the initiation of the class action, were brought into sharper light when the Leumit Federation joined the proceedings. As earlier noted, the Leumit Federation signed a special enforcement agreement with Amishav, the petitioner in HCJ 9325/12. According to the Leumit Federation, when a labor union is actively engaged in protecting the rights of workers, the collective framework should be preferred to a class action, even if that activity began after the filing of the class action. The Leumit Federation further argued that in such a situation, the class action should not be certified, subject to the condition that if filing it was the class action that led to the enforcement of the rights, then appropriate compensation should be awarded to the class-action plaintiff and its attorney, despite the denial of the suit, or some other agreed arrangement should be made with the class-action plaintiff.

 

35.       The Leumit Federation further argued that the Special Enforcement Agreement that it signed with Amishav was firm and not restricted to the limitation-of-actions period or to current breaches. Therefore, it was argued, it is important to preserve the organized labor relations created by the special collective agreement, and to prevent the submission of class actions where enforcement actions have commenced even after the filing of the class action. This is also true in view of the fact that a labor union has better tools for achieving enforcement in comparison to a class action. The attorney for the Leumit Federation noted in the hearing before this Court that Leumit is open to a certain measure of supervision of the implementation of the Special Enforcement Agreement by the labor court.

 

Discussion and Decision

 

36.       This decision requires that we reexamine the guiding principles of labor law. It requires that we address the special difficulties associated with the protection of workers’ rights in general, and of unempowered workers in particular, as well as the special considerations related to collective labor law and the faithful representation of unempowered workers in that framework. All of this must be examined against the special background of class-action law and the principles that govern this Court’s intervention in the decisions of the labor courts.

 

37.       We should first note that, in this case as well, our guiding policy is that the labor courts are the appropriate forum for delineating the principles of labor law, in view of their superior expertise in this area (see, e.g., HCJ 525/84 Hatib v. National Labor Court, Jerusalem, 40 (1) IsrSC 673, 684-694 (1986); HCJ 4193/04 Gartner-Goldschmidt v. National Labor Court, paras. 12-14 (June 20, 2010); HCJ 92/13 Peri v. National Labor Court, para. 7 (Jan. 1, 2013)). However, the petitions before the Court are of a type that justifies an in-depth examination of the arguments by this Court, given the substantive legal question at issue, and its impact upon the interpretation of the Class Actions Law and upon the fundamental rights of a unempowered workers (see: HCJ 3716/13 Egged, Israel Transport Cooperative Ltd. V. National Labor Court, paras. 25-26 (July 3, 2014)).

 

38.       In any event, for reasons that will be explained below, we have concluded that the petitions should be denied, as the National Labor Court struck an appropriate balance among the competing considerations in the Viron case, the Buskilla case, and in the Yashiev case. Nevertheless, we are of the opinion that the scope of the restriction established under sec. 10 (3) of Schedule Two should be clarified, inter alia, in light of certain differences in this regard in the Buskilla and Yashiev cases.

 

The scope of the dispute up to this point: Class actions prior to and following the Class Actions Law

 

39.       In order to take a “broad view” in addressing the petitions before us, we should present the development of the case law of the National Labor Court, and the opinions expressed in that regard.

 

40.       Before the enactment of the Class Actions Law – In principle, when the question of class actions of workers came before the courts prior to the enactment of the Class Actions Law, the starting point of the National Labor Court was that class actions could not proceed against a unionized workplace subject to a collective agreement. This followed from the principled view that collective action was the high road for resolving labor-law disputes. This approach was established in the decision of President S. Adler in LabA 1210/02 Bibring v. El Al Israel Airlines Ltd., 38 IsrLC 115, 136-140 (2002) (hereinafter: the Bibring case). (Also see: LabA 300031/98 Israel Aircraft Industries Ltd. V. Morag, 35 IsrLC 289, 308 (2000)).

 

 

41.       We would preface our remarks by stating that, in general, this is a very sensible approach. However, the question before us is whether the principle is inviolable, or whether exceptions should be established for situations in which the collective protection system fails. This question only became acute with the enactment of the Class Actions Law and the exception in sec. 10 (3) of Schedule Two.

 

42.       The traditional approach following the enactment of the Class Actions Law – Initially, the National Labor Court held fast to its traditional approach in regard to the possibility of submitting class actions in labor law, even after the enactment of the Class Actions Law. When the question came before the court, the majority opinion of the National Labor Court in regard to sec. 10 (3) of Schedule Two followed the interpretation previously adopted in the Bibring case, and thus reflected a narrow approach that prevented the submission of class actions (and see: LabA 1154/04 Gross v. State of Israel Ministry of Defense (Jan. 9, 2007) (hereinafter: the Gross case); LabA 1537/04 Katz v. Clallit Health Services, Clalit Health Fund (Jan. 9, 2007) (hereinafter: the Katz case); the Oren case). Deputy President E. Barak-Ussoskin adopted a different approach, arguing (in a minority dissent in the Gross case, and as a lone dissent in the Katz case) that class actions should be permitted in unionized workplaces when the labor union refrains from taking up the issue on the workers’ behalf.

 

43.       The new approach after the enactment of the Class Actions Law – As opposed to the traditional approach of the National Labor Court, a broader approach developed that recognized the possibility of certifying a class action in cases in which workers’ rights were infringed even when the work place was purportedly subject  to a collective agreement. Under this approach, sec. 10 (3) of Schedule Two should be interpreted in a manner that would exempt situations of systematic infringements of workers’ rights that were not effectively addressed by the labor union, as an exception that could be permitted at the discretion of the labor court. This approach, first enunciated in the opinions of Deputy President E. Barak-Ussoskin (originally in a minority or lone dissents), was adopted by the majority in the Viron case, per Judge V. Viret-Livneh (ibid. paras. 48-54). Judge Viret-Livneh based her opinion in the matter on the doctrine of purposive interpretation, as follows:

 

“The purpose of the exception in part 10 (3) of the Appendix was to enable the representative labor organization in unionized workplaces subject to a collective agreement that regulates labor conditions – and here I would add that it actually regulates the labor conditions in practice and not just on paper – to take the steps at its disposal by virtue of its function, to compel the employer to conform to the collective agreement, primarily by initiating a process of a collective labor dispute” (ibid., para. 31, emphasis original).

 

Thus, under this approach, sec. 10 (3) should be read in a manner that limits its scope in regard to situations in which the collective agreement formally addresses workers’ rights, but does not advance them in practice. As noted, this approach was again adopted in the Havusha and Buskilla cases, which emphasized the importance attached to the actual enforcement of workers’ rights, and referred to the labor court’s discretion in the matter, in light of the specific character of the relevant labor relations.

 

44.       It should be noted that the new approach in the case law of the National Labor Court was adopted only in a majority opinion. In the Viron case, President Adler continued to adhere to his strict approach to class actions in unionized workplaces, as it was earlier developed in the Bibring case. President Adler expressed his position in stating: “Even where we discern a problem of under-enforcement and a breach of workers’ rights that undoubtedly requires resolution, it is proper – in the case of a unionized concern – that the solution be found in the collective labor framework and not by infringing or undermining it” (the Viron case, para. 17 of the opinion of Adler, P.).

 

45.       It would hardly be superfluous to note that even according to the approach of President Adler, there may be exceptions to sec. 10 (3) of Schedule Two, and in some cases a class action may be certified despite the existence of a collective agreement. However, President Adler defined the exceptions very narrowly, referring to a situation of a “puppet” organization, or one that is not authentic or that is entirely inactive, situations in which the collective agreement is invalid (for substantive rather than technical reasons), or where a collective agreement is declared void because it was signed by a party that was not the representative organization at the time. As opposed to this, he emphasized that dissatisfaction with the functioning of the representative organization is insufficient in this regard (see: the Viron case, at para 17 of the opinion of Adler, P.), as the proceeding for the certification of a class action is ainppropriate for the examination of the functioning of the representative organization. The workers, he added, have other mechanisms at their disposal for improving the functioning of the labor union.

 

46.       Additional approaches – Another narrow approach to the interpretation of sec. 10 (3) was presented in an article by Professor Alon Klement and Professor Sharon Rabin-Margalioth (Alon Klement & Sharon Rabin-Margalioth, “Employment Class Actions: Did the Rules of the Game Change?” 31 Iyuney Mishpat, Tel Aviv University Law Journal 369 (2009) (Hebrew)) (hereinafter: Klement & Rabin-Margalioth). However, the emphasis of that article was somewhat different, and was based upon a distinction between lawsuits initiated for a breach of contractual rights deriving from collective labor relations and lawsuits concerning a breach of rights deriving from labor shield laws. This distinction was based upon the postulation that a class action is a means for advancing the full enforcement of rights, whereas union action may only result in a partial enforcement of rights. The authors go on to explain that when rights deriving from labor shield laws are concerned, full implementation should be ensured, and class actions should be permitted in regard to their breach, while the protection of contractual rights can be left to labor unions, which should enjoy control over the extent of enforcement.

 

47.       In addition to the approaches presented above, we should note that (retired) Deputy President Barak-Ussoskin even suggested – in light of cumulative experience – that sec. 10 (3) of Schedule Two be amended such that the labor courts be granted discretion to certify class actions even when a workplace is governed by a collective agreement (see: Elisheva Barak-Ussoskin, “From the Heights of Nebo – Class Action and Labor Law: Can they exist together? In light of the Class Actions Law, 5766-2006,” Gabriel Bach Volume 577, 579 (David Hahn et al, eds., 2011)). According to her approach, preventing class actions in unionized workplaces is not in keeping with the character and tradition of Israeli labor law, and in any case, is not appropriate as a matter of legal and social policy. The article is ultimately aimed at the legislature, and calls for amending the exception as it appears in the Law, in view of the fundamental principles of labor law. However, inasmuch as the article was completed after the decision in the Viron case was handed down, it also expresses support for the principled approach enunciated there (ibid., p. 617).

 

48.       It is now appropriate that we move from the examination of cumulative experience to a presentation of the considerations that should guide us in establishing the appropriate approach for the construction of sec. 10 (3).

 

Interpreting the law: Labor law versus class-action law

 

49.       We should state at the outset that in interpreting sec. 10 (3) of Schedule Two, we will adopt the interpretive approach generally employed by the Supreme Court in its decisions – purposive interpretation – which is the approach that guided the National Labor Court, as well.

 

50.       In order to establish the appropriate purposive interpretation of this legislative provision, we must examine the objectives of the two fields of law between which it resides – class-action law and labor law. From the perspective of class-action law, the reigning objective is that of the maximal enforcement of rights, and those of unempowered communities in particular. Labor law, as well, views the optimal enforcement of workers’ rights as a central objective. However, that objective is aligned with another one, that of the protection of the power of labor unions, and the two are strongly bound. The power of labor unions is not an independent value, but is intended to serve the interests of workers in the framework of collective labor relations. Weak unions cannot effectively represent the working community and ensure its rights, as such unions would not be relevant negotiating partners from the perspective of the employers. But union activity is multi-dimensional, and is not limited to the enforcement of workers’ rights. Often, it is directed at improving working conditions that go beyond the issue of existing rights. Thus, the protection of the power of unions is a broad objective that goes well beyond the defense of existing rights. The Class Actions Law sought to negotiate a path between these objectives by means of an arrangement that opens the broad avenue of class actions to workers, but that is subject to a restriction intended to preserve the power of labor unions. An understanding of the balance grounding that compromise will guide is as we proceed.

 

51.       As earlier noted, there is, indeed, good reason for the approach that argues that the effective enforcement of workers’ rights requires collective action that organizes workers against the power of their employer. In the collective labor system, collective action is generally founded upon the activity of the labor union. The Class Actions Law presented an alternative path for organized action by workers when their rights were infringed – not action by the labor union but through uniting forces by means of a class action. Section 10 (3) sought to prevent workers from choosing class actions, in normal circumstances, in order not to undermine union activity. In such circumstances, sec. 10 (3) should be construed in a manner that will ensure workers’ rights, but without opening a breach that would undermine labor unions and their standing in the important system of organized labor relations. From this perspective, the current trend in the decisions of the Labor Court is appropriate. Below, we will set out the main points of our position in order to clarify its proper implementation, in the spirit of the decisions of the Labor Court but with some additional explanations and points of emphasis. The interpretation of the section is grounded upon several footings: interpretation of the language of the law, its legislative history, and its purpose.

 

The Language of the Law

 

52.       Section 10 (3) of Schedule Two removes suits covered by a collective agreement from the type of suits that can be certified as class actions. The key to interpreting this section is the interpretation of the term “regulate”. What is a collective agreement that regulates labor relations? The word “regulate” in its legal context is a term of art that refers to the establishing of a comprehensive normative system that applies to a field, its enforcement and supervision. Regulation is comprehensive organization, in the sense of creating rules, enforcing them, and monitoring implementation. Thus, regulation is expressed by action, and not merely by words on paper. Professor Itzhak Zamir wrote in this regard that the concept of regulation “consists of two parts: first, regulation of private activity in different fields by means of rules determined by statutes, regulations and administrative provision; second, enforcement of the rules by various mechanisms…” (Itzhak Zamir, “Public Supervision of Private Activity,” 2 IDC Law and Business Journal 67 (2005) (Hebrew)).  That represents the accepted approach in the literature on regulation in general. Of course, there are different approaches to defining the concept, but generally speaking, they can all be said to describe a system of rules that are  implemented through monitored enforcement (see, for example: Philip Selznick, “Focusing Organizational Research on Regulation,” in Regulatory Policy and the Social Sciences 363, 363-364 (R.G. Noll, ed., 1985) “Regulation refers to sustained and focused control exercised by a public agency over activities that are valued by a community”; Morgan Bronwen and Karen Yeung, An Introduction to Law and Regulation 3 (2007) “deliberate attempts by the state to influence socially valuable behaviour which may have adverse side-effects by establishing, monitoring and enforcing legal rules”; David Levi-Faur, “Regulation and Regulatory Governance,” in Handbook on the Politics of Regulation 6 (David Levi-Faur, ed., 2011) “the ex-ante bureaucratic legalization of prescriptive rules and the monitoring and enforcement of these rules by social, business, and political actors on other social, business, and political actors”; and see: Sharon Yadin, “What is Regulation? Proposing a Definition Following First Uses of the Term in Israeli Legislation,” Hukim Journal on Legislation (Sept. 2014) (Hebrew); Ayelet Hochman, Alon Hesper and Dan Largmen, “Speaking about Regulation – On the Concept of ‘Regulation’ and its Place in Israeli Law,” in Regulation (Roy Kreitner, Yishai Blank and David Levi-Faur, eds., to be published in 2015) (Hebrew)).

 

53.       This Court, as well, has repeatedly held that monitoring is an inherent element of regulation. Thus, for example, the Court held in CrimA 725/97 Kalkoda v. Agricultural Inspection Authority, 52 (1) IsrSC 749 (1998) that the need to monitor or enforce compliance with agricultural production and marketing quotas, as established by law, is a “structural need that is essential to the survival of the regulatory regime” (ibid., at p. 765).  Moreover, according to the decisions of this Court, where the legislature grants an administrative agency the authority to issue a license, we must assume that the legislature also intended to authorize that agency to supervise the activity for which the license was given, in order to prevent the frustration of the objectives that the license was meant to serve (see: CrimA 107/58 Attorney General v. Nordau Plaza Hotel Ltd., 13 IsrSC 1345, 1358 (1959);  HCJFH 6127/00 Insurance Supervisor v. Zion Insurance Co. Ltd., 58 (4) IsrSC 937, 956-947 (2004); AAA 9187/07 Luzon v. Minister of Interior, para. 32 (July 24, 2008)). Therefore, regulation that is expressed in the dry words of rules alone – merely on the books – without the breath of life in the form of actual enforcement and supervision – does not constitute regulation in the full sense of the term, and certainly not for legal purposes.

 

54.       This is true in the matter before us, as well. A collective agreement that is not enforced by the labor union cannot be deemed an agreement “that regulates the terms of his employment” in regard to the worker. Only when the implementation of a collective agreement is enforced and monitored can it be deemed an agreement that “regulates” the worker’s terms of employment. Of course, this construction addresses only the “first order” issue, i.e., the question whether the existence of a collective agreement categorically prevents the submission of request to certify a class action. That is not sufficient. The following will address the question of the cases in which a collective agreement will be deemed one “that regulates the terms of his employment” in regard to a worker.

 

The Legislative History

 

55.       Evidence of the purpose of sec. 10 (3) of Schedule Two as a provision intended to protect the activity of the representative labor organization in the workplace in which it acts to monitor and enforce the rights of workers – as opposed to where it does not act – can also be found in the words of Knesset Member Reshef Chen, who presented the Class Actions Bill to the Knesset plenum on behalf of the Constitution, Law and Justice Committee, for the second and third readings:

 

“I would like to briefly address the scope of the causes of action to which this law will apply, and to draw the attention of the Knesset to the expansion presented by this law…It will be possible to bring suit for every matter related to labor relations that is within the jurisdiction of the labor court. The suit will be heard by the labor court. The only restriction in this regard concerns matters in which the worker is represented by a labor union, because the idea is that if a worker is represented by a labor union, then it is right and proper that the labor union represent him rather than a class action proceeding” (13 Proceedings  of the Knesset 94 (5766)).

 

56.       From the above, it is clear that sec. 10 (3) of Schedule Two includes the inherent assumption that unions should be protected against the creation of means that sidestep them when they actually act to ensure the rights granted to workers by a collective agreement or by law, and as stated “it is right and proper that the labor union represent” the worker (ibid.). In other words, the section does not treat of the situation in which the labor union does not function.

 

57.       We should further note that the above was stated after the problem of a union that does not act on behalf of the workers, despite the infringement of their rights, was addressed in the meetings of the Constitution, Law and Justice Committee. MK Chen raised the following question himself:

 

“The question is what do we do when the labor union objects to the submission of a class action? The answer must be that it must be joined as a defendant.”

 

And thereafter:

 

            “It objects by omission, it doesn’t submit the lawsuit.”

 

See the protocol of Session 1 of the Constitution, Law and Justice Subcommittee, 16^th Knesset 57 (April 20, 2005).

 

Purposive Interpretation in light of Labor Law

 

58.       As stated, the exception established under sec. 10 (3) of Schedule Two of the Law was intended to further an important objective of labor law – protection of the various organs in collective labor law, and particularly the labor union. The preliminary assumption grounding that protection is that the labor union enjoys an inherent advantage in protecting workers’ rights. It is a permanent organization that is not formed only at times of crisis and conflict, and therefore can garner achievements over time and not just in localized conflicts. As already noted, it facilitates improvements in working conditions that go beyond the enforcement of obligatory rights. It can serve as a counterweight to the power of the employer. In general, it demonstrates the concept that the whole is greater than the sum of its parts (see Moran Savorai, “The Purpose of Representation Mechanisms in Labor Law: The Class Action Mechanism versus the Traditional Tools of Collective Labor Law,” Elisheva Barak-Ussoskin Volume 597 (Stephan Adler et al., eds., 2012) (Hebrew)). Indeed, there have been changes over the years in the background of labor law that have directly and indirectly led to the weakening of labor unions (see: Guy Mundlak, “Inter-union Relations: On the Decentralization of the Israeli Labor Relations System,” 6 Labor Law Annual 219, 239-240 (1996) (Hebrew) (hereinafter: Mundlak); Nava Pinchuk-Alexander, “Directions for the Renewal of the Labor Union in the Twenty-First Century,”10 Labour, Society and Law 51 (20040 (Hebrew)). However, these alone cannot detract from the basic reasons that ground the importance of those organizations. We will, therefore, proceed to examine the exception under sec. 10 (3) of Schedule Two in light of the objective of protecting labor unions.

 

59.       In principle, the source of the representative labor organization’s strength is to be found in its acting as a single actor in a given negotiation unit, uniting a large number of workers (this understanding gave rise, for example, to the slogan “One Histadrut – a strong Histadrut”. See Mundlak, at pp. 230-234, and see: Stephan Adler, “Collective Agreements: Framework, Application and Coordination,” Bar-Niv Volume 17 (1987) (Hebrew); Guy Mundlak, Fading Corporatism – Israel’s Labor Law and Industrial Relations in Transition 18-19 (2007). The power of the labor union permits it to conduct a dialogue with the employer – to acquiesce in one matter in order to gain in another. Thus, for example, the labor union may relinquish certain non-obligatory economic or legal rights in order to garner achievements in other areas (see: LabA 300205/98 Avni v. The New Histadrut Labor Organization, 34 IsrLC 361, 369 (1999)). The possibility of waiving certain rights in a manner that allows the employer to rely upon that waiver exists only when the workers, or some of them, cannot act against the employer in regard to that decision by means, for example, of a class action. In other words, a labor union’s power to protect the rights of its members and act for their benefit derives from its uniqueness – from its representativeness. The achievement of this objective requires that we “encourage activity by means of strong labor unions that concentrate substantial negotiating power. This requires restricting the freedom to organize and preventing insubstantial organizations from negotiating on behalf of the workers” (Ruth Ben-Yisrael, Labor Law, vol. 3, 1134 (2002); and see: the Amit case, at p. 104; LabC 7-4/33 Tel Aviv University v. Tel Aviv University Academic Faculty Organization, 5 IsrLC 85, 96 (1973)). Against this background, the legislature was guided by the concept that class actions should not be permitted to undermine the representative labor organization in a unionized workplace in which the normal tools of collective labor law are being applied, for fear that it would weaken the union.

 

60.       What does this imply? Purposive interpretation of the Class Actions Law in light of labor law leads to the conclusion that protection of the labor union is required only in cases in which there actually is organizational or legal labor-union activity for the purpose of protecting workers’ rights.

 

61.       The proposed interpretation of sec. 10 (3) of Schedule Two is consistent with a guiding principle of labor law that definitions must be scrutinized from within the system itself, in accordance with the actual situation and the purpose of the definitions, and not simply by an external examination focused upon classifications and terms. Thus, for example, the decision who is an “employee” is not contingent solely on the formal term the parties choose to describe the labor relationship. The test adopted over the years for classifying the employment category is a “mixed test”. The test comprises a large number of subtests, among them the “integration test” that examines whether the party performing the work is integrated into the business of the party supplying it, and whether the party performing the work maintains his own business. In the framework of the integration test, the issue of control is examined, as well as the manner of employment and the arrangements for paying taxes, etc. As was explained in this context: “The main advantage of the mixed test is expressed in its great flexibility. This flexibility allows the court maneuvering room in which to consider the dynamic character of labor relations, and strike a balance among the factors that influence the nature of the relationship between the performer of the work and the receiver of the work product” (see: Stephen Adler, “The Scope of Incidence of Labor Law – From Control to Purpose,” Menachem Goldberg Volume 17, 22 (Aharon Barak, Stephen Adler, Ruth Ben-Yisrael, Yitzhak Eliasaf & Nachum Feinberg, eds., 2001)).

 

62.       That is also what was decided in regard to the issue of recognizing a labor union. In the Amit case, it was held that a condition for recognizing a labor union was that an organization seeking legal recognition must be capable of fulfilling the function expected of such an organization by the legislature. In this regard, it was held that mere appearance was not enough, and that an examination was required to ascertain whether the organization actually, rather than just formally, met the statutory criteria for recognition. In other words, “one must also carry out a reasonable examination of whether an organization that presents itself as a labor union is truly a labor union” (ibid., at p. 120). As explained later in the decision, there can be two reasons that an organization will not be deemed a “true” union – first, that the organization merely purports to be a union but has no true intention to act in accordance with its declared purposes, and merely pretends to that end; second, and relevant to the present case, it is a failed organization, in the sense that although its intentions and desires are real, it does not realize them (ibid., at p. 121; and see EA (National) Hareidi Kindergarten Teachers’ Association v. Agudath Yisrael Teachers’ Organization (Sept. 15, 2008), para 24 of the opinion of Adler, P.). In practice, these two exceptions are also significant in understanding the dispute over the appropriate interpretation of the Class Actions Law, in light of the two purposes noted above – protection of workers’ rights and preserving the power of labor unions. The narrow interpretive approach that President Adler proposed for certifying a class action adopted the first of the above two situations. As opposed to this, the majority of the Labor Court in the Viron case, and the National Labor Court’s decisions in the Havusha and Buskilla cases, opened the class-action gate in the second situation – in which the organization failed in performing its duty – as well. In the Yashiev case, the National Labor Court further examined the question of when an organization may be said to fulfil its function properly, and more specifically, whether the existence of enforcement mechanisms justifies an affirmative answer to this question.

 

Purposive Interpretation in regard to the Class Actions Law

 

63.       As noted, purposive interpretation of sec. 10 (3) of Schedule Two requires that we also examine it in light of the purpose of the Class Actions Law itself. The purposes of the Class Actions Law are defined in sec. 1 of that law, as follows:

 

“The purpose of this law is to set uniform rules for the submitting and managing of class actions, in order to improve the defense of rights, and thereby particularly to promote the following:

(1) Realizing the right of access to the courts, including for populations that have difficulty approaching the court as individuals;

(2) Enforcing the law and deterring its violation;

(3) Providing appropriate relief for those harmed by the violation of the law;

(4) Efficient, fair and exhaustive administration of suits.”

 

64.       We can learn from sec. 1 of the Class Action Law that a class action has two primary purposes: first, helping injured groups; second, enforcement of the law and deterrence of further violations. A class action serves the personal interests of the plaintiff, but also “harnesses” him for the general good, and thereby ensures compensation for those who aid in law enforcement and deterrence of violations in areas in which there is a “market failure” in regard to enforcement. In this regard, a class action is a type of regulatory tool, in the broad sense of the term (as for the influence of the position of the regulator upon the certification of class actions, compare and contrast, for example: CA 7928/12 A.R.M. Technologies Ltd. v. Partner Communications Ltd. (Jan. 22, 2015)). The regulatory purpose of the Class Actions Law requires that we interpret sec. 10 (3) of Schedule Two in a manner that would prevent a market failure in the enforcement of workers’ rights. Therefore, narrow construction of the exception established by sec. 10 (3), such that it would apply only in cases in which there actually is organized “regulation” of labor relations in practice, with all that this implies, is the interpretation that realizes the purposes of the Class Actions Law as established by the legislature.

 

65.       That being so, our interpretation of sec. 10 (3), permitting the initiation of a class action in regard to a workplace in which the labor union is dysfunctional and does not act to enforce the workers’ rights, is consistent with and advances the objectives stated in the Class Actions Law. As opposed to this, the interpretation urged by the employers, the Trade Association and the Histadrut, largely frustrates those objectives. The approach that would prohibit the initiation of a class action where the labor union is dysfunctional, directing the workers to alternative means for enforcing their rights, such as submitting individual lawsuits against the employer, leads to a paradoxical result. The initial assumption of collective labor law is that the individual worker is a weak party that is generally not equipped to bring about enforcement of the law and protection of his rights, and thus requires the assistance of a labor union. Therefore, one cannot argue that recourse must be made to private lawsuits when the labor union is dysfunctional. In such a case, in which the labor union is not doing its job, recourse must be made to a comparable alternative to a collective labor dispute, i.e., a class action. As a rule, an individual worker lacks adequate financial means to press for his rights, and all the more so in circumstances characterized by relatively small infringements from the perspective of the worker. To this we might add that, practically speaking, under such circumstances, the worker does not have very promising alternatives. That is true in regard to a suit for inadequate representation, which the case law narrowly construes (see: LabC 4-7/36 El Al Israel Airways Ltd. v. Herut, 8 IsrLC 197, 223 (1977); LabA 7129-10-11 Hajaj v. Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd. (April 7, 2014)).

 

Purposive Interpretation in regard to the Principal-Agent Problem

 

66.       In truth, interpreting the exception established in sec. 10 (3) of Schedule Two is another example of contending with the phenomenon of the “Principal-Agent Problem” in law, that is, situations in which the party meant to represent the interests of another fails to do so, and for whatever self-serving reasons, does not fulfil its duty. The Principal-Agent Problem refers to situations in which the interests of the agent and of the principal are not congruent. The agent is meant to act faithfully in pursuing the principal’s interests, but occasionally, the interests of the two are not aligned, and the agent acts in his own interest. The agent may not act in the interests of the principal in a situation in which there is an asymmetry in the information available to each of them. In addressing this problem, it is important to employ incentives that will bring the interests of the parties into closer alignment, while imposing a supervision and monitoring regime over the actions of agent (and see: Zohar Goshen, “‘Agency Cost’ as a Unifying Theory in Corporate Law,” in Essays on Law in Memory of Professor Gualtiero Procaccia 239 (Aharon Barak ed., 1996) (Hebrew)). In the present context, the labor union is the agent responsible for the protection of the interests of the workers. When a labor union fails to fulfil its duty to act for the realization of the rights of unempowered workers, we have an example of the Principle-Agent Problem. A labor union would seem to have incentives to represent workers effectively in order to maintain its position as a representative organization and continue to collect dues. However, those incentives are not sufficient in a situation in which the workers are characteristically dispersed and unaware of their rights, such that they ae a “captive audience”. In such a situation, particularly when it would be difficult to establish a competing organization, the Principle-Agent Problem becomes acute. The labor union may suffice with minimal or no activity, and nevertheless continue to collect dues from its members. Accordingly, it is appropriate to interpret sec. 10 (3) in a manner that ensures monitoring of the attendant concerns of the Principle-Agent Problem. This conclusion is of particular importance in light of the narrow construction given to lawsuits for inadequate representation, that otherwise might offer an alternative solution. Parenthetically, we would note that the narrow construction adopted in this regard would seem to be problematic. But inasmuch as the matter is not before the Court, we will not address it in depth.

 

67.       Occasionally, the Principal-Agent Problem is anticipated by ex ante monitoring, for example, by requiring court approval for legal acts (by a guardian or a receiver).  In other cases, the Principal-Agent Problem is addressed by ex post monitoring, by creating an alternative procedure for enforcing rights – in those case where the “high road” is blocked by an agent’s defective action. Thus, for example, derivative suits in companies law constitute a residual alternative to the high road of a lawsuit brought by the company’s authorized organs. A derivative suit allows a shareholder to wield the company’s power to sue when the company does not use that power (see: Zipora Cohen, Company Shareholders - Causes of Action and Remedies Vol. 3 (2nd ed., 2010)). One of the reasons for this apparatus was explained as follows:

 

“The danger of abuse in reserving the power to initiate legal action to the board of directors. The directors may decide not to initiate legal action on the company’s behalf in order to shield themselves and prevent the discovery of their mistakes or the imposition of liability upon them. Since the deciding of primary rights and obligations is not involved, but rather their realization by means of a secondary right – the right to sue – there is greater willingness to permit a majority of shareholders to intervene” (ibid., at pp. 452-453).

 

We thus find that where the Principal-Agent Problem is one in which the organ with the authority to initiate legal action, i.e., the board of directors,  does not act, and the shareholders may be harmed thereby, a special procedure exists for contending with the problem, as an alternative route appropriate for a situation of “system failure”.

 

68.       At times, a petition to the High Court of Justice or to the Administrative Court against an act or omission by a governmental agency may be an example of contending with the Principal-Agent Problem in situations in which a public functionary fails in its duty as a public trustee. As Justice H. Cohn noted:

 

“The private sphere is not like the public sphere. In the former, one grants at will and denies at will. The latter exists for no reason other than to serve the public, and has nothing of its own. All it has is held in trust, and it has no other, different or separate rights or obligations than those that derive from that trust or that are granted or imposed by the authority of statutory provisions” (HCJ 142/70 Shapira v. Bar Association District Committee, Jerusalem, 25 (1) IsrLR 325, 331 (1971)).

 

69.       Similarly, in the matter before us, the question is how to act in situations in which the potential danger inherent in agency is realized when the labor union refuses to defend workers’ rights. In such a situation, we should not deny the possibility for alternative action that would allow the workers to enforce their rights collectively. Moreover, the very existence of a residual system may itself serve as an incentive for the labor union to act on behalf of its members, and thus mitigate the Principal-Agent Problem (even when it is not employed). A labor union that knows that if it does not act to protects workers’ rights, there is the possibility of a class action that will effectively make it superfluous, will make an effort to take timely action against the employer in appropriate cases. The very existence of an alternative system (that of class actions), even if not used, may change the incentives of the organs acting for the general good, and strengthen the mechanisms of collective labor law. All the more so when we take into account the changes that have occurred in the labor market, in which we find a stratification of worker populations, with low-paid workers at the lowest stratum that is barely represented by labor unions, and that suffer from under-enforcement of their rights and from low job security (and see: Guy Mundlak & Reuben Gronau, Industrial Relations in Times of Transition, The 12^th Caesarea Economics Policy Planning Forum, 69-106  (Policy Paper No. 54, Israel Democracy Institute, 2004)).

Comparative Aspects

70.       In principle, our decision in this matter is rooted in Israeli labor law and the conditions of the local labor market. In such circumstances, the value of a comparative law analysis is relatively limited. Accordingly, the parties focused their arguments on local law. However, in his supplementary pleadings, the attorney for the class-action plaintiffs pointed to the possibility of initiating class actions in American and Australian labor law even in unionized workplaces. Against this background, we will briefly comment on the subject.

71.       In general, an examination of foreign legal systems in this area reveals a variety of approaches. These approaches are the result of the particular considerations of each system rather than of some statutory restriction in the law governing class actions.

72.       In Canada, we see an approach restricting the possibility of submitting class actions in labor law in order to protect collective labor relations. An example can be found in the Canadian Supreme Court’s decision in Bisaillon v. Concordia University [2006] 1 S.C.R. 666 (hereinafter: the Bisaillon case), in which a request to certify a class action was denied in a case in which there was a collective agreement. However, that conclusion derived from the fact that, in Canada, the collective agreement mechanism is entirely governed by the conception that disputes arising therein be referred to arbitration (in accordance with the Canada Labour Code, 1985). The restriction is not upon class actions, per se, but is part of a general view as to the resolution of disputes in collective labor relations. Additionally, and no less important, in the Bisaillon case, the relevant labor unions supported the class action, such that it did not address the issue before us – the initiation of a class action in circumstances in which the labor unions refrained from supporting the workers whose rights were infringed.

73.       In the United States, the birthplace of class actions, the question of certifying class actions in labor law focuses upon whether the traditional requirements of class actions in this regard are met (in terms of the commonality of the claims of the members of the class, etc.), rather than upon “threshold” questions (see, e.g., Wal-Mart Stores, Inc. v. Dukes 564 U.S. (2011)). To the extent that restrictions apply to the submission of class actions in workplaces with collective agreements, they arise from arbitration clauses in the agreements with the workers (although there is some debate as to the enforceability of such clauses, see, e.g., Stacey L. Pine, “Employment Arbitration Agreements and the Future of Class-Action Waivers,” in 4 (1) Am. U. Labor & Employment L. Forum 66 (2014)).

74.       To all the above we should add that a comparison to the situations in other jurisdictions is further complicated by the fact that the labor unions are, themselves, important “actors” in this area. In the United States, a class action can be filed against the union itself, and not just against an employer. In Australia, labor unions are deemed effective class-action plaintiffs in cases of infringement of workers’ rights (see: Jane Caruna & Vince Morabito, “Australian Unions – the Unknown Class Action Protagonists,” 30 Civil Justice Quarterly 382 (2011)).

75.       In light of all the above, we have based our opinion primarily upon the objectives of local law, and the particular considerations of the Israeli labor market.

 

Answer to the “First Order” Question: Regulation as Regulation in Practice

76.       Our conclusion is, therefore, as follows: The Law does not categorically prevent the submission of a request for the certification of a class action by workers in a workplace that is subject to a collective agreement. In cases in which the collective agreement does not comprise an enforcement and monitoring mechanism for workers’ rights, and the labor union is dysfunctional, i.e., it does not act to enforce the rights of the workers in practice, sec. 10 (3) will not constitute a bar to certification of the request for a class action. A collective agreement that is “on paper”, but that is not enforced in practice, is not sufficient to constitute a bar to the initiation of a class action under sec. 10 (3). A collective agreement that is a dead letter, and a labor union that is no more than a fig leaf that hides an actual failure to protect workers’ rights are insufficient. In such cases, one cannot claim that the collective agreement regulates labor relations, and therefore the request to certify the class action may be granted. Below, we shall discuss in greater detail the cases in which the conduct of a labor union will be deemed actual regulation of labor relations (in the framework of the discussion of the “second order” question).

77.       This construction of sec. 10 (3) will prevent situations in which a worker will find himself in a “catch-22” in which his rights and those of his fellow workers are neither protected nor respected, but he is unable to act because he is subject to a labor union for good and for ill. In such circumstances, in which the collective agreement is not worth the paper it is written on, as neither the union nor the employer act to enforce it, we must say that there is no “collective agreement that regulates the terms of his employment”, and the exception established under sec. 10 (3) of Schedule Two does not apply.

78.       This conclusion thus approves the fundamental approach adopted in the Viron case, which has served as the basis for the decisions of the National Labor Court in subsequent cases, as well. What this means is that when a labor union does not act to enforce the infringed rights of workers, the bar established by sec. 10 (3) of Schedule Two is removed. In such cases, the labor court’s discretion does not relate to the question of whether the exception established under sec. 10 (3) is met, but only to the fulfilment of the other conditions established by sec. 8 of the Class Actions Law for the purpose of certifying such a suit.

 

Answer to the “Second Order” Question: The Scope of Incidence of Section 10 (3) in relation to the Question of what Constitutes an Active Labor Union

79.       Examining the activity of a labor union – in light of the above, when a request to certify a class action is submitted, the question that the labor court must examine is whether the union is working to advance the rights of the workers, and whether that activity constitutes an effective means for enforcing the rights claimed in the suit. Such activity need not be optimal, but it must exist as more than a “display” of activity. Section 10 (3) is not meant to protect a labor union that shirks its responsibilities and power, and refuses to protect the rights of its members. The purpose of sec. 10 (3), which focuses upon the protection of the representative organization, evaporates when the labor union does not function. There is no reason or justification for protecting a union that does not do its job.

80.       The decision as to what constitutes such a situation is, of course, dependent upon the circumstances of each individual case. In general, in order to decide whether there is a collective agreement that “regulates” the labor relations, the labor court will have to examine whether the labor union acts to protect the workers’ rights. The court will have to consider the overall circumstances of the case, including: the characteristics of the particular industry; the existence or absence of systematic violations of workers’ rights; the type of rights infringed; the activity of the labor union (both in regard to the infringed rights and in general); the accessibility of the labor union for addressing particular complaints of workers, on the assumption that a functioning labor union must provide an active, efficient mechanism for addressing the complaints of the workers it represents, and for enforcing their rights; the general functioning of the labor union in regard to the protection of workers’ rights; the ability of the labor union to enforce workers’ rights in practice, such that they receive what they are entitled to from the employer; as well as the ability of the labor union to redress past violations, and not act solely prospectively.

81.       We would further note that it would be easier for the class-action plaintiff to show that a labor union is ineffective by specifying cases of other workers who did not receive an adequate response from the union in regard to the violation of their rights. As opposed to this, it would be easier for the labor union to show that it was active if it could point to concrete steps that it adopted in regard to the violated rights, show that there was an efficient, effective mechanism that enabled workers to voice their complaints and enforce their rights, and if it would supply data in regard to the complaints it successfully resolved (without need for an exhaustive list).

82.       In this regard, the distinction between obligatory rights and contract rights may be of importance – a distinction addressed by Klement & Rabin-Margalioth (para. 46 above) if not in the same manner. There is a presumption that a labor union is dysfunctional when it fails to act in protecting the obligatory, statutory rights of workers, inasmuch as the matter is not discretionary, and such rights cannot be waived. In such circumstances, there is no rationale for protecting the union, and there is no reason to prevent the certification of a class action brought by a worker. As opposed to this, when a union does not take action to protect a right that derives from an agreement, that failure to act does not necessarily imply that the union is not functioning properly. A union may justifiably refrain from acting from a broader perspective of labor relations with the employer and a desire to achieve some other goal in another aspect of those relations. Therefore, in such a case, the burden of proof is on the labor union in proceedings for the certification of a class action, and requires that it show that its inaction resulted from a discretionary decision. It is worth emphasizing that, at this stage, the labor court is not required to evaluate the wisdom of the union’s decision, i.e., whether it would have acted in the same manner as the union. There is also no need for an exhaustive examination in order to decide whether the labor union acted or failed to act to protect the workers’ rights, and whether such a failure to act was reasonable under the circumstances. As a rule, the labor court enjoys broad discretion in examining the matter and its circumstances in relating to the nature of the violated rights and the scope of their infringement. The labor court must gain an impression of whether the labor union considered the matter, the appropriate time to take action and the alternatives, and whether, in view of these considerations, it reached a decision that took the rights of the affected workers into account.

83.       Prior notice to the labor union for the purpose of examining its actions – An additional question that arises in this context is whether the class-action plaintiff must show that he gave advance notice to the labor union before requesting the certification of the class action, in order to allow the labor union to take the initiative in seeking a resolution of the dispute. The National Labor Court gave a resoundingly affirmative answer to this question in the Eyal case, in the course of developing its case law on the subject following the Viron decision. President N. Arad wrote in this regard:

“In light of these provisions, and in order to realize the objectives of the provisions of the Class Actions Law, when a class plaintiff intends to initiate class-action proceedings in an unionized workplace, it is proper that he first deliver written notice to the labor union of his intention to initiate a class action and its causes of action…Prior notice to the representative labor organization in the workplace is also required by the principles of fairness, efficiency and good faith in a unionized workplace, and it serves to further the provisions of the Class Actions Law in accordance  with their purpose…If the class plaintiff acts in such a manner, it is conceivable that the class action will become superfluous, or that it is subject to the restrictions established by the Law. In doing so, the prior notice will help clarify the possibility of initiating a class action under the circumstances, and afford the labor union an appropriate opportunity to consider its position on the dispute or prepare for its resolution. Alternatively, the presence of the labor union in the proceeding may allow for a more efficient examination, to the benefit of the parties and the public in general” (the Eyal case, paras. 13-14).

This principle was also emphasized in later decisions, particularly the Yashiev case, which was addressed by this Court (see the Yashiev case, para. 54 of the opinion of then Deputy President Y. Plitman, and para. 14 of the opinion of President N. Arad).

84.       The proceedings before the Court did not focus on the issue of prior notice to the labor union, but in practice it is inherent due to its influence upon the question of whether the labor union is functional. Applying to the labor union would appear to present a simple, efficient means for examining whether it is responsive to workers’ complaints in regard to the violation of their rights. In this regard, we are of the opinion that there is merit to the fundamental approach of the National Labor Court in the Eyal case in regard to the importance attributed to notification of the labor union. However, and in addition to that, we must address how that demand should be understood in the context of the current examination, i.e., in a class action regarding labor law in a unionized workplace.

85.       In examining this question, and before addressing the special considerations for submitting a class action in labor law, it is important that we view it in the broader context of the question debated in the legal literature as to whether a class-action plaintiff should be required to give the defendant prior notice. This question raises conflicting considerations. On its face, it would appear that such notice could lead to the resolution of the problem motivating the class action at an early stage and reduce litigations costs. However, as opposed to that, there is the fear that such notice will reveal the “idea” of the class action to others, and thereby harm not only the class-action plaintiff but also the general incentives to expose wrongdoings in order to submit class actions in their regard (for a comprehensive discussion of these considerations, see Chemi Ben Nun & Tal Havkin, “Should a Plaintiff be required to give notice to the Defendant before requesting Certification of a Class Action?” 12 Alei Mishpat (not yet published) (hereinafter: Ben Nun & Havkin)). Needless to say, this question is not before the Court. Indeed, this Court has recently held that, as a rule, prior notice should be given to the potential defendant in a class action when that defendant is a public authority (AAA 2978/13 Mei Hagalil – District Sewage Corporation Ltd. v. Younes (July 23, 2015) (hereinafter: the Mei Hagalil case)). However, that decision did not unequivocally decide the question of notice to a private defendant (see: ibid., paras 14 and 38 of the opinion of Deputy President E. Rubenstein). In any case, the question before the Court is different. We are not concerned with a potential defendant but rather with the particular question of prior notice to the labor union as opposed to a defendant. This question must be framed by different considerations, at least in part, than those relevant to notice to a potential defendant. In the instant case, we will limit ourselves to this question, alone. The purpose of giving notice to the labor union is to enlist its aid. Moreover, from the start, the legislature was guided by a preference for the enforcement of rights through the labor union, where an active labor union is operating in the workplace. Thus, insistence upon prior notice to the labor union realizes the legislative intent.

86.       In my opinion, in that light, and in view of the purpose of serving notice upon the labor union – notice that is intended to call it to action – that notice should be directed at enforcing the personal rights of the worker, as opposed to a specific warning of the intention to initiate a class action. The labor union is supposed to muster for action as a result of a worker’s complaint regarding a serious infringement of his rights, whether or not it has been “warned” of the possibility of a class action. On the contrary, it may be said that the true test of a union’s seriousness in enforcing workers’ rights is its response to a complaint that is not accompanied by an express statement of the possibility of a class action. Moreover, this approach mitigates the Principal-Agent Problem in regard to labor unions, inasmuch as the looming possibility of a class action in the event of a failure to act serves as an incentive to act for the enforcement of workers’ rights. As opposed to this, imposing a duty of notice of a class action may act as an incentive for the union to bide its time and wait until it is explicitly “threatened”. An additional advantage of such notice – that does not explicitly “wave the sword” of a class action – is that it mitigates the possibility of undermining the incentives to potential class-action plaintiffs (because it does not involve “publication” of the possibility of a class action, which might lead others to “steal the idea” (see: Ben Nun & Havkin, chap. 2 (1) (a)). However, although there is no need for a formal warning or notice of the intention to initiate a class action, a focused demand to enforce concrete rights, as opposed to some general request, is required. In other words, the class-action plaintiff must submit a specific complaint to the union, asking for the enforcement of rights that he claims were violated. However, in my view, serving the labor union formal warning or notice of an impending class action is not a precondition.

87.       I would further clarify that while a prior application to the labor union is required, that should clearly not create a possibility for a lengthy period of deliberation by the union as to the course of action it should adopt. The appropriate response time for the union is a matter that can be examined by the labor court, in light of the circumstances of each case. In considering the period of time that should be granted to the labor union prior to submitting the class action, some weight should be given to the question of whether we are concerned with a union that was “presently absent” in addressing workers’ rights in the workplace, and completely absent over a long period of years. In such a case, the union would have to prove that it “woke up”, and relatively very quickly set about protecting the rights of those workers it had ignored, in order to justify refraining from initiating a class action as a means for redressing those rights. Here, too, the distinction between obligatory and contractual rights is of importance. Where the enforcement of obligatory rights is concerned, the labor union must act relatively quickly, for as already noted, it does not enjoy discretion in regard to the enforcement of rights granted by law and that cannot be waived. As opposed to this, where contractual rights are concerned, it would seem appropriate that the union be granted a reasonable period to consider the matter against the background of its overall activity, upon the assumption that the enforcing of contractual rights may form part of a broader strategy within the collective framework. The reasonable length of time for such activity can be examined by the labor court in the context of the applicability of sec. 10 (3) of Schedule Two. We should emphasize that prior notice that leads to a purported display of activity to “shake off” the class action, should not shield it from examination in the framework of the interpretation of sec. 10 (3) of Schedule Two, a point we will more fully address below.

88.       The problem of the pretended awakening of the labor union, and the significance of enforcement agreements – In examining the activity of the labor union, even after prior notice has been served, it is important that we consider the possibility that although awakened to action, that awakening was merely ”pretended”. In this regard, it is necessary to examine what constitutes the “awakening” of a labor union, in a similar way to that for examining what constitutes an active labor union, which we considered above, and is directly related. Acting “as if” that does not provide every worker with an avenue for enforcing his rights in an easy and cost-free manner cannot be deemed an “awakening” of the labor union. It is not enough that the matter “is being handled” (see and compare: CA 3807/12 Ashdod City Center K.A. Ltd. v. Shimshon, para. 7 of my opinion (Jan. 22, 2015)). Such purported activity can occur in a number of ways. A specific instance of the phenomenon, that we have largely focused upon in this case, is action by the labor union in the form of signing or beginning to implement an enforcement agreement when it is as yet unclear whether such action has borne fruit from the perspective of the workers. In such a case, the specific question that arises is whether such activity is a sufficient response to the period prior to signing the enforcement agreement or to the commencing of its implementation. That is the question that arose most forcefully in the Yashiev case. According to the class-action plaintiffs, there is no certainty that the Enforcement Agreement of 2011 will actually result in the enforcement of workers’ rights, and all the more so in regard to events in the past. As opposed to this, the employers and the labor unions argue that when an enforcement agreement is in place, sec. 10 (3) of Schedule Two fully applies, as it can no longer be maintained that there is no “regulation” of the workers’ rights.

89.       It is our belief that there cannot be a comprehensive, fundamental answer to this question, but rather, the answer must be contextual, not only in regard to the concrete example of an enforcement agreement, but also in regard to other execution mechanisms that may be suggested for the enforcement of rights. In each case, we must ascertain whether the actions taken to enforce the workers’ rights actually constitute “regulation”, or whether they are nothing but continued non-enforcement in new clothes. The criteria for examining these questions were set out in secs. 79-82, above. In the context of an enforcement agreement, we might add that the labor court should consider whether the mechanism for the enforcement of workers’ rights makes it possible for every worker to enforce his rights easily and without cost (inasmuch as these are characteristics of enforcement in the class-action framework). In this regard, the examination should consider whether the complaints of workers of the specific company named in the class action were answered in all that regards the enforcement of their rights, whether the enforcement agreement also regulates the enforcement of rights that were infringed in the past, and is not limited to the prospective enforcement of rights, and whether the rights claimed in the class action are addressed in this framework. A step taken by a union for the enforcement of workers’ rights in the industry (whether an enforcement agreement or some other step) cannot be deemed to render class actions superfluous in that industry. In this context, the responses given to prior complaints to the union and the timeframes that the union is willing to set for enforcement are important factors in ensuring that the protection of workers’ rights will be achieved within a reasonable time. For that purpose, limitation-of–actions periods established in regard to labor rights can also be taken into consideration, and an inviolable upper limit can be established in each case (see, e.g., sec. 31 of the Annual Leave Law, 5711-1951, that establishes a three-year limitation of actions; sec. 17A of the Wage Protection Law, 5718-1958, that establishes various periods of limitation for delayed payment, dependent upon the circumstances, which run from sixty days to three years, as the case may be). Of course, this is merely an upper limit, and we should normally expect that the reasonable time for acting will be considerably less.

90.       The labor courts can, as may be needed, further develop tools for addressing the question of when an enforcement step will be deemed effective to the extent that it would prevent the submission of a class action. In the Yasheiv case, concerning the General Enforcement Agreement, Judge Rabinovich emphasized that it should be evaluated over time, and in light of its results. That is true for any other enforcement step. Just as the heading “enforcement agreement” or even the establishment of an “enforcement committee” are insufficient to categorically prevent class actions, so other obligations to enforce rights do not “inoculate” a union or an employer against class actions. Here as well, the purposive interpretation of sec. 10 (3) of the Class Actions Law requires a substantive examination of regulation in practice, together with the requirement of prior notice to the labor union that allows it to enforce those rights that the plaintiff seeks to redress by a class action.

The Answer to the “Third Order” Question: “Awakening of the Labor Union following the initiation of a Class Action

91.       Up to this point, we have considered the situation of a labor union that began to act before the request to certify a class action was filed. That is the optimal situation (relatively speaking) in a situation in which the labor union did nothing to enforce rights in the past, but mustered shortly after receiving a complaint. That is the purpose of giving prior notice to the labor union, and when it achieves its purpose, a class action is no longer needed. Of course, the test of whether the labor union acted to enforce those rights will be conducted in accordance with the criteria we set out in paras. 79-82, above. As we explained, should it be found that its action was “pretended”, that will not serve as a bar to the submission of a class action. That is, in effect, the situation that was examined in the Yashiev case. When the labor union “awakes” prior to the submission of the request to certify the class action, the question of the application of sec. 10 (3) will be examined in accordance with the enumerated criteria. However, we must further consider the question of what should occur when labor unions “awake” only after the request for certification of the class action is submitted. That question arose in the Buskilla case.

92.       The submission of a request for the certification of a class action is a step that may spur labor unions to greater action. In this regard, it is important that we distinguish two situations of “awakening”. One possibility is that the “threat” to its position may lead the existing representative labor organization to act where it had previously failed to do so. Another possibility is that a new labor union that had not previously operated in the workplace will identify a possibility to expand its activity, succeed in becoming the representative labor organization and sign a special collective agreement after the submission of the class action. In the Buskilla case, we see both of these possibilities occur at once. Only following the submission of the request to certify the class action in that case, did the Histadrut sign the General Enforcement agreement. And only following the submission of the request to certify the class action (and, in fact, only after its approval), did the Leumit Federation sign the Special Enforcement Agreement with Amishav.

93.       In the Buskilla case, the National Labor Court addressed only the General Enforcement Agreement (as the Special Enforcement Agreement had not yet come into being). The National Labor Court held that the General Enforcement Agreement did not have retroactive effect, and that the signing of enforcement agreements following the submission of a request to certify a class action could not be taken into account and did not apply to the rights claimed in it. Our approach is similar to that of the Labor Court, although not identical, as we shall explain.

94.       As a rule, we are of the opinion that the basic approach to steps by labor unions taken for the protection of workers’ rights after the submission of a request for the certification of a class action (when it has been submitted after a prior “exhaustion of remedies” with the labor union) must be that such steps should not prevent the certification of the class action under the provisions of sec. 10 (3) of Schedule Two. In other words, the restriction established by sec. 10 (3) should be examined in accordance with the situation in regard to the possibility of enforcing the claimed rights as it was on the day of the submission of the request. Viewing steps taken after the request to certify the class action as constituting a bar to certification might encourage deals between labor unions and employers that would not reflect a true intention to enforce workers’ rights, and in effect, allow them to replace the statutory bar with another. Moreover, such a practice might strike a fatal blow to the incentives for submitting class actions on behalf of workers. If class-action plaintiffs knew that their class actions might be frustrated at any moment by a subsequent awakening of a labor union, this might result in creating disincentives for vital class actions.

95.       Therefore, where enforcement steps commence after the filing of a request to certify a class action, the restriction established by sec. 10 (3) will not apply. However, this does not necessarily mean that class actions are the best and most efficient means for enforcing workers’ right from the perspective of the general tests established by the Class Actions Law. In other words, if the situation changes to the extent that the class action is no longer justified at the time of its certification, whether because a new union or the existing union is providing a full, effective response, then there may no longer be any need for it to proceed. If the labor court find that the union has presented an appropriate path for redressing the rights claimed in the class action, including past rights and the rights of former workers who no longer work for the employer, it can deny the request for certification when certifying the class action no longer constitutes the path that is “efficient and just for resolving the dispute”, as stated in sec. 8 (a) (2) of the Law (and not on the basis of the “primary” restriction of sec. 10 (3) of Schedule Two). In this framework, the labor court may weigh the advantages and disadvantages of conducting the proceeding as a class action. Effective collective action that ensures the redress of the claimed rights is a practical alternative for achieving the objectives of the class action (see: Alon Klement, “Guidelines for the Interpretation of the New Class Action Statute – 2006" 49 Hapraklit 131 (2006)). As explained in regard to prior notice to the labor union, the legislature expressed its view that collective action and class actions are alternative tools for the enforcement of rights. The late awakening of a labor union can be taken into account, in light of all the considerations noted, in considering the request of a class-action plaintiff to withdraw, or in the framework of a compromise agreement by the parties (see the Ben Shlomo case, in which the National Labor Court examined a proposed rights process that was submitted, and emphasized the need to reward the class-action plaintiff as a condition for approval of the process).

96.       We should reiterate that even in this context, the enforcement of rights – like the activity of the labor union – must be evaluated by its practical success, in accordance with the various considerations elaborated above. In addition, specific consideration is required in regard to the particular question of whether the labor union is providing redress for the rights of former workers who no longer work for the employer. It may be assumed that such workers are not aware of the filing of the class action and of their right to demand the enforcement of their rights. They also do not pay union dues or service fees, and therefore, there is a fear that the union may, regrettably, see itself as less obligated to them. There may also be some doubt as to the ability of such former workers to apply for help in ascertaining their rights, even if there is an effective mechanism for such enquiries by current workers Therefore, to the extent that an employer or labor union argues against the certification of a class action, the labor court will have to examine carefully whether such enforcement steps provide a comprehensive response to the rights claimed by current and former employees as one. We are certain that the National Labor Court will develop guidelines for this examination.

97.       It should be noted that, as a rule, a distinction should be drawn between the enforcement steps undertaken by an existing labor union and those of a new union that “enters” the workplace following the class action. In the latter case, when a new union presents a collective agreement that is meant to serve as grounds for denying the class action, the said collective agreement must be examined carefully in order to remove the suspicion that its purpose is solely to remove the threat of the class action, as well as to make sure that the agreement also covers former workers who may “fall between the cracks”, and not benefit from the new agreement.

98.       We should further add that when a union’s awakening after the filing of a class action prevents the class action from proceeding – in all of the “paths” delineated above – the court must make sure that the class-action plaintiff and his attorney receive an award sufficient to protect the incentives for filing the class action that, in practice, brought about that “awakening” (see: sec. 22 (3) (1) of the Class Actions Law;  CA 1834/07 Keren v. Dan Region Tax Assessment Officer, para. 25 (Aug. 12, 2012)).

From Theory to the Practice

99.       It is now time to put the principles delineated above into practice in regard to the instant petitions.

100.     The petition in the Viron case concerned a case in which the class action was directed at a persistent, systematic violation of workers’ rights in an industry characterized by low-wage workers with limited ability to act collectively. It concerned an industry in which wages are not high, and it is, therefore, possible that there is little incentive for an individual worker to demand his rights. Moreover, it is in industry in which the workers are scattered among various security points and do not spend much time together, which impedes the possibility of organizing. In such circumstances in which the labor union was long aware that the collective agreement had become a dead letter, and that the basic rights of the workers had not been protected, yet nevertheless did not lift a finger to act for the workers’ benefit for reasons known only to itself and motives that do not fall within the prerogative granted it in the conduct of negotiations and the waiving of certain rights, such a union is not one that the Law sought to protect. Therefore, the National Labor Court correctly decided to certify the class action.

101.     The same is true for the Buskilla case. After the filing of the request for certification of the class action in this case, two collective agreements were signed – the General Enforcement Agreement with the Histadrut, and the Special Enforcement Agreement with the Leumit Federation. However, these agreements were signed only after the request was filed.  The General Enforcement Agreement, which at the times relevant to the National Labor Court’s decision, applied to all the employers included in the proceedings, was signed only after the request was filed, and the Labor Court found that it did not apply retroactively, such that it did not provide for the rights of the workers during the periods relevant to the filing of the suit. The Special Enforcement Agreement – whose effect was argued by the Leumit Federation – was signed only after the National Labor Court had rendered judgment. In such a case, as we have already explained, the restriction established by sec. 10 (3) does not apply, inasmuch as we are concerned with arguments that are based upon events subsequent to the filing of the class action, which raise the fear of excessively deterring the filing of class actions that serve as a catalyst to hastening labor unions to act for the protection of unempowered workers. That, of course, is the case unless the said events make it possible to redress of the violations grounding the class action retroactively. The National Labor Court did not find that to be so in the specific case, and we see no reason to intervene in that finding.

102.     In the end, and not without second thoughts, we did not find reason to intervene in the decision of the Labor Court in the Yashiev case. While in the Buskilla case, the National Labor Court found that the General Enforcement Agreement did not apply retroactively, in the Yashiev case, the National Labor Court (adopting the opinion of the District Labor Court) held that the agreement provided sufficient response to the rights claimed by the workers, even though their claims dated back to 2004, seven years prior to the signing of the General Enforcement Agreement and the filing of the class action. This change in the National Labor Court’s approach to the effect of the General Enforcement Agreement of 2011 on past rights would appear to raise questions. However, the Yashiev decision focused upon the facts as they appeared at the time to the National Labor Court, and the Histadrut’s actual enforcement of the rights that grounded the class action. Under the circumstances, we see no reason to intervene in those specific findings. First, we are also of the opinion that weight should be given to the finding that the class-action plaintiff made no application to the labor union, a fact that weighs against him. In addition, the Histadrut demonstrated before the National Labor Court how enforcement had commenced on the basis of the General Enforcement Agreement, and the National Labor Court gained the impression that it was well underway and that it was efficient and effective both in terms of the sample audit carried out, and the in-depth audits of the various employers in the security industry. As noted, the Histadrut also demonstrated before the National Labor Court the manner in which the specific cause of action in the Yashiev matter was being addressed, namely, the employer’s payments to the pension fund in that matter. We agree with the fundamental approach that requires not only the making of enforcement agreements but also there actual execution. Actually, in our view, the important test is whether the workers’ rights are enforced by the labor union, and not the precise mechanism that serves that purpose. We also agree with the opinion of Judge Rabinovich in the Yashiev case that the test must be contextual, examining the results of enforcement over time. As we have already stated, we do not find it appropriate, at this stage, to intervene in the factual findings in the Yashiev case, which were based upon the actions of the Histadrut in regard to the subjects addressed by the class action (and not only in regard to the general provisions established by the Enforcement Agreement). However, we would note that every enforcement agreement, including the General Enforcement Agreement of 2011, which was addressed in the Yashiev case, must be evaluated on the basis of its actual results in each case. More generally, the question of whether the Enforcement Agreement constitutes a bar to the certification of a class action must be weighed in light of all the stated considerations, including the actual execution of the relevant enforcement agreement at the times relevant to the request – and also in regard to the specific employer – in regard to the claimed rights. In light of the delineated considerations, the labor union may be requested to submit its activity in regard to the General Enforcement Agreement to further scrutiny. If that activity prove unsatisfactory, the request for a class action may be reinstated.

103.     It is important to reiterate that concluding an enforcement agreement (or taking any other step “on paper”) is not enough. The root of the problem in all the proceedings before the Court is the creation of enforcement agreements that left the workers unprotected in practice. As we noted, in the future, in this regard, the labor court will have to take into consideration the complaint mechanism that the enforcement agreement provides the workers, whether complaints in regard to violations of rights are addressed in practice, and the time period required for the union to respond to such complaints. It is also important that we reiterate that in order for an enforcement regime – including an enforcement agreement – to be deemed an appropriate substitute for class actions, it is not enough that it comprise a “sample” enforcement regime. Rather, it must present a means by which the class-action plaintiff, or any other worker, can seek redress even before his workplace comes up in the sample-audit lottery. It should be superfluous to note that the application of these principles in these cases is not within the usual purview of this Court, and should be left to the the judgment of the labor courts. We are confident that the National Labor Court will continue to develop its case law in this matter, in examining the relevant enforcement agreements and their success in meeting the tests of time and reality, and with due regard for the objectives of sec. 10 (3) of Schedule Two.

Comments and Answers

104.     At this juncture, I have had the opportunity to read the opinion of my colleague Justice H. Melcer. My colleague concurs with the principles I have set out in regard to the interpretation of sec. 10 (3) of Schedule Two, according to which the submission of a class action in labor law should not be precluded when the labor union fails in its duty to represent workers whose rights have been violated. However, my colleague adopts a somewhat different approach in regard to two aspects related to the application of those principles, both in regard to the method for serving notice upon the labor union prior to filing a class action, and in regard to the applicability of sec. 10 (3) to the violation of obligatory labor rights, as opposed to rights granted under a collective agreement. The common denominator of our respective views is greater than the differences between them. Although the practical import of the difference is limited, and relates solely to the form of the notice, I would like to clarify my position in regard to these two matters.

105.     The form of the notice to the labor union – My colleague is of the opinion that in order to prepare the groundwork for filing a class action, the notice served upon the labor union cannot be a “usual” request for help in securing the personal rights of the worker. In his opinion, there is need of a formal notice that clearly states the intention to file a class action, and that reserves the right to do so if the complaint is not appropriately addressed within a reasonable time. My colleague explains that such notice is required by the good-faith doctrine, and accords with the opinion of this Court in the Mei Hagalil case, cited above in para. 85 (which treated of the need to give prior notice to an administrative agency expected to be a defendant in a class action). I hold a different opinion in this regard. The prior notice in the instant matter is directed at the labor union rather than the defendant employer, and is intended to serve as a true test of whether the union actually acts to defend the rights of the workers. In this regard, I believe that insisting that the notice include a warning that an unsatisfactory response will result in a class action misses the point of the notice – an authentic test of the daily operation of the union, even when not “warned”. Moreover, my colleague’s approach might result in the union having no incentive to protect the rights of unempowered workers when it knows that as long as it has not been “warned” of an intention to initiate a class action, there is no danger of the undermining of its status as the defender of workers’ rights, even when it does not actually do so. Moreover, it should be our objective that the relationship between a worker and a labor union not be “lawyered up” to the point that a workers’ request that the union come to his defense require a formal notice of the type described by my colleague in order for it to have practical effect for the purpose of filing a class action. I do not think that my colleague’s approach is required by the good-faith doctrine. On the contrary, it may be said that the union’s duty to act faithfully and diligently on behalf of the workers it represents supports the view that there be a price for its neglect even when it is not warned of the consequences. Lastly, I would emphasize that a distinction should be drawn between prior notice to a defendant in a class action – as addressed in the Mei Hagalil case in regard to a defendant that is a public agency, and that does not arise in the instant case (and, thus, need not be addressed) – and the question before the Court regarding a notice intended to test the performance of a labor union that is not the defendant in the class action.

106.     The question of the distinction between rights deriving from a collective agreement and obligatory rights – My colleague argues that sec. 10 (3) of Schedule Two should be understood such that the limitation it places upon class actions apply solely to violations of rights under a collective agreement, as opposed to class actions directed at violations of obligatory rights granted to workers by shield laws. Here, too, I disagree, although, as I explained above, I too am of the opinion that there is practical significance to the nature of the right that the labor union fails to enforce. Obligatory rights are rights over which there is no discretion as to their strict enforcement. Therefore, as I explained (para. 82 above), where a complaint to the labor union does not prompt immediate action, there is a presumption that the union is not acting to protect workers’ rights, and the road to a class action is paved. In such circumstances, there is no need to “threaten” the initiation of a class action. Rather, as already explained, I hold the contrary opinion. As opposed to this, when we are concerned with a violation of rights deriving from a collective agreement, the labor union may have greater discretion as to its course of action vis-à-vis the employer. However, I believe that sec. 10 (3) was intended to preserve the status of the labor union as a significant actor in a workplace subject to a collective agreement regarding workers’ rights. Holding that the labor union has no standing with the employer in regard to the violation of obligatory rights, and that there is no need to serve it notice prior to filing a class action, may unnecessarily undermine the union’s status, and ultimately harm the workers themselves. Indeed, in many respects, the disagreements between my colleague and myself on this point are only of theoretical interest rather than practical import, as even he believes that prior notice must be served upon the union in regard to a violation of obligatory rights, before filing a class action. However, in principle, I see a problem with my colleague’s assertion that even though he believes that sec. 10 (3) does not apply ab initio to a violation of obligatory rights, a class action cannot proceed without prior notice to the labor union. As I explained above, notice to the union is required in order to “clear the hurdle” presented by sec. 10 (3) (i.e., in order to test whether workers’ rights are “regulated”). It is not prior notice to a potential defendant. In any event, if the workers’ request for the enforcement of his obligatory rights is not addressed within a reasonable period of time, then, in my opinion, the limitation established by sec. 10 (3) would not apply. I state all this only for clarification, inasmuch as I do not believe that there is any practical significance to the difference of opinion on this point.

Before Concluding

107.     The advantage of the interpretation we have found to be appropriate for sec. 10 (3) of Schedule Two, in general, becomes clear in light of the history of the enforcement of workers’ rights in the security industry, and of unempowered workers in the secondary market in general. The history revealed by the cases adjudicated in the security industry shows that the labor unions did not act for the benefit of workers whose rights were violated over the course of years, and that they awoke only late in the game, after a number of requests were filed for the certification of class actions in the industry.

108.     In a broader historical view, one might add that the maintaining of the status of labor unions, which is of considerable importance, is dependent, first and foremost, upon the unions themselves. A review of the annals of the defense of workers’ rights shows that the particular challenge presented by defense of the rights of unempowered classes of workers is nothing new, and concerned the leaders of the labor movement from its earliest days. In 1934, Berl Kaztnelson wrote the following:

“I therefore see the purpose of our professional struggle in times of economic boom not in strengthening the bargaining power of the privileged sectors of the labor force, who are the first to benefit from the economic circumstances, but rather in the ongoing concern for the weakest, most overlooked strata of society that are the first to suffer the hardships and bear the losses of booms, and the last to enjoy the benefits, and for whom every small improvement of their living and working conditions requires special exertion” (in:  Berl Katznelson,  Beit Avodah – A Collection of Essays on the Question of the Histadrut, 89, 99 (1965) (Hebrew)).

Yitzhak Tabenkin, one of the leaders of the Histadrut, wrote even more forcefully in 1955:

“Indeed, the trend to equality is steadily weakening in our Histadrut, and differentiation of status is growing. Let no one say that the Histadrut cannot act in this area. It does not have to accustom itself to the ‘strong’, to the ‘privileged’, and abandon the underprivileged to their own devices” (Yitzhak Tabenkin, “Toward a Renewal of the Values of the Histadrut,” in B’darkhei Hashlihut – A Selection of Comments on the Question of the Histadrut and the Labor Movement, 82, 86 (Avraham Tarshish & Aryeh Fialkov, eds. 1969) (Hebrew)).

It is only right and proper that sec. 10 (3) of Schedule Two of the Class Actions Law be given an interpretation that serves that important objective of protecting the weaker members of the workforce, and an interpretation that, as explained above, provides appropriate incentives for workers’ representatives in this regard.

109.     In light of all the above, the petitions are denied. The Petitioner in HCJ 1893/11, the Trade Association, will pay the costs of Respondent 2 in that petition, Yigal Viron, in the amount of NIS 30,000, and the costs of Respondent 5, Kav La’oved, in the amount of NIS 30,000. The Petitioner in HCJ 1965/11, Tevel, will bear the costs of Respondent 2 in that petition, Yigal Viron, in the amount of NIS 30,000, and the costs of Respondent 5, Kav La’oved, in the amount of NIS 15,000. The Petitioner in HCJ 9325/12, Amishav, will bear the costs of Respondents 2-4, the class action plaintiffs Ilan Buskilla, Sergei Zandel and Vlad Konstantinovsky, in the amount of NIS 15,000 each, and the costs of Kav La’oved in the amount of NIS 15,000. The Trade Association, which asked to join this petition, will bear the costs of the class-action plaintiffs Ilan Buskilla, Sergei Zandel and Vlad Konstantinovsky in the amount of NIS 10,000 each. Under the circumstances, we do not find it appropriate to assess costs against the Petitioner in HCJ 7644/13, the class-action plaintiff in that matter, German Yashiev.

 

                                                                                                            Justice

 

Justice H. Melcer:

1.         I concur with the result proposed by my colleague Justice D. Barak-Erez, and with the main points of her thoughtful, learned opinion.

2.         Due to the importance of the matter, I nevertheless feel the need to clarify certain points, and make a few comments on matters on which we somewhat differ. I will, therefore, set them out in order.

3.         Section 2 [Note to editor: this should be “3”] of the Class Actions Law, 5766-2006 (hereinafter: the Class Actions Law, or the Law) states in the matter at hand: “A class action shall be brought only as an action specified in Schedule Two”. Section 10 of the Second Schedule to the Class Actions Law, which is the focus of the petition, reads as follows:

“10.     (1)        A suit for a cause of action that is within the exclusive jurisdiction of a District Labor Court under section 24 (a) (1), (1A) or 3 of the Labor Courts Law, 5729-1969, provided that no relief is claimed for delayed pension, compensation for delayed wages or compensation for delayed severance pay under the provisions of sections 16, 17 or 20 of the Wage Protection Law, 5718-1958.

            (2)        A suit by a worker for a cause of action under section 6A of the Minimum Wage Law, 5747-1987, a suit by a worker for a cause of action under sections 2 and 3 of the Right to Work while Sitting Law, 5767-2007, or under the Employment of Employees by Manpower Contractors Law, 5756-1996.

            (3)        In this section –

‘Suit’—with the exception of a suit by a worker who is subject to a collective agreement that regulates the terms of his employment, and the employer of that worker, or a trade association of which it is a member, is a party to that collective agreement;

‘Collective Agreement – a collective agreement under the Collective Agreements Law, 5717-1957, or a written collective arrangement.”

3.         It seems to me that the question of the interpretation of sec. 10 (3) of Schedule Two of the Class Actions Law, 5766-2006, above, in regard to the possibility of initiating a class action for workers subject to a collective agreement as defined by the Law (i.e., including a written collective arrangement) is complex. It is all the more so when the issues before the court concern a (justified) change in the case law by the National Labor Court in the framework of LabA 629/07 Viron v. Tevel Security, Cleaning and Services Ltd. (Jan. 3, 2011) (hereinafter: the Viron case) per Judge Varda Viret-Livneh (with Judge Amiram Rabinovich and Public Representative Ilan Segev concurring with some reservations), as against the dissenting opinion of President Steve Adler and Labor Representative Mr. Shalom Habshush. We therefore heard these petitions as if an order nisi had been granted, and did not see fit to deny them simply on the basis of the rules under which this Court intervenes in the judgments of the National Labor Court, even though I see no reason to deviate from our basic approach on this subject, as explained by my colleague Justice Z. Zylbertal.

4.         I accept the proposition presented by my colleague (hereinafter: Proposition A) according to which when there is no action by the relevant labor union to enforce the violated rights of workers covered by a collective agreement as defined by the Law, the restriction set out in sec. 10 (3) of Schedule Two of the Law is removed. My reason for this is grounded primarily on the principle that we must guard the guards themselves.

            However, I am of the opinion that not only is sec. 10 (3) of Schedule Two inapplicable when we are concerned with a right that derives from a collective agreement, but also when we are concerned with obligatory rights deriving from labor shield laws (hereinafter: Proposition B). In this regard, I believe that we should adopt the view expressed by Professor Alon Klement and Professor Sharon Rabin-Margalioth in their important article, “Employment Class Actions: Did the Rules of the Game Change?” 31 Iyuney Mishpat, Tel Aviv University Law Journal 369 (2009) (Hebrew)) (hereinafter: Klement & Rabin-Margalioth) as they presented it, rather than as presented by my colleague in para. 82 of her opinion.

            To my way of thinking, this is required by the rules of purposive interpretation, otherwise the result would be that the very existence of a collective agreement as defined by the Law, would appear to preclude a class action even for a right that is not mentioned, or that does not derive from the collective agreement, as defined by the Law. This would be especially true for obligatory rights that cannot be stipulated or restricted even by a collective agreement. Any other view – if accepted – would limit access to the courts, which is a constitutional right (see: the sources cited in para. 14 of my opinion in CFH 5698/11 State of Israel v. Dirani (Jan. 15, 2015)) and would be contrary to the very purpose of law, which is meant to provide operative, effective relief to anyone whose rights are violated (see: Elisheva Barak-Ussoskin, “From the Heights of Nebo – Class Action and Labor Law: Can they exist together? In light of the Class Actions Law, 5766-2006,” Gabriel Bach Volume 577 (David Hahn et al, eds., 2011) (Hebrew); and cf. the persuasive dissent of Justice Kagan (Breyer and Ginsburg, JJ concurring) in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), that bears certain similarities to the legal issues before us, and see Imre Stephen Szalai, “More than Class Action Killers: the Impact of Concepcion and American Express on Employment Arbitration,” 35 Berkeley J. Emp. & Lab. L. 31 (2014), which strongly criticizes the majority opinion in the American Express case and its possible application to labor law).

5.         Recognizing that each of the above two propositions negates the exception established under sec. 10 (3) of Schedule Two of the Law is also consistent with the idea that exceptions should be narrowly construed (see: HCJ 4672/90 Ariel Electrical Engineering, Traffic Lights and Control Ltd. v. Haifa Municipality, 46 (3) IsrSC 267 (1992); HCJ 11088/05 Hayeb v. Israel Lands Administration (Aug. 19, 2010); LCA 3788/06 Yefet v. Yediot Aharonot Ltd. (Jan. 19, 2012)).

A somewhat similar idea that supports the merger of the two propositions that make the restriction an exception was raised by Moran Savorai in her article “The Purpose of Representation Mechanisms in Labor Law: The Class Action Mechanism versus the Traditional Tools of Collective Labor Law,” Elika [Note to editor: This should be “Elisheva”. “Elika” is the judge’s nickname] Barak- Ussoskin Volume 597 (2012) (Hebrew), for her own reasons.

 

6.         Therefore, in accordance with my approach, in the presence of either one of the above two propositions, the discretion granted the labor court does not extend to the question whether the exception under sec. 10 (3) of Schedule Two of the Law has been met, but only to the meeting of the other conditions set forth in sec. 8 of the Class Actions Law for the certification of a class action. The difference between my approach and that of my colleague is that while my colleague is of the opinion that this would hold only in regard to Proposition A (see: para 78 of her opinion),  I am of the opinion that this result is required both by Proposition A and by Proposition B. I am also of the opinion that there is no need for a “voir dire” or other separate, interim proceeding in regard to the applicability or inapplicability of the exception, but rather all of these questions can be addressed together in the course of deciding whether or not to certify the class action. That is what was done in the Viron case, and it is the accepted procedure in regard to the certification of class actions that do not concern labor law – see: LCA 8268/96 Reichart v. Shemesh, 55 (5) IsrSC 276, 290 (2001); and my opinion in LCA 5154/08 Kost Forer Gabbay & Kasierer, Accountants v. Kedmi (April 2, 2009), and the citations there.

7.         According to my colleague, before filing a class action and the request for its certification, the class-action plaintiff must first serve notice upon the representative labor union (see: paras. 85 and 86 of her opinion). While I agree, I do not accept the view that such notice must be directed solely at enforcing the personal rights of the worker, as opposed to a specific warning of the possible intention to file a class action. My colleague is of the opinion that there is no need to “warn” the labor union of a possible class action. In her view, the labor union should muster in response to a workers’ complaint of a serious infringement of his rights, whether or not it is “warned” of the possibility that the worker may file a class action (ibid., para. 86). In my opinion,  the labor union should be reminded of its duties and given a “first right” to act, while emphasizing that if it not act, the worker will be free to initiate a class action. I believe that the worker should also do so in regard to obligatory rights that derive from labor shield laws. In such matters, the union may, at times, act on behalf of the worker in accordance with explicit legal provisions (see, e.g: sec. 7 of the Minimum Wage Law, 5747-1958 [Note to editor: This should be “1987”]; sec. 28 (b) of the Wage Protection Law, 5718-1958; sec. 13B of the Employment of Women Law, 5714-1954), and it would appear that the union could also file a class action on the worker’s behalf under the combined provisions of secs. 3 and 4 (a) (3) of the Class Actions Law, as a possible alternative to declaring a labor dispute (in this regard, my view differs from that of Klement & Rabin-Margalioth, who argue that a labor union can only declare a labor dispute). In my opinion, the prior notice that the worker must send to the representative labor organization should comprise the following elements:

(a)        Details of the claimed violation by the employer.

(b)        A demand that the labor union take steps to enforce the worker’s rights.

(c)        An explanation emphasizing that if the labor union not act with due speed and diligence, it may be exposed to a suit for inadequate representation (in this regard, I agree with my colleague that the scope of that cause of action should be expanded).

(d)       Notice that the complainant reserves the right to file a class action against the employer if the union fails to act, or if its efforts do not bear fruit within a reasonable period of time (in this regard, I agree that a reasonable time before the limitation of actions comes into force is the “upper limit” of the waiting period before filing the class action, although it is possible that even if the worker does not do so before the limitation period expires, he will still have a cause of action for negligence against the labor union, jointly and severally with the cause of action for inadequate representation. And cf: CA 479/65 Wieder v. Gideon Harnoy, 20 (1) IsrSC 468 (1996)).

8.         In my opinion, the need to include all the above elements in the prior notice derives from the duty of good faith, and also reflects the balance that must be struck between the means that collective labor law places at the disposal of the labor union and recourse to class actions, which I believe is the default option in such cases.

            Moreover, in my view, this is also the conclusion to be drawn from this Court’s recent decision in AAA 2978/13 Mei Hagalil – District Sewage Corporation Ltd. v. Younes (July 23, 2015), for the many reasons elaborated there, mutatis mutandis to the instant case. It is also required for the purpose of the “scrutiny of the relevant factual and legal grounds” that must be carried out before requesting certification of a class action (see and compare: LAA 4303/12 Inslar v. Emek Hefer Regional Council (Jan. 22, 2012); and recently, LAA 582/15 Amit Yosha v. Hod Hasharon Municipality (Aug. 22, 2015)). Therefore, if the labor union is not made aware of the alternative of a class action, the potential class-action plaintiff may be placing an obstacle in the union’s path (as it may not know what it is expected to do), and may trip over it himself (if he is unaware of what the union may have done or intends to do, if anything).

            It would appear to me that the distinctions that my colleague suggests in these contexts are not consistent with the rationales that she gives in justification of Proposition A, which she presents in order to ground the dismissal of the barrier to class actions under sec. 10 (3) of Schedule Two of the Law. Moreover, following her approach, it is hard to identify how the presumption regarding the representative organization’s omissions in realizing obligatory rights would work if the worker is not required to specify what is stated above in para. 7, while explaining that the worker may act on his own if the union remains complacent.

9.         Therefore, subject to the above two reservations, which I believe to be significant for the protection of workers’ rights, I concur in the opinion of Justice D. Barak Erez.

                                                                                                                        Justice

 

Justice Z. Zylbertal

1.         I concur in my colleague Justice D. Barak-Erez’s comprehensive opinion, but would like to explain my view in regard to one aspect of the matter, and comment upon the points of disagreement between my colleagues.

            A discussion of the place of class actions in labor law, inter alia in view of the provisions of sec. 10 (3) of Schedule Two of the Class Actions Law, 5766-2006 (hereinafter: Schedule Two), requires that, first and foremost, we address considerations from the field of labor law, and collective labor law in particular, as my colleague’s opinion demonstrates. A significant part of the discussion focused upon the manner for ensuring the effective protection of the rights of unempowered workers, and the role of a representative labor organization in this campaign. Another question addressed was that of the most effective means for achieving those objectives, and what the consequences would be of strengthening the role of class actions in collective labor law. For that reason, and in addition to all that has been said by my colleague Justice D. Barak-Erez, I would like to stress that it would be most proper that the intervention of this Court in the decisions of the National Labor Court in the subject at hand be limited. This was stated more than once in regard to matters at the core of labor law and within the special expertise of the Labor Court. Inasmuch as the High Court of Justice does not hold appellate jurisdiction over the decisions of the National Labor Court, intervention in its decisions should be reserved for those relatively rare cases that concern a conspicuous, substantive legal error in an area of public, social or economic significance, and that resulted in an injustice that cannot be ignored. In other words: intervention should be reserved primarily to cases in which a substantive legal error is found in the decision, and justice requires the intercession of this Court in order to prevent a miscarriage of justice (HCJ 739/10 Anonymous v. Anonymous, paras. 8-11 (May 30, 2012), and the cases cited there).

            Indeed, as my colleague noted, it has been further held that another test for the intervention of this Court is the general, public importance of the problem, the scope of its attendant implications, or the fundamental nature of the issue raised. But it would seem that such is the case primarily when we are concerned with questions that affect legal issues that go beyond the scope of labor law. In my opinion, we must restrain ourselves from excessive intervention even – or, perhaps, especially – when we are concerned with original or precedent-setting decisions on broad issues firmly rooted in labor law. Even if there may be alternative approaches or solutions to those arrived at by the National Labor Court (although I agree with its decisions), the instant cases certainly are not examples of decisions that present a substantive legal error that caused a miscarriage of justice. Therefore, in my opinion, these petitions could have been denied on the basis of the guidelines governing the intervention of the High Court of Justice in the decisions of the National Labor Court.

2.         My colleagues presented a disagreement on two points: the content of the application to the labor union prior to filing a class action (must that application include notice of the intention to file a class action against the employer), and in regard to the distinction between the violation of obligatory rights deriving form shield laws and violations of rights deriving from a collective agreement in regard to the application of sec. 10 (3) of Schedule Two.

            These issues were not argued by the parties, and more importantly, no factual foundation, grounded in evidence submitted to the trial court, was laid. As a result, what my colleagues stated in their regard was largely obiter dicta and in the realm of academic theory.  In keeping with my view that this Court should act with restraint in regard to issues given to the jurisdiction of the labor courts, as sated above, I believe that we should refrain as much as possible from establishing rules in areas that have not yet passed through the “crucible” of the various instances of the labor courts, as it is best that the decisions of this Court be founded, first and foremost, upon approaches developed by the labor courts, which have special expertise and experience in the said field. This is all the more true when we are concerned with matters that are not founded upon factual foundations established by a duly constituted court. Or as aptly stated by President M. Naor, and as repeatedly expressed in the case law of this Court, “the law arises from the facts”:

“As Justice M. Naor has emphasized in hearings before this Court, ‘the law arises from the facts’. This statement reflects an axiom of the judicial task, grounded in the deeply rooted principal ex facto jus oritur [see: HCJ 7957/04 Marabeh v. Prime Minister of Israel, 60 (2) 477, 525 (2005)]. [Note to editor: This judgement appears in [2005] (2) IsrLR 106]  The desire to establish a particular legal rule cannot ignore the factual foundation of the case upon which the rule is developed” (CrimFH 5852/10 State of Israel v. Shemesh (Jan. 1, 2012), para. 3 of the opinion of Y. Danziger, J.).

Indeed, there is no Supreme Court case-law rule in regard to the questions addressed by my colleagues, and precisely for that reason, it is inappropriate that the Supreme Court express its binding opinion in this matter in the absence of a concrete factual foundation, and even to be the first to state its opinion, even before the labor courts have addressed these issues.

            Under these circumstances, I see no need to take a firm stand in the debate between my colleagues, and I will suffice in presenting the main points of my preliminary view, while stressing that the rule should properly be developed only after it is required in a proceeding in which the factual footings are laid out such that we may set our opinions, inter alia, upon that foundation.

3.         In sec. 10 (3) of Schedule Two, the legislature expressed its view that when labor relations are regulated by a collective agreement, a class action cannot proceed. Indeed, as my colleague Justice Barak-Erez explained, that provision should not be applied strictly, and when a labor union forsakes its duty to represent the workers whose rights were violated, a worker should be allowed to file a class action against his employer. In this, we have no disagreement. However, despite the door opened for initiating class actions, the starting point must, in my view, be the legislature’s fundamental view that prefers the resolution of labor disputes within the framework of collective labor relations, to the extent that they exist and function, as against the use of class actions.

            Therefore, I believe that, as a rule, and in order to realize the basic preference for resolving employee-employer disputes within the framework of collective labor relations, if the dispute falls within it, it is best to exhaust that framework to the extent possible before stating that it has failed and that the path has been paved for a class action. For this reason, I would expect that when a worker turns to the labor union with a request that it act in defense of his rights, he should also inform it of his intention to file a class action if the union not act as a union should in protecting its members. My colleague Justice Barak-Erez believes that in order to put the labor union to a “true test” and ascertain whether it acts to defend workers’ rights in practice, such a “threat” of a class action against the employer should not be included in the notice sent to the union. My colleague is also of the opinion that requiring such a warning of the intention to file a class action would result in the union not having an incentive to defend the rights of unempowered workers who do not intend to initiate class actions. These are practical concerns that I do not take lightly. However, I believe that for the present, before such possible scenarios have been brought to light in an actual case, against a factual background, the starting point must be the full disclosure of all the intentions of the worker applying to the labor union, in order to fully realize the basic approach of the legislature that where there are collective labor relations, it is preferable that disputes be resolved in that framework. In that framework, all cards should be on the table as long as it has not been proved that such a course will lead to real harm to the worker, such as to justify deviating from the principal established in sec. 10 (3) of the Schedule. Should it transpire, as my colleague expects, that this approach – which my colleague Justice Melcer addressed at length, and for which he brought additional support – will result in some “failure” that must be corrected, then we can revisit the said approach.

4.         As for the second issue disputed by my colleagues, I prefer the approach of my colleague Justice Barak-Erez. This, in particular, where my colleague Justice Melcer believes that even in the case of a violation of an obligatory right deriving from shield laws, the worker must first turn to the labor union before filing a class action, and must even give prior notice of his intention to file such an action. As noted, there is barely any practical difference between the two approaches. However, it seems to me that the approach of Justice Barak-Erez better expresses the legislative intent in regard to the place of class actions where there are collective labor relations. Here, too, it would be best to allow the case law to develop, and leave it flexible. If it transpire that the difference in approach expressed by my colleagues has real consequences, or that ensuring true protection of workers’ rights requires it, then we shall be free to revisit the issue, first in the district labor courts – on the basis of factual findings – and then in the National Labor Court. But not first in this Court.

                                                                                                                        Justice

 

The petitions are therefore denied.

Given this 15^th of Elul 5775 (Aug. 30, 2015).

 

Justice                                     Justice                                     Justice                                                                           

HCJ 721/94

El-Al Israel Airlines Ltd

v.

1. Jonathan Danielowitz

2. National Labour Court

 

The Supreme Court sitting as the High Court of Justice

[30 November 1994]

Before Vice-President A. Barak and Justices Y. Kedmi, D. Dorner

 

Petition to the Supreme Court sitting as the High Court of Justice.

 

Facts: The first respondent, who is employed by El-Al as a flight attendant, has a stable relationship with another man. Under a collective agreement, El-Al gives every permanent employee a free aeroplane ticket, every year, for that employee and his/her spouse (husband or wife). Under a collective arrangement, a free ticket is also given to a companion recognized publicly as the employee’s husband/wife. The first respondent asked El-Al to give him a free ticket for his companion, but his request was denied.

 

Held: (Majority opinion — Vice-President A. Barak, Justice D. Dorner) Not giving the respondent a free ticket for his same-sex companion amounted to discrimination, since a distinction on the basis of the difference between a heterosexual and a homosexual relationship is unjustified in the context of employee benefits.

(Minority opinion — Justice Y. Kedmi) Linguistically, only a heterosexual couple can be called a ‘couple’; the concept of the ‘couple’ linguistically only applies to an union of male and female that can, conceptually, have children. Therefore a distinction between a same-sex companion and an opposite-sex companion is a distinction between persons who are fundamentally unequal, and this does not amount to discrimination.

 

Petition denied, by majority opinion (Vice-President M. Shamgar and Justice D. Dorner), Justice Y. Kedmi dissenting.

 

Legislation cited:

Basic Law: Human Dignity and Liberty, 5752-1992, ss. 7, 8.

Contracts (General Part) Law, 5733-1973, ss. 14, 31.

Criminal Law Ordinance, 1936, s. 152(2).

Employment Service Law, 5719-1959, s. 42.

Equal Employment Opportunities Law, 5748-1988, ss. 2, 2(a) 2(c).

Equal Employment Opportunities Law (Amendment), 5752-1992.

Equal Remuneration for Female and Male Employees Law, 5724-1964.

Equal Retirement Age for Female and Male Employees Law, 5747-1987.

Government Corporations Law, 5735-1975, s. 18A.

National Insurance Law [Consolidated Version], 5728-1968, s. 8.

Penal Law, 5737-1977, s. 351(3).

Penal Law (Amendment no. 22), 5748-1988.

Women’s Equal Rights Law, 5711-1951, s. 1.

 

Israeli Supreme Court cases cited:

[1]      FH 13/84 Levy v. Chairman of Knesset Finance Committee [1987] IsrSC 41(4) 291.

[2]      HCJ 98/69 Bergman v. Minister of Finance [1969] IsrSC 23(1) 693; IsrSJ 8 13.

[3]      EA 2/88 Ben-Shalom v. Central Elections Committee for Twelfth Knesset [1989] IsrSC 43(4) 221.

[4]      HCJ 114/78 Burkan v. Minister of Finance [1978] IsrSC 32(2) 800.

[5]      HCJ 453/94 Israel Women’s Network v. Government of Israel [1994] IsrSC 48(5) 501; [1992-4] IsrLR 150.

[6]      HCJ 953/87 Poraz v. Mayor of Tel-Aviv-Jaffa [1988] IsrSC 42(2) 309.

[7]      HCJ 104/87 Nevo v. National Labour Court [1990] IsrSC 44(4) 749; IsrSJ 10 136.

[8]      HCJ 507/81 Abu Hatzira MK v. Attorney-General [1981] IsrSC 35(4) 561.

[9]      HCJ 301/63 Streit v. Chief Rabbi [1964] IsrSC 18(1) 598.

[10]    HCJ 693/91 Efrat v. Director of Population Registry at Ministry of Interior [1993] IsrSC 47(1) 749.

[11]    HCJ 1000/92 Bavli v. Great Rabbinical Court [1994] IsrSC 48(2) 221.

[12]    HCJ 5394/92 Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [1994] IsrSC 48(3) 353.

[13]    HCJ 246/81 Derech Eretz Association v. Broadcasting Authority [1981] IsrSC 35(4) 1; IsrSJ 8 21.

[14]    HCJ 141/82 Rubinstein v. Knesset Speaker [1983] IsrSC 37(3) 141; IsrSJ 8 60.

[15]    HCJ 5688/92 Wechselbaum v. Minister of Defence [1993] IsrSC 47(2) 812.

[16]    FH 10/69 Boronovski v. Chief Rabbis [1971] IsrSC 25(1) 7.

[17]    HCJ 30/55 Committee for Protection of Expropriated Nazareth Land v. Minister of Finance [1955] IsrSC 9 1261.

[18]    CrimA 112/50 Yosipof v. Attorney-General [1951] IsrSC 5 481; IsrSJ 1 174.

[19]    HCJ 153/87 Shakdiel v. Minister of Religious Affairs [1988] IsrSC 42(2) 221; IsrSJ 8 186.

[20]    CrimA 224/63 Ben-Ami v. Attorney-General [1964] IsrSC 18(3) 225.

[21]    HCJ 720/82 Elitzur Religious Sports Association, Nahariyah Branch v. Nahariyah Municipality [1983] IsrSC 37(3) 17.

[22]    HCJ 4169/93 — unreported.

[23]    HCJ 410/76 Herut v. National Labour Court [1977] IsrSC 31(3) 124.

 

Israel National Labour Court cases cited:

[24]    NLC 33/25-3 Flight Attendants Association v. Hazin [1973] 4 IsrNLC 365.

[25]    NLC 44/85-0 – unreported.

 

American cases cited:

[26]    Welsh v. United States 398 U.S. 333 (1970).

[27]    Califano v. Westcott 443 U.S. 76 (1979).

[28]    Boutilier v. Immigration Service 387 U.S. 118 (1967).

[29]    Nemetz v. Immigration & Naturalization Service 647 F. 2d 432 (1981).

[30]    Braschi v. Stahl Associates Co. 544 N.Y. Supp. 2d 784 (1989).

[31]    Yorkshire Towers Co. v. Harpster 510 N.Y. Supp. 2d 976 (1986).

[32]    Two Associates v. Brown 502 N.Y. S. 2d 604 (1986).

[33]    E. 10th St. Assoc. v. Estate of Goldstein 552 N.Y. Supp. 2d 257 (1990).

 

English cases cited:

[34]    Dyson Holdings Ltd v. Fox [1975] 3 All E.R. 1030 (CA).

 

European Court of Human Rights cases cited:

[35]    Norris Case 142 Eur. Ct. H. R. (Ser. A) (1988).

[36]    Modinos v. Cyprus Case 259 Eur. Ct. H. R. (Ser. A) (1993).

 

Canadian cases cited:

[37]    Schachter v. Canada (1992) 93 D.L.R. (4th) 1.

[38]    R. v. Turpin [1989] 1 S.C.R. 1296.

[39]    Vriend v. Alberta (1994) 6 W.W.R. 414.

[40]    Egan v. Canada (1993) 103 D.L.R. (4th) 336.

[41]    Haig v. Canada (1992) 94 D.L.R. (4th) 1.

[42]    Layland v. Ontario (Consumer Protection & Commercial Relations) (1993) 104 D.L.R. (4th) 214.

[43]    Canada (A.G.) v. Mossop [1993] 1 S.C.R. 554.

 

Jewish Law sources cited:

[44]       Genesis 1, 27; 1, 28; 2 24; 5 2; 6 19.

 

For the petitioner — Y. Winder, A. Ben-Israel

For the first respondent — S. Donevitz, O. Kalmaro

 

 

JUDGMENT

 

 

Vice-President A. Barak

A collective agreement and a collective arrangement confer a benefit on a ‘spouse’ (husband or wife) or a ‘companion recognized as a husband/wife’ of an employee. Is this benefit conferred also on an employee’s same-sex companion? That is the question before the court in this petition.

The facts and the litigation before the Labour Court

1.    The first respondent (the respondent) works as a flight attendant for the petitioner (the El-Al company). Under the collective agreement, every (permanent) employee is entitled to receive free (or discounted) aeroplane tickets for himself and his ‘spouse (husband/wife)’ once a year. Under a collective arrangement (entitled ‘professional guidelines’), aeroplane tickets (as of 1 January 1986) are given to ‘a companion recognized as the husband/wife of an employee of the company if the couple live together in a joint household as husband and wife in every respect, but they are unable to marry lawfully.’

2.    The respondent applied (on 21 January 1988) to the petitioner with a request to recognize his male companion as his ‘companion’ for the purpose of receiving an annual free or discounted aeroplane ticket. In his request, the respondent explains that he has a stable and long-term relationship (since 1979) with another man. The relationship involves, inter alia, running a joint household and cohabiting in a private apartment purchased jointly. The respondent’s request was refused.

3.    The respondent applied to the Regional Labour Court. He asked the court to declare him entitled to receive free or discounted aeroplane tickets for his male companion, just as El-Al gives these to its employees’ spouses. According to a procedural agreement, it was agreed that the court would first consider the underlying question whether an El-Al employee is entitled to a free or discounted ticket for a same-sex ‘companion’. On this question, the Regional Labour Court (Justice Lubotsky and public representatives Ozeri and Pinchas) held that the provision of the collective agreement (which confers the right to the benefit on a ‘spouse’) does not confer a right on a companion of an employee, and this does not involve improper discrimination. However, the provision of the collective arrangement conferring a benefit on persons recognized as a couple (despite their being unable to marry lawfully) but not conferring the same benefit on a same-sex couple (who are also unable to marry lawfully) is a discriminatory provision. This discrimination is prohibited by the provisions of the Equal Employment Opportunities Law, 1988. Under the provisions of this law (in s. 2) — as amended in the Equal Employment Opportunities (Amendment) Law, 1992 — an employer may not discriminate against any of his employees in their conditions of employment ‘on the basis of sex, sexual orientation, personal status or their being parents.’ Because of this prohibited discrimination, the discriminatory provision in the collective arrangement was disqualified. By virtue of the procedural agreement, the Regional Labour Court went on to consider whether the respondent in fact cohabits with his companion.

4.    El-Al appealed to the National Labour Court. The National Labour Court (President M. Goldberg, Vice-President S. Adler, Justice Y. Eliasof and public representatives R. Ben-Yisrael, Abrahamovitz, Friedman and Galin) dismissed the appeal.[*] It was held that the respondent does not fall into the category of those entitled to a discount under the collective agreement, since the expression ‘spouse (husband/wife)’ does not include a same-sex companion. It also held that the respondent does not fall into the category of ‘persons recognized as the husband/wife of an employee’ in the collective arrangement, since a recognized companion, in the context of the collective arrangement, does not include same-sex companions. Notwithstanding, the court held that this position constitutes improper discrimination on the basis of sexual orientation, contrary to the principle of equality set out in the Equal Employment Opportunities Law, as amended in 1992. This improper discrimination, contrary to provisions of the law, gives the respondent (as of 2 January 1992) a right to demand for himself the benefit that was not conferred on him for discriminatory reasons.

5.    The petition before us is directed against the decision of the National Labour Court. El-Al (the petitioner) asks for a ruling that its refusal to give the respondent an aeroplane ticket for his companion does not constitute improper discrimination under the Equal Employment Opportunities Law as amended in 1992. El-Al’s contention is that this law — in the 1992 amendment — added an additional type of prohibited discrimination (‘sexual orientation’) but it did not confer rights to receive benefits that an employee was not previously entitled to receive. The respondent argued before us that there is no reason why we should intervene in the National Labour Court’s judgment, which ruled that a cause of action based on discrimination was created by the Equal Employment Opportunities Law, justifying giving aeroplane tickets for the respondent’s companion as of the date when the law was amended (on 2 January 1992).

The interpretive construction

6.    The respondent (the flight attendant, the employee) may base his argument to receive the benefit (a free or discounted ticket) for his companion on two legal constructions. According to the first construction, his right is founded on the collective agreement that gives benefits to ‘a spouse (husband/wife)’ and on the collective arrangement that gives a benefit to ‘a person recognized as the husband/wife of an employee.’ According to this construction, the term ‘spouse’ (in the collective agreement) and the term ‘recognized companion’ (in the collective arrangement) should be interpreted according to their purpose to include also a spouse of the same sex and a recognized companion of the same sex. The respondent’s right to receive the benefit is contractual, and it is founded on the text of the collective agreement and the collective arrangement, just like the respondent’s right to receive the benefit for himself. This legal model is interpretive in nature. It is intrinsic to the actual text. In this the respondent’s right to receive benefits — for his companion and for himself — derives from the legal meaning of the contractual text that is chosen from among its various linguistic meanings. Naturally this right accrues to the employee when the conditions entitling him to it are fulfilled.

7.    The interpretive construction was rejected by the Labour Courts. They held that the (legal) meaning of the term ‘spouse (husband/wife)’ in the collective agreement does not include same-sex companions. The National Labour Court pointed out that —

‘In the case before us, the parties to the collective agreement expressly showed that they did not mean a same-sex companion. The collective agreement says “spouse (husband and wife)”. The words “husband and wife” attached to the term spouse show that the parties used the term spouse in its narrow sense. It follows that this expression in the collective agreement does not include recognized companions and same-sex companions who are indisputably not “husband and wife”.’*

With regard to the term ‘person recognized as a husband/wife’ in the collective arrangement, the National Labour Court held that this does not include persons of the same sex who cohabit. The National Labour Court pointed out that the ‘term “recognized companion” does not appear by itself, but it is accompanied by the words “as husband/wife”.’* This use of language shows ‘that the intention of the drafter was not to include persons of the same sex.’*

The statutory construction

8.    A second legal construction is also available to the respondent. This construction starts with the premise that the contractual right to receive a benefit is conferred only on a companion who is not the same sex as the employee. According to this construction, the contractual arrangement (the product of the interpretive construction) is a discriminatory arrangement that is contrary to the Equal Employment Opportunities Law (as amended in 1992). The remedy given to the respondent as a result of this discrimination is not to nullify the contractual arrangement — a remedy that he did not request at all — but to make a (judicial) order based on the provisions of the law to correct the discrimination. The respondent will therefore be entitled to the benefit for his companion by combining the discriminatory contractual provision with the corrective statutory provision. This construction is not interpretative. It is extrinsic to the actual text. Its existence derives from the combination of (A’s) contractual right and the statutory mandate to prevent discrimination (against B). The resulting right of the employee arises on the day that the statutory prohibition against discrimination on grounds of sexual orientation came into force (i.e., on 2 January 1992). It may be called a statutory (or extrinsic) construction. The National Labour Court accepted this construction, and this is what El-Al is attacking before us. Analyzing this legal model must be done in two stages: first, whether the contractual arrangement (the product of the interpretive construction) is (improperly) discriminatory because of sexual orientation; second, what remedy should be given to an employee who has been the victim of (improper) discrimination on the basis of sexual orientation?

9.    The respondent did not reargue the interpretive construction before us. Indeed, this construction — which, as stated, was rejected by the National Labour Court — is complex (cf., with regard to the term ‘spouse’, FH 13/84 Levy v. Chairman of the Knesset Finance Committee [1]; see also C. A. Bowman, B. Cornish, ‘A More Perfect Union: A Legal and Social Analysis of Domestic Partnership Ordinances,’ 92 Colum. L. Rev. (1992) 1164; R. Elbin, ‘Domestic Partnership Recognition in the Workplace: Equitable Employee Benefits for Gay Couples (and Others),’ 51 Ohio St. L. J. (1990) 1067). We would have been compelled to decide this, had the respondent insisted on his (contractual) right to receive a benefit from the date when these (contractual) rights were created. As we have seen, the respondent accepts the decision of the National Labour Court that his right is based on the argument of discrimination on the basis of sexual orientation, relying on the amendment (of 2 January 1992) to the Equal Employment Opportunities Law. As a result, we do not need to consider the interpretive construction. I therefore presume — without deciding the issue — that the respondent does not have a (contractual) right under the collective agreement and the collective arrangement to receive the benefit for his companion. On this basis, I will now examine the statutory construction, with its two questions (is discrimination present; what is the proper remedy). I shall begin with the first question.

The right to equality and its violation

10. Equality is a fundamental value in Israeli law. ‘It is the heart and soul of our whole constitutional regime’ (Justice Landau in HCJ 98/69 Bergman v. Finance Minister [2], at p. 698 {18}) and ‘it is part of the essence and character of the State of Israel’ (Vice-President Justice Elon in EA 2/88 Ben-Shalom v. Central Election Committee for the Twelfth Knesset [3], at p. 272). ‘…The rule that one may not discriminate against persons on the basis of race, sex, nationality, ethnicity, country of origin, religion, beliefs or social status is a fundamental constitutional principle which is counted among our fundamental jurisprudential perspectives and constitutes an integral part of these’ (Justice Shamgar in HCJ 114/78, Motion 451, 510/78 Burkan v. Minister of Finance [4], at p. 806). Considerations of justice and fairness underlie the principle of equality. ‘The principle of equality… has long been recognized in our law as one of the principles of justice and fairness…’ (Justice Mazza in HCJ 453/94 Israel Women’s Network v. Government of Israel [5], at p. 521 {150}). Equality is a central element of the social contract upon which society is based (see HCJ 953/87 Poraz v. Mayor of Tel-Aviv-Jaffa; Labour Party in Tel-Aviv-Jaffa Municipality v. Tel-Aviv-Jaffa Municipal Council [6], at p. 332). Indeed —

‘Discrimination is a plague that fosters a feeling of unfairness and frustration. It harms the sense of belonging and constructive motivation to participate in, and contribute to, social life. A society that practices discrimination is not a healthy society, nor can a state in which discrimination is practised be called a civilized state’ (Justice Bach in HCJ 104/87 Nevo v. National Labour Court [7], at p. 760 {150}).

11. The principle of equality is entrenched in Israel in a number of normative structures. First, it is a principle of case-law — the product of  ‘Israeli common law’ — that has been recognized and developed by the courts in Israel. This principle reflects on the (objective) intention of every piece of legislation and acts as a criterion for its interpretation. ‘The fundamental principle, which constitutes a legislative goal for all the acts of the legislature, is the principle that everyone is equal before the law… legislation should therefore be presumed and interpreted as intending to achieve this purpose, not to undermine it.’ (HCJ 507/81 Abu Hatzira MK v. Attorney-General [8], at p. 585. See also HCJ 301/63 Streit v. Chief Rabbi [9], at p. 612). The case-law principle of equality reflects on the law’s ‘fundamental concepts’ (such as reasonableness, justice, equality and public policy) and constitutes a normative element in establishing the scope of their application (see HCJ 693/91 Efrat v. Director of Population Register at Interior Ministry [10]). A discriminatory collective agreement may therefore be contrary to public policy and be disqualified as a result (see Nevo v. National Labour Court [7] and L.C.J. 3-25/33 Flight Attendants’ Committee v. Hazin [24]). The case-law principle of equality is a normative basis for recognizing the right of equality as a human right in Israel. It leads to the formulation of case-law rules based on it — such as the rule of spouses’ joint property ownership (see HCJ 1000/92 Bavli v. Great Rabbinical Court [11]).

12. Second, the principle of equality is incorporated in Israeli legislation. This began with Israel’s Declaration of Independence, which provides that the State of Israel shall treat its citizens equally ‘irrespective of religion, race or sex’. It continued in legislation that creates equality in specific relationships. Thus, for instance, the Women’s Equal Rights Law, 1951, provides that ‘women and men shall be subject to the same law for every legal act...’ (s. 1). The Employment Service Law, 1959, prohibits discrimination by the Employment Service when referring a person for employment (s. 42). The Equal Remuneration for Female and Male Employees Law, 5724-1964, aims to ensure equality in employees’ salaries. Special legislation is intended to allow corrective preferential treatment for women (see section 18A of the Government Corporations Law, 1975). Another law — which is the relevant one in this case and which we will discuss separately — is the Equal Employment Opportunities Law. This development culminated in the enactment of the Basic Law: Human Dignity and Liberty, which entrenched equality as a super-legislative constitutional right, within the framework of human dignity:

‘Today the principle of equality can be entrenched in the Basic Law: Human Dignity and Liberty. Such entrenchment implies the elevation of the principle of equality to a constitutional, super-legislative normative status’ (per Justice Or in HCJ 5394/92 Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 362).

13. Needless to say, equality does not confer an absolute right. The human right of equality — like every other human right — is a relative right. The principle of ‘equality is not an absolute but a relative principle’ (per Justice Or in Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 361); the limits of extending the principle of equality are determined by an (internal) balance between the whole spectrum of human rights and by the public interest (see A. Rubinstein, The Constitutional Law of the State of Israel, Shoken, 4th edition, 1991, at pp. 199, 299). The right to equality may be restricted by virtue of other appropriate values (see HCJ 246/81 Derech Eretz Association v. Broadcasting Authority [13], at p. 13 {32}, and cf. s. 8 of the Basic Law: Human Dignity and Liberty). Indeed, sometimes equality is not completely protected. Equality may be lawfully restricted if this is consistent with the values of the State of Israel, is for a proper purpose and if equality is not restricted more than necessary.

14. The factual premise is that people are different from one another. ‘...No person is completely identical to another’ (Justice S. Levin in HCJ 141/82 Rubinstein v. Knesset Speaker [14], at p. 148 {67}). Every person is a world in himself. Society is based on people who are different from one another. Only the worst dictatorships try to eradicate these differences. Moreover, the presumption behind the Basic Law: Human Dignity and Liberty is that every person is free to develop physically and spiritually as he sees fit (see HCJ 5688/92 Wechselbaum v. Minister of Defence [15]). This underlying freedom is the basis for the principle of equality. It means equality before the law and the law being impartial to the differences between people. It means equality in applying freedom. It means equality in opportunities. This equality presumes a normative arrangement that is applied uniformly to all individuals, irrespective of the factual difference between them. However, the principle of equality does not presume only one rule for everyone. Indeed, the principle of equality does not rule out different rules for different people. The principle of equality demands that the existence of a rule that treats people differently is justified by the nature and substance of the issue. The principle of equality therefore presumes the existence of objective reasons that justify a difference (a distinction, dissimilarity). Discrimination — which is the opposite of equality — exists therefore in those situations where a different law for people who are (de facto) different from one another is based on reasons that are insufficient to justify a distinction between them in a free and democratic society. In Justice Or’s words, discrimination is ‘different treatment without an objective justification’ (Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 360). President Agranat discussed this and pointed out:

‘The principle of equality, which is merely the opposite of discrimination and which, for reasons of justice and fairness, the law of every democratic country aspires to achieve, means that people must be treated equally for a particular purpose, when no real differences that are relevant to this purpose exist between them. If they are not treated equally, we have a case of discrimination. However, if the difference or differences between different people are relevant for the purpose under discussion, it is a permitted distinction to treat them differently for that purpose, provided that those differences justify this. In this context, the concept of “equality” therefore means  “relevant equality”, and it requires, with regard to the purpose under discussion, “equality of treatment” for those persons in this state. By contrast, it will be a permitted distinction if the different treatment of different persons derives from their being, for the purpose of the treatment, in a state of relevant inequality, just as it will be discrimination if it derives from their being in a state of inequality that is not relevant to the purpose of the treatment’ (FH 10/69 Boronovski v. Chief Rabbis [16], at p. 35).

Therefore a particular law will create discrimination when two individuals, who are different from one another (factual inequality), are treated differently by the law, even though the factual difference between them does not justify different treatment in the circumstances. Discrimination is therefore based on the factors of arbitrariness, injustice and unreasonableness. Justice Witkon discussed this and pointed out:

‘What is discrimination? Not every distinction between different groups of people is called “discrimination”; the concept of discrimination includes the idea of unfairness in treating equals unequally’ (HCJ 30/55 Committee for Protection of Expropriated Nazareth Lands v. Minister of Finance [17], at p. 1265).

Discrimination — which, as stated, is the opposite of equality — means unfair, unjust and arbitrary treatment (see CrimA 112/50 Yosipof v. Attorney-General [18], at p. 490 {183}).

15. As we have seen, the contractual regime at El-Al gives a male or female employee a right to receive a benefit (a free or discounted aeroplane ticket) for a wife or husband or recognized companion (male or female), provided that they are of the other sex. Does this constitute discrimination against a companion of the same sex? As we have seen, the test for equal and discriminatory treatment is the question whether the difference in sex is relevant to the issue. This relevance is examined on the criteria of arbitrariness, fairness and justice. The basis for giving a benefit to an employee for a spouse or a recognized companion lies in the attitude that there are reasons for giving a benefit — such as an aeroplane ticket — to an employee for the person with whom he lives and shares a common household, from whom he is separated when he leaves on his flights and to whom he returns when he finishes his work. This is the criterion that both a spouse and a recognized companion have in common. The purpose of the benefit is not to strengthen the institution of marriage. Indeed, El-Al gives the benefit to an employee living with a recognized companion, even when that recognized companion is lawfully married to someone else. The idea underlying the giving of the benefits is therefore cohabitation for a certain period (specified in the collective arrangement), which is evidence of a firm social unit based on a life of sharing. In this context, it seems clear to me that denying a same-sex companion this benefit amounts to discrimination and a violation of equality. Indeed, the only reason for denying the benefit to a same-sex companion is sexual orientation. There is no other reason. This difference is not at all relevant to the issue before us (supporting a firm social unit, based on a life of sharing). In the case before us, we are dealing with a distinction that is arbitrary and unfair: is parting from a same-sex companion easier than parting from a companion of the opposite sex? Is living together for persons of the same sex different, with regard to the relationship of sharing and harmony and running the social unit, from this life of sharing for heterosexual couples?

16. One might argue that a life of sharing and harmony between persons of opposite sexes (whether as husband and wife or as recognized companions) is so different in its character from a life of sharing and harmony between persons of the same sex that any legal regime giving a benefit to the former relationship does not discriminate against the latter relationship. Although this argument seems to me problematic, I am prepared to reserve judgment, since the question that we must ask is not whether one relationship (a life of sharing and harmony between persons of opposite sexes) is different on any criteria from the other relationship (a life of sharing and harmony between persons of the same sex). As stated, I am prepared to assume that in various social contexts this difference does indeed exist. The question that we must ask is whether the difference in the relationship is relevant to the issue before us. The ‘issue before us’ is the social unit, the life of sharing and harmony that justify, in El-Al’s opinion, giving a benefit to a (permanent) employee in the form of an aeroplane ticket which will enable him to take with him the person with whom he cohabits. In this respect, the difference between a life of sharing between persons of different sexes and a life of sharing between persons of the same sex is clear and blatant discrimination.

Discrimination on the basis of sexual orientation

17. We have seen, therefore, that giving a benefit to a (permanent) employee for a spouse or recognized companion of the opposite sex and not giving the same benefit for a same-sex companion amounts to a violation of equality. What is the nature of this discrimination? Indeed, all discrimination is prohibited, but among the different kinds of discrimination there are varying degrees. The severity of the discrimination is determined by the severity of the violation of the principle of equality. Thus, for example, we consider discrimination on the basis of race, religion, nationality, language, ethnic group and age to be particularly serious. In this framework, the Israeli legal system attaches great importance to the need to guarantee equality between the sexes and to prevent discrimination on the basis of sex (see HCJ 153/87 Shakdiel v. Minister of Religious Affairs [19]; Poraz v. Mayor of Tel-Aviv-Jaffa [6]). It may be said that the discrimination in the appeal before us is based on improper considerations of sex. Conversely, it may be argued that discrimination on the basis of sex does not exist, since the same benefit is conferred on (permanent) male and female employees. This argument, in itself, does not strike me as convincing. However I do not need to decide the issue, since there can, I think, be no doubt that the discrimination in this case is based on the ‘sexual orientation’ of the (permanent) employee. This discrimination — against homosexuals and lesbians — is improper. It is contrary to equality. This emerges clearly from the provisions of the Equal Employment Opportunities Law. This law, as amended in the Equal Employment Opportunities Law (Amendment), states (in s. 2):

‘(a) An employer shall not discriminate between his employees, or between candidates for employment on the basis of their sex, sexual orientation, personal status or their being parents with respect to any of the following:

(1)  giving employment;

(2)  conditions of employment;

(3)  promotion in employment;

(4)  training or professional studies;

(5)  dismissal or severance pay.

(b) For the purposes of subsection (a), making irrelevant conditions shall also be regarded as discrimination.

(c) Discrimination shall not exist under this section when it is required by the character or nature of the job or position.’

In explaining the provision about the prohibition of discrimination on the basis of sexual orientation, the chairwoman of the Labour and Welfare Committee, Mrs O. Namir, pointed out:

‘I hope that adopting the proposed law will contribute towards treating men and women equally, regardless of their sexual orientation, allowing them to live according to their sexual orientation as equal citizens in every respect, and affording them the legal protection enjoyed by every other group.’

This provision does not deny the differences between human beings. These differences are natural. This provision states that the different sexual orientation of persons shall not be relevant in employment, unless this is required by the nature of the job. Indeed, with regard to conditions of employment, the employer must be impartial to his employees’ sexual orientations. He must determine the conditions of employment only in view of the criteria required by the nature of the job. Therefore if a benefit is conferred on an employee having a long-term and permanent relationship with a woman, that benefit should be conferred on an employee who has a long-term and permanent relationship with another man. Thereby the employer implements the principle of equality. Thereby he is prevented from invading the privacy of the employee (cf. s. 7 of the Basic Law: Human Dignity and Liberty). Conferring a benefit on a permanent employee for his recognized companion and not conferring it on a permanent employee for a same-sex companion (who complies with all the requirements of a recognized companion apart from the requirement of sex) amounts to discrimination in conditions of employment because of sexual orientation. This discrimination is prohibited. Consider A, a permanent employee of El-Al, who shares his life for several years with a woman B. They cohabit and run a common household (as required by El-Al for complying with the conditions of a recognized companion). A is entitled to an aeroplane ticket for B. Now consider A who lives in the same way with a man C. They too cohabit and run a common household. A is not entitled to an aeroplane ticket for C. How can this difference be explained? Does the one carry out his job as an employee differently from the other? The only explanation lies in A’s sexual orientation. This amounts to discrimination in conditions of employment because of sexual orientation. No explanation has been given that might justify this discriminatory treatment. There is nothing characterizing the nature of the job or the position that justifies this unequal treatment (see s. 2(c) of the Equal Employment Opportunities Law). To be sure, it is possible that El-Al thinks that a (permanent) employee who lives with a (same-sex) companion behaves ‘improperly’. It is possible that someone at El-Al thinks that this joint lifestyle should not be encouraged. We need not examine this argument on an ethical level. Whether or not we agree with it, it does not amount to a justification that negates the existence of the discrimination. Indeed, the discrimination is not determined merely by the will and intention of the person creating the discriminatory norm. It is determined by the effect that it has in practice (see Nevo v. National Labour Court [7], at p. 759; Bavli v. Great Rabbinical Court [11]). Occasionally we can justify a violation of equality — which, as we have seen, is not an absolute but a relative right — on the basis of a proper purpose. Such grounds must be very substantial and relevant. A very great weight rests on someone who tries to discharge this burden. In the case before us, the burden has not been discharged. No attempt has even been made to discharge it. All that we have heard is that same-sex companions who cohabit are not like companions of different sexes who cohabit. Thereby they indicated to us the difference that exists between the different situations. In doing so they did not negate the discrimination, and they certainly did not point to a proper purpose that might justify it (see M. N. Cameli, ‘Extending Family Benefits to Gay Men and Lesbian Women,’ 68 Chi-Kent L. Rev. (1992-93) 447.

The remedy for a violation of the right to equality

18. I have therefore reached the conclusion that the legal regime created by the collective agreement and the collective arrangement, with regard to the benefit conferred on an employee to receive a (free or discounted) aeroplane ticker for a spouse or recognized companion (of the opposite sex), discriminates against an employee living with a same-sex companion. Now we must turn to the second question requiring a decision, namely the remedy to which an employee who has suffered discrimination is entitled. Case-law has established that a discriminatory contractual regime may support a claim that the provision in the contract is contrary to public policy and is therefore invalid (see Flight Attendants Association v. Hazin [24]). This invalidity may cause the whole contract to be invalid. In most cases, there is no reason to invalidate the whole contract, and it is sufficient to invalidate the illegal part by severing it from the lawful part (see ss. 14 and 31 of the Contracts (General Part) Law, 1973). Thus, for instance, in Nevo v. National Labour Court [7] the contractual regime provided that the ‘retirement age for a pension is 65 for men and 60 for women’ (ibid. at p. 753). The Supreme Court held that this amounts to discrimination against women. It was held that the proper remedy — which the petitioner sought in that case — is striking out the invalid part. The result is that the part of the employment agreement providing that ‘the retirement age for a pension is 65’ remained valid. The Court thereby used a technique of severance. This technique is not possible in the case before us. Indeed, had the collective agreement and collective arrangement provided that a permanent employee is entitled to a benefit for whoever is his companion, except a companion of the same sex, it would have been possible to strike down the limiting provision, and so re-establish equality. But the contractual text in our case is different. It does not allow operating on the body of the text and severing the healthy part from the unhealthy part. What, then, is the remedy to which the petitioner is entitled?

19. As we have seen, a possible remedy is voidance of the contractual arrangement regarding the benefit. The result, from the respondent’s perspective, will be a case of ‘Let me die with the Philistines’ (Judges 16, 30): the respondent will not receive a benefit, but neither will recognized companions of the opposite sex. This outcome is not reasonable in the circumstances. Why should recognized companions of opposite sexes suffer a material loss? What wrong have they done? The National Labour Court rightly pointed out that the petitioner himself did not seek this remedy.

20. The appropriate remedy in this situation is to confer the benefit also on same-sex cohabitees. This remedy is recognized in the comparative literature. It was developed mainly in the case of laws that are contrary to the principle of equality laid down in a constitution. In American constitutional literature it is called the  ‘extension’ of the existing text. In Canadian constitutional literature it is called ‘reading into an arrangement’ or ‘reconstruction’ of the text. These terms are not accurate ones. The judge does not change the existing text, nor does he reconstruct it nor add to it. The judge does not do anything to the existing text. What the court does is different. It determines that as long as the existing text remains as it is — and as stated the judge does not do anything to it — similar benefits must be given to an additional group that is not mentioned in the text. Conferring this benefit derives directly from the principle of equality, which is a normative principle to which the text is subservient and to which it must conform. It can be seen then that the court does not implant an additional organ into the body of the text infected by improper discrimination. The court determines, however, that by virtue of the principle of equality — as long as the discriminatory contractual arrangement remains unchanged — a relief of conferring a benefit also on the victims of discrimination is required in order to remove the discrimination.

21. As we have seen, this relief is recognized by American constitutional law. In the case of Welsh v. United States (1970) [26] a statute exempted a person from military service because he was opposed to war for reasons of religion or faith. The petitioner asked for an exemption for reasons of conscience. A number of judges held that the exemption for reasons of religion or faith extends also to an exemption for reasons of conscience. Justice Harlan, however, disagreed. In his view, an exemption for reasons of conscience was not included in the statute. In this the statute violated the provisions of the Constitution. The proper remedy, in the judge’s opinion, was not nullifying the exemption for reasons of religion or faith but granting an exemption, based on the Constitution itself, for reasons of conscience. Justice Harlan writes, on page 361:

‘Where a statute is defective because of underinclusion there exist two remedial alternatives; a court may either declare it a nullity and order that its benefits not extend to the class that the legislature intended to benefit, or it may extend the coverage of the statute to include those who are aggrieved by exclusion…’

He continues at p. 364:

‘While the necessary remedial operation, extension, is more analogous to a graft than amputation, I think the boundaries of permissible choice may properly be considered by the legislative pronouncement on severability.’

Since that case, American courts tend to grant this remedy (see R. Bader-Ginsburg, ‘Some Thoughts on Judicial Authority to Repair Unconstitutional Legislation’ 28 Clev. St. L. Rev. (1979) 301; B. K. Miller, ‘Constitutional Remedies for Underinclusive Statutes: A Critical Appraisal of Heckler v. Mathens,’ 20 Harv. C.R.-C.L.L. Rev. (1985) 79. This remedy appears to the court natural and appropriate and preferable to nullification. One of the cases involved a statute that gave assistance to needy families. The statute provided, inter alia, that the support would be given to a family where the mother did not work and the father had worked previously but was now unemployed. A family where the father did not work and the mother had worked previously but was now unemployed was not included among the recipients of the support. The court held that the statute unlawfully discriminated against families where the father did not work whereas the mother had worked but was now unemployed. Against this background arose the problem of the remedy: whether to nullify the support for the family that was entitled (because of the discrimination inherent in the arrangement) or to extend the application of the statute to a family that was not included in it. It was held that the family which was the victim of discrimination should be added (Califano v. Westcott (1979) [27]).

22. The Supreme Court of Canada has a similar approach. It often tends to ‘read in’ to the statute provisions that will negate the unconstitutional nature of the statute. Justice Lamer wrote in Schachter v. Canada (1992) [37], at p. 12:

‘…extension by way of reading in is closely akin to the practice of severance. The difference is the manner in which the extent of the inconsistency is defined. In the usual case of severance, the inconsistency is defined as something improperly included in the statute which can be severed and struck down. In the case of reading in, the inconsistency is defined as what the statute wrongly excludes rather than what it wrongly includes. Where the inconsistency is defined as what the statute excludes, the logical result of declaring inoperative that inconsistency may be to include the excluded group within the statutory scheme. This has the effect of extending the reach of the statute by way of reading in rather than reading down.’

23. These remedies are appropriate in the constitutional sphere. They promote the purpose underlying the constitutional arrangement. They make it unnecessary to nullify legislation. The use of this remedy is not mechanical. We must consider in each case whether extension is possible. We must examine whether it is simple to implement, and whether it does not involve excessive intervention in the legislative fabric. We must consider the budgetary ramifications. Indeed, a benefit conferred by law to a marginal group does not justify granting a constitutional remedy by extending the remedy to a large and significant group. Neither should we adopt this technique to impose obligations on sectors of the population in whose favour the law has discriminated by not imposing these obligations on them.

24. These remedies — which were developed in the constitutional sphere — can be applied in the field of collective agreements and collective arrangements. They create a contractual regime that is subject to a supreme normative principle of equality. This principle derives its supremacy (with respect to collective agreements and arrangements) from the Equal Employment Opportunities Law. This principle of equality applies — by virtue of the express provisions of the Equal Employment Opportunities Law — also in private law. It is not merely a principle of public law. It obliges every employer not to discriminate against any of his employees in the fields of private law. Indeed, with regard to the prohibition of discrimination because of sexual orientation — just as with regard to other kinds of discrimination — the law establishes a mandate that obliges the employer. By virtue of this normative mandate — which is of supreme status with regard to collective agreements and arrangements — the employer is forbidden to discriminate against any of his employees with regard to conditions of employment. When a contractual arrangement drawn up by him involves prohibited discrimination, the contract is tainted with illegality. It may be voided by virtue of the provisions relating to invalid contracts. To prevent it being voided, we may demand — as an alternative remedy — that the employer refrains from the prohibited discrimination. This is achieved by compelling the employer to confer the benefit on the employee who is the victim of the discrimination. This does not change the agreement between the parties. We do not thereby read into the contract what is not there. We thereby merely remove the discrimination and comply with the normative mandate not to discriminate. Indeed, the basic fact is the discriminatory contractual arrangement. The contents of this are determined by the parties to the contract, and they control it and can change it. As long as the discriminatory contractual arrangement remains unchanged, the supreme normative mandate — which derives from cogent law — exists alongside it and compels the employer to act with equality. Indeed, just as by virtue of the normative supremacy of the constitution (or the entrenched Basic Law) the scope of applicability of a provision of a law may be extended, so too can the normative power of the law extend the scope of applicability of provisions in a collective agreement or a collective arrangement. By virtue of this normative supremacy, the contractual regime must modify itself to comply with the principle of equality (in our case, the prohibition against discrimination in conditions of employment because of sexual orientation). This modification does not require cancelling the existing contractual arrangement. This modification is achieved by conferring a benefit — which originates not in the contractual arrangement but in the principle of equality that extends the contractual arrangement to equivalent situations — on the class that is the victim of discrimination. This extension is suitable for the contractual model. It adds a small group of beneficiaries and does not therefore impose a significant budgetary burden. Justice is done, and justice is seen to be done.

The petition is denied. The case is remanded to the District Labour Court, as stated in the judgment of the National Labour Court. The petitioner shall pay the costs of the first respondent in a total amount of 10,000 NIS.

 

 

Justice Y. Kedmi

The question we must decide in this case is: does the concept ‘spouse’ used in the employment agreements include same-sex companions or not? My esteemed colleague, the Vice-President, answered this in the affirmative. Unfortunately, I cannot agree with that conclusion. The following are my main reasons:

1.    ‘Spouse’: the conceptual significance in the social sphere

(a) The linguistic concept of spouses, who together form a ‘family’, expresses, in the social sphere, an union of two individuals of opposite sexes to form a ‘couple’; a ‘couple’, in this context, has since the origin of man until the present represented a joining of two individuals of opposite sexes. This is the case here and throughout the world, and the Book of Books gives decisive proof of this: ‘And God created man in His image, in the image of God He created him; male and female He created them’ (Genesis 1, 27 [44]).

This is the case with man and it is the case with the animals, and the story of Noah’s ark leaves no doubt about this: ‘You shall bring two of each into the ark to preserve with you; they shall be male and female’ (Genesis 6, 19 [44]).

There is of course nothing to prevent the term ‘couple’ expressing a ‘quantity’ of two individuals; but we are not dealing here with the quantitative meaning of the concept but with its substantive meaning in the social sphere.

To give the concept ‘couple’, in the context discussed here, a different meaning from the linguistic meaning that it has always had is impossible. ‘A different meaning’ of this concept would deprive it of its essence; once again we are not speaking of a ‘couple’ that builds a family, incorporating a ‘husband’ and a ‘wife’, but a ‘couple’ that expresses a ‘quantity’ of two individuals who have come together, whatever their sex is.

In Hebrew the concepts of ‘husband’ and ‘wife’ are inseparably associated with the concept of ‘family’; you cannot have a ‘family’ unless two companions of different sexes are its basis (‘a heterosexual couple’).

(b) The relationship that turns two individuals — of opposite sexes — into a ‘couple’, in its linguistic-social meaning, is characterized by the decision of the two to have a joint lifestyle; ‘joint’, in this context, inter alia and especially, expresses family life whose primary purpose — and from a conceptual viewpoint it is impossible otherwise — is to bring children into the world: ‘And God blessed them, and God said to them: be fruitful and multiply and fill the earth…’ (Genesis 1, 28 [44]).

Thus it is no coincidence that the concept ‘couple’ is, in Hebrew, derived from the root meaning ‘intercourse’; the ‘couple’ and ‘intercourse’ are one, and only where these exist can we speak of a ‘family’.

Admittedly not every couple is ‘capable’ — or wishes — to bring children into the world, and not every ‘couple’ becomes such in order to bring children into the world. But these ‘exceptions’ in this context cannot undermine the fundamental conceptual meaning of the concept ‘couple’; therefore a precondition for two people being a ‘couple’ is that they are of different sexes.

(c) The heterosexual ‘couple’ is what creates the basic family unit; and, as stated, there is no ‘family’ in the social meaning of the word, unless a heterosexual couple forms the basis of it.

It is indeed possible to change the meaning of basic concepts such as ‘couple’ and ‘family’. However the change must primarily be a conceptual change of basic epistemological meanings; the language that has existed from ancient times does not recognize a ‘couple’ and a ‘family’ that are not heterosexual, except as an exceptional phenomenon that requires a descriptive supplement alongside the use of these concepts, which lose their original meaning where we do not refer to a joining of the two sexes.

(d) It is indeed possible for ‘two persons’ of the same sex to adopt for themselves external characteristics that describe a ‘couple’ and a ‘family’ as stated, and to imitate — in so far as they can — the behaviour pattern of ‘spouses’ and even to establish in practice a ‘family’. But they do not become a ‘couple’ and a ‘family’ in the fundamental meaning of these terms in our language; and language is, in the end, the mirror that reflects our society.

In order for two people to become a ‘couple’ that establishes a ‘family’, in the conceptual-epistemological meaning of our language — and it is a common language that forms the basis of our existence as a society — it is an essential and necessary condition that the two individuals who comprise a ‘couple’ come from opposite sexes.

In this regard, it is irrelevant that two individuals of the same sex, who join into a ‘couple’, do so because their natural sexual orientation does not allow them to be ‘spouses’ in the conceptual sense accepted in our language, namely that of persons of the opposite sex. It is not the ‘capacity’ to be a spouse, in the said basic epistemological meaning, that matters, but the sex of the partner. The criterion for two persons to be a ‘couple’ — according to the epistemological meaning of the concept — does not lie in the lifestyle led by the two persons but, primarily, in their being of different sexes.

(e) The aforesaid should not be regarded as a position deriving from a conservative religious outlook: religion did not dictate the meaning of the concept ‘couple’ in the epistemological sphere, but life itself dictated it; and the reality that reflects life is what lies at the basis of the expression ‘couple’ and this is what gave it the aforesaid meaning in the social sphere.

(f) It should be emphasized:

(1) The concept ‘couple’ — whose components are a ‘husband’ and ‘wife’ — is not necessarily connected with the institution of marriage. Use can be made of the concept ‘couple’ both with regard to a ‘married couple’ and an ‘unmarried couple’, so long as the joining of the spouses makes them a ‘couple’ within the meaning set out above.

(2) There is nothing to prevent adjectives being added to the concept ‘couple’ in its basic social meaning, such as married and unmarried; the adjective ‘married’ does not affect the basic meaning of the concept ‘spouse’ which expresses, in the context under discussion, two individuals of opposite sexes forming a social unit, based on sexual collaboration, whose nature is determined by its original purpose.

(3) In consequence — and more will be said about this below — there is no reason why ‘recognized companions’ should not be regarded as ‘spouses’, since they comply with the basic condition of an union of two persons of different sexes into a family unit, within the basic meaning of this expression as aforesaid. Recognized companions are not a ‘married’ couple but they do constitute a ‘couple’ and a ‘family’; as such, there is no fundamental conceptual difficulty in applying to them legal arrangements prescribed for a ‘married’ couple, and treating them, socially and linguistically, as a ‘couple’ in every respect.

(4) In these circumstances, in the language of human beings — all human beings — the word ‘couple’, in a social context, expresses an union of two individuals of opposite sexes, for a ‘joint life’ in the primary meaning of the word as aforesaid; and if we wish to change the meaning of the concept, we must do so, first and foremost, in the sphere of the basic linguistic concepts of our language and determining this change, expressly, in legislation relating to this issue. Without an express determination, the law gives expression to the linguistic meaning of the concepts to which it refers, unless it states the contrary.

The law speaks in human language, since it is intended for human beings; wherever we wish to deviate from human language and speak in the ‘language of the law’ — this should be done in accordance with an express, clear and unambiguous provision of the legislator. In the present context, this must be a provision that deliberately changes the linguistic significance of the term ‘couple’ in the social context and gives this concept, for the purpose under discussion, another meaning, materially different from its meaning in current usage.

2.    Marriage and the institution of recognized spouses

(a) As a rule, wherever we speak of a ‘couple’ — in the social sphere — the initial impression created in the conscience of the listener or the reader is one of a ‘married’ couple; for ‘marriage’ is what grants legal — and social — recognition to the joint life of the ‘spouses’ as a family unit, in the aforesaid primary meaning.

(b) However, as stated, it is not the external, formal framework of marriage that gives a ‘couple’ its traditional, literal meaning as aforesaid: a ‘couple’ in the sense discussed here, may be ‘married’ or ‘unmarried’, but it must always be a ‘couple’; and you do not have a ‘couple’ in the meaning discussed here unless the two individuals who form it are of opposite sexes. Linguistically, there is no ‘other’ couple in the social sphere; and language is what underlies human communication, and it is the means whereby people express their thoughts.

So marriage, as a legal institution, does not give the linguistic term ‘couple’ its content and conceptual meaning; it merely adds to it social recognition as a family unit in the community, and grants the two individuals forming it — the man and the woman — rights and duties in the legal sphere.

(c) For this reason — and this too has already been said — wherever a ‘couple’ complies with the basic definition of the concept — namely, wherever we are speaking about an union of two individuals of different sexes for a joint lifestyle as a family unit within the meaning set out above — there is no logical difficulty in regarding them as a ‘married couple’ for the purpose of duties and rights that the law prescribes for a ‘married’ couple; regarding the two as a ‘couple’ forms the basis whereby the law confers rights and imposes duties on a married couple.

By contrast, wherever we are speaking of two persons who have joined together for a joint lifestyle as a ‘pair’ that is not a ‘couple’ within the aforesaid basic linguistic sense, logic does not allow us to regard them from a legal viewpoint as if they were a ‘couple’, because they constitute something ‘else’. The ‘married’ couple and ‘recognized companions’ are a ‘couple’, whereas two persons who have joined for a joint lifestyle and are of the same sex are not a ‘couple’ but a ‘pair of friends’.

3.    The collective agreement and the collective arrangement

(a) Now let us turn from the general to the particular. The collective agreement, whose provision we are interpreting, speaks of a ‘spouse (husband/wife)’ (emphasis added); the term ‘spouse’ should be given the traditional linguistic meaning, whereby it refers to individuals of different sexes forming a ‘couple’ as set out above.

The addition ‘husband/wife’ is not intended to tell us that we are referring to spouses of different sexes, since for this we do not need any addition, and use of the term ‘spouse’ is sufficient. The addition is intended to clarify that this agreement refers to spouses who are married to one another, for they alone are called ‘husband’ and ‘wife’; the supplementary addition in the collective arrangement referring to a ‘companion recognized as a husband/wife’ proves that this is indeed the case. Had it not been for this supplement, the words ‘husband/wife’ in the collective agreement could have been interpreted as restricting ‘spouse’ to a ‘married’ couple only, and it would have been necessary to clarify that they are referring also to a ‘couple’ that is not married but which is merely recognized publicly as such.

(b) The addition of ‘recognized companion’ in the collective arrangement does not break away from the framework provided in the collective agreement: both refer to a ‘couple’ and ‘spouses’ in the basic social meaning of the concept ‘couple’, as aforesaid; distinguishing between ‘couples’ on the basis of marriage has more than a hint of discrimination. A married couple and an unmarried couple are fundamentally ‘equal’, in so far as the meaning of the concept ‘couple’ is concerned; distinguishing between them on the basis of ‘marriage’, which merely constitutes a formal, external mark of the framework of their joint lifestyle as a ‘couple’, amounts to improper ‘discrimination’ and not a permitted ‘distinction’. This is sufficient to justify the supplement in the collective arrangement, which intends to prevent improper and forbidden discrimination between ‘couples’.

(c) By contrast, introducing a pair made up of two individuals of the same sex (‘a same-sex couple’) into the said provisions of the agreement and the arrangement amounts to planting a foreign type of plant — something that is not a ‘couple’ — in a field that contains only couples, whether married or unmarried.

A same-sex ‘couple’ is not a ‘couple’ within its basic linguistic meaning, and it should, in my opinion, be referred to, linguistically, as a ‘pair’; the argument that it is a victim of discrimination in comparison with other ‘couples’ is unfounded: the married and unmarried couples are couples, and distinguishing between them constitutes discrimination, whereas the ‘pair’ is not a ‘couple’, and distinguishing between it and a ‘couple’ (married or merely publicly recognized) is not discrimination. So long as the linguistic and social meaning of the concept ‘couple’ is unchanged, a ‘pair’ will not become a ‘couple’: the latter ‘combine into one’ (‘Wherefore a man shall leave his father and mother, and shall cleave to his wife, and they shall become one flesh,’ Genesis 2, 24 [44]), whereas the former will always remain two.

4.    The interpretive aspect

(a) The means of communication between human beings is language, and a precondition for understanding between persons having a discussion is that the words, expressions and concepts that form the language have a stable linguistic meaning.

(b) As stated, the law speaks to human beings in human language: and the word is, first and foremost, the basis for interpretation of its provisions. The concepts ‘couple’ and ‘spouses’ and the linguistic relationship between them and ‘family’ are primarily linguistic concepts, whose meaning — in so far as the social sphere is concerned — is, as stated above, an union of two individuals of opposite sexes to share their lives in a family unit, when this sharing is characterized, inter alia, by intimacy designed, conceptually, to ensure the continuation of life.

(c) The same is true of interpretation of the law, and likewise with regard to interpretation of a legal document: a ‘couple’ requires the union of two individuals of opposite sexes; this is true even when the two are incapable in practice or unwilling — for whatever reason — to be intimate for the purpose of ensuring the continuation of life.

(d) Indeed, one of the fundamental rules of statutory interpretation is that the law is interpreted in order to achieve the purpose for which it was legislated; mutatis mutandis, a legal document is interpreted so as to achieve the intention of the parties to it.

Where the language is clear, we would fail in our duty if we were to deviate from the agreed linguistic meaning by which people plan their lives, and give the concepts used by the law or the agreement a different meaning from the one that they have in the world of language.

5.    The Equal Employment Opportunities Law – discrimination

(a) I wholeheartedly agree with the illuminating remarks of my esteemed colleague — the Vice-President — with regard to the significance of the principle of equality and the duty to realize and apply it.

However, as my esteemed colleague noted — when citing Boronovski v. Chief Rabbis [16] and Committee for Protection of Expropriated Nazareth Lands v. Minister of Finance [17] — you cannot violate the principle of equality unless you have ‘equals’; where you have persons who are not equal, treating them differently compared with others who are different from them should not be regarded as improper discrimination, but merely as a permissible distinction.

(b) My esteemed colleague found that same-sex couples are ‘equal’ to heterosexual couples; from here, it was naturally easy to reach a conclusion of ‘discrimination’ between the two types of ‘couples’, where one is entitled to a benefit and the other is not.

I do not accept this position. In my opinion — following what I have said until now — we are dealing with two ‘couples’ that are completely different in nature; the one — the heterosexual (whether married or unmarried) — is a ‘couple’, whereas the other — the homosexual — is merely a ‘pair’; therefore conferring a benefit on the one does not constitute discrimination when not conferring the benefit on the other.

(c) The common denominator that makes the two ‘couples’ — the homosexual and the heterosexual — ‘equals’ for the purpose of the principle of equality, lies, according to my esteemed colleague, in the fact that the characteristic marks of the joint lifestyle of the two are equal; both run a common household, both form a family unit, and both live within a social framework based on a life of sharing and harmony; prima facie, they only differ from one another in one external-formal factor, which is merely that the homosexual couple cannot marry.

My esteemed colleague adds: ‘the inability to marry’ is a factor that also distinguishes married spouses from ‘publicly recognized’ companions; and this distinguishing factor did not prevent a total comparison between the latter and the married spouses.

(d) According to my thinking, a sharing and harmonious relationship — as pointed out by my esteemed colleague — is insufficient to make a homosexual couple a ‘couple’ within the meaning that this concept has in our language in the context discussed here, because it lacks an element essential to ‘being a couple’, namely that the spouses must be of opposite sexes. The formal ‘inability’ to marry — by a formal marriage — does not put the homosexual couple in the same category as the heterosexual ‘publicly recognized’ unmarried couple; the latter is a ‘couple’ within the linguistic meaning of this concept, whereas the former is not.

The distinction between the heterosexual couple — including ‘publicly recognized companions’ — and the homosexual couple is based on the fundamental nature of the concept ‘couple’; the first is a ‘couple’ because it is comprised, as stated, of two individuals of opposite sexes, whereas the second is otherwise; the fact that the homosexual spouses maintain a social framework ‘similar’ in its external characteristics to that of the heterosexual couple — the natural family unit — does not make them a heterosexual couple.

As stated, an essential factor — which is an indispensable condition in this context — for converting two individuals enjoying a life of sharing and harmony into a ‘couple’, within the meaning of the term in the Hebrew language, lies in them being ‘of one flesh’ and their being able — conceptually — to fulfil the precept of ‘being fruitful and multiplying’. The ‘married’ couple and the ‘publicly recognized’ couple meet this basic requirement, and they are therefore ‘equal’ for the purpose of examining an allegation of discrimination; whereas the homosexual couple, which does not meet the said basic requirement, is different from them in the said respect.

(e) My esteemed colleague is aware of a substantive difference that distinguishes, conceptually, between the two ‘couples’ as stated, but according to his approach this difference has no implication for the case before us; this is because in his opinion El-Al decided to confer a benefit on its employees ‘in the form of an aeroplane ticket enabling the employee to take with him the person with whom he shares his life’ (emphasis added), and for this purpose there is no difference between the two couples.

Even this narrow and restrictive approach to the problem before us does not, unfortunately, enable me to agree with my colleague. Admittedly we are concerned with the interpretation of El-Al’s decision. However, this decision does not speak of granting an aeroplane ticket to a person who ‘lives together with the employee’ (emphasis added) but to ‘the employee’s spouse’ (emphasis added); the linguistic difference between the two speaks for itself. As I have already stated, in my opinion the concept ‘couple’ in our language — in the social sphere considered here — expresses the union of two individuals who share their lives, which makes them physically into ‘one flesh’ in the primary sense of the expression; ‘He created them male and female… and He called their name man…’ (Genesis 5, 2 [44]); whereas the union of two individuals that ab initio cannot, physically, become ‘one flesh’ as stated, and who conceptually cannot achieve the said purpose, creates a couple quantitatively (since there are two), but not qualitatively (since the two cannot become one, within the framework of the commandment of being fruitful and multiplying).

(f) In my opinion, all we have before us is the language of the collective agreement — and in the supplement found in the collective arrangement — namely: ‘spouse (husband/wife)’ in the agreement, and ‘the person publicly recognized as husband/wife of the company’s employee’ in the arrangement; I do not think that we may read instead of these: ‘whoever lives together with the employee’ and even not ‘whoever forms a family unit with the employee’.

We are not dealing with a ‘life of sharing’ or a ‘family unit’, but with spouses within the basic conceptual meaning that this concept has in our language; these are always heterosexual, as long as language does not change its meaning.

5.    With regard to the allegation of discrimination between a ‘homosexual couple’ and a ‘heterosexual’ couple, there is no place in my opinion for considerations of social justice; the distinction between these two does not lie in the employees’ sexual orientation, but in the distinction between a ‘couple’ and a ‘family’ and those who do not constitute either a ‘couple’ or a ‘family’, within the meaning given to these terms in our language. Even single employees — whether ‘heterosexual’ or ‘homosexual’ — have close friends with whom they would like to spend their vacation abroad; yet no-one claims that they are discriminated against in that they are refused the benefit merely because they do not commit themselves to a formal framework of ‘a joint lifestyle’ with those friends.

El-Al saw fit to confer a benefit on ‘spouses’ that constitute a ‘family’ within the meaning thereof in the language which we use to communicate with one another; this does not constitute discrimination on the basis of ‘sexual orientation’, since we do not regard the homosexual spouses as included in the linguistic concepts ‘couple’ and ‘family’. We have here a distinction between a ‘spouse’ and someone ‘who is not a spouse’, and it may be argued that from a sociological and social viewpoint there is discrimination between ‘couples’ and those who are not ‘couples’; however, discrimination on a basis of ‘sexual orientation’ is not present here.

6.    More regarding the distinction between ‘couples’

(a) Heterosexual couples share a complete mutual commitment to sharing and stability, each to the other and both to the framework of the couple, in all spheres of life. The law gives validity to this commitment, since society, as such, has a profound interest in preserving the framework of the couple — which forms the basis of the organizational structure of human society — and ensuring its stability.

Society has adopted in this respect the approach that regards spouses becoming ‘one flesh’ — that is capable, conceptually, of achieving the mission of ‘being fruitful and multiplying’ — as a condition for making two people who unite for a life of sharing into a ‘couple’; language expresses this with the meaning it attaches to ‘couple’ and ‘family’. At the same time, society created rules to give a seal of social recognition to the framework of the ‘couple’, and it protects it and intervenes when a couple wishes to dissolve the framework, and it even seeks to prevent the dissolution whenever possible.

The said protection and intervention are achieved with legal tools; and the law — following language, which reflects social consensus — attaches the said meaning to ‘couple’ and ‘family’, but not to the homosexual couple.

(b) The recognition of the heterosexual couple that is ‘publicly recognized’ as a ‘couple’, even though it does not have all the legal guarantees of mutual commitment and stability, derives from the existence of the basic social requirements for the existence of a ‘couple’ — namely, an union of two individuals of opposite sexes as ‘one flesh’, who are able, conceptually, to ensure reproduction — and when these exist, there is no social justification for ignoring the de facto existence of the family unit and the spouses comprising it; on the contrary, it must ensure that the mutual commitment and stability of the unit are protected, even without the formal status of marriage.

The rules granting ‘mutual benefits’ to publicly-recognized heterosexual couples just like to married couples — in the circumstances provided by law — are based on a desire to give expression to the mutual commitment and ensure the stability of the family unit created by the publicly recognized ‘couple’, not necessarily by formally entering into the institution of marriage.

(c) This case of the homosexual couple is different: on the one hand, the substantive condition of different sexes is not met, and without this, one cannot speak physically of ‘one flesh’ and conceptually of reproduction and continuation of life, and therefore it does not constitute the same fundamental unit that lies at the basis of the organizational structure of human society; on the other, the partners do not have the same mutual commitment to the stability and continuity of the partnership that might induce society to recognize them as a ‘special’ couple and fit them in alongside the ‘typical’ couple at the basis of the social structure.

When society reaches the conclusion that a homosexual unit should also serve as a basic ‘unit’ of the social structure alongside the heterosexual couple, and when it determines rules for its creation, formal recognition of its existence and the guarantee of the mutual commitment between its constituents to partnership and stability, then the linguistic-conceptual meaning of the term ‘couple’ and ‘family’ in this context will change, and the homosexual couple will be included in the new linguistic framework alongside the heterosexual couple.

But as long as there is no such social consensus, the homosexual couple is not included within the framework of a ‘couple’ in our language, and it is not recognized as one of our society’s nuclear units; consequently its formation, the mutual commitment of its constituents to the partnership and its stability, and the rights and duties of those involved in it are naturally not regulated by our law.

(d) The change required here is therefore a basic conceptual change in our social outlook regarding the substance of the basic social unit, counted among the elements of our society’s organizational basis. The expression of what appears to be ‘tolerance’ towards exceptional cases and an attempt to prevent apparent social discrimination against those exceptional cases on the basis of what is exceptional about them cannot replace the fundamental conceptual change necessary for equating the homosexual couple with the heterosexual couple.

7.    Different conceptual attitudes in different cases

(a) According to my approach, there is no reason to attach an ‘independent’ and different meaning to the concepts ‘couple’ and ‘spouse’ in different contexts of sharing lives in society. I do not accept the approach that says that these concepts should be examined separately in the field of labour relations, in the field of social legislation, in the field of residency and citizenship, in the field of property law and obligations, in the field of taxation, etc..

In my opinion, as stated, in current circumstances, from the linguistic-social viewpoint, the words ‘couple’ and ‘spouse’ have only one conceptual meaning, namely two individuals of opposite sexes who have united into a framework of a joint life, which is based on the physical ability to become ‘one flesh’ and the conceptual ability to fulfil the commandment of being fruitful and multiplying; the removal of this two-fold characteristic from the framework of the definition of the concept ‘couple’ amounts to a nullification of the meaning that this concept has in the language of consensus that we use as an organized society.

(b) Destroying the linguistic-conceptual meaning in one sphere naturally leads to departing from it in other spheres, and the social framework built on an existing agreed meaning is undermined. The term ‘couple’, in this context, will lose its conceptual meaning in our language, and the focus of this meaning, which today derives from the heterosexuality of the spouses, will become a personal decision to have a life of quasi-family sharing at a particular time, where the sex of the spouses will be left to one side. There is nothing to prevent this result being reached, if it is deemed correct to go in this direction. However, this must be done by giving a ‘different’ meaning to the linguistic concept ‘couple’; this is not for us to do, but for whoever is authorized to change the Hebrew language, even if only in the legal sphere.

(c) Let me not be misunderstood: my approach does not seek to challenge the increasingly prevalent social recognition of the sexual orientation of individuals who wish to build their lives with persons of the same sex, nor do I wish to place obstacles in the path of those individuals to prevent their self-fulfilment in accordance with their orientations. All that I want is to refrain from the destruction of a conceptual ‘barrier’, linguistic chaos and communication that suffers from ‘misunderstandings’, by deviating so sharply from the meaning of basic concepts, which are the foundation of society and facilitate its operation in the way that we currently live.

For generations the concept ‘couple’ has been used in the social context to express a heterosexual couple. It was used in this way both orally and in writing, and it was used in this way in determining social arrangements and legal norms. If we try to introduce a change in this matter, this ought to be done in a straightforward way and not in a roundabout fashion; for we are dealing with human language, and we are obliged to respect it and protect the stability of its contents.

8.    Summary

(a) A ‘heterosexual’ couple — whether married or unmarried — is a ‘couple’ within the conceptual meaning of the word, whereas a ‘homosexual’ couple is not.

(b) For this reason, we are not dealing conceptually with ‘equal’ couples, and therefore the distinction made between the heterosexual couple and the homosexual couple is merely a ‘distinction’, and not ‘discrimination’.

(c) There is no basis for partial and limited recognition of the institution of the ‘homosexual’ couple; yes — with regard to labour agreements; no — in other areas, such as taxation, personal status, citizenship, giving testimony, etc..

A change in the meaning of the concept of ‘spouse’ must be general and all-encompassing, and it ought to be done in a way that everyone is aware of the new meaning given to it and its ramifications.

(d) An employer may offer a ‘benefit’ only to heterosexual couples without being guilty of discrimination, because the homosexual couple is not a ‘couple’, and the distinction between employees who are ‘spouses’, in the said basic linguistic sense, and employees who are not, is a ‘distinction’ and not ‘discrimination’.

(e) The discrimination that the respondent alleges in this case, is merely an ‘appearance of discrimination’, and it derives from what clearly appears to be ‘social injustice’. However, every distinction in distributing benefits to employees involves ‘social injustice’; the principle of equality as a defence against discrimination was not intended to address this.

Were my opinion accepted, the petition would be granted and the judgment of the National Labour Court’s decision would be reversed.

 

 

Justice D. Dorner

1.    The French philosopher, Michel Foucault, discussed the influence of social norms — reflecting what is accepted, ‘normal’, and what changes from time to time and from society to society — on the application of transcendental and formal laws (legal norms).

‘…le pouvoir de la Norme… est venu s’ajouter à d’autres pouvoirs en les obligeant à de nouvelles délimitations; celui de la Loi… et du Texte…

…le pouvoir de la norme fonctionne facilement a l’intérieur d’un système de l’égalité formelle, puisque a l’intérieur… la règle, il introduit… des différences individuelles’ (M. Foucault, Surveiller et Punir (1975) 186).

In translation:

‘… the power of social norms joins with other forces — the law and the text — and imposes on them new limitations…

… the power of social norms acts well within a system of formal equality, since it introduces… individual differences into… the rules.’

It seems to me that we cannot decide the petition before us without referring to the changes that have taken place with regard to social norms in Israel respecting homosexuality.

2. The respondent demanded that the petitioner recognize the man with whom he shares his life as a ‘spouse’ for whom he is entitled to receive an aeroplane ticket as of 1989, by virtue of the collective agreement. The Labour Court accepted the claim on the basis of the Equal Employment Opportunities Law (Amendment). The law, which came into effect on 2 January 1992, added to s. 2(a) of the Equal Employment Opportunities Law (hereafter — ‘the Equal Opportunities Law’) a prohibition against discrimination against employees because of their sexual orientation. The Labour Court held that the law changed the existing law and gave the respondent a right that he did not have before it was enacted, and that therefore he is entitled to receive the aeroplane tickets from the date that the amendment came into effect.

My colleague, Vice-President Barak, presumed — in the absence of any contrary argument by the respondent — that the respondent’s right does not derive from the collective arrangement itself. In Justice Barak’s opinion, the respondent’s right derives from the amendment, which reflects the principle of equality and the prohibition of discrimination against employees on the grounds of their sexual orientation.

My colleague, Justice Kedmi, is of the opinion that the expression ‘spouse’ cannot be given a different meaning in different laws. In his view, this expression has only one meaning: a man and a woman who unite for a joint life. This definition is accepted both from a linguistic viewpoint and a social viewpoint. It follows that without an express provision in the law that a same-sex life-partner is a ‘spouse’, a life-partner of the same-sex should not be given the benefits to which a ‘spouses’ is entitled on the basis of a provision prohibiting discrimination against the employee himself because of his sexual orientation.

3.    I agree with the result reached by the Vice-President. However, in my opinion, the respondent’s right does not derive only from the Equal Opportunities Law, but also derives from the general principle of equality that has, for some time, been a part of our labour law.

In my view, the original version of the Equal Opportunities Law reflected the principle of equality but did not establish it. Thus, for instance, in Nevo v. National Labour Court [7], a provision that provided a different retirement age for men and women was disqualified on the basis of the principle of equality. This disqualification was based on the legal position prior to the Equal Retirement Age for Female and Male Employees Law, 5747-1987, which made the retirement age the same for women and men, while preserving the right of women employees to early retirement. Cf. also the remarks of Justice Mazza in Israel Women’s Network v. Government of Israel [5], at pp. 521-522 {150}.

Similarly, the amendment also did not change the existing law about equal rights for homosexuals, but merely gave expression to them. Consequently, had the respondent insisted on his original claim to receive the benefits for his spouse since May 1989, which was before the enactment of the amendment, I would have granted his request. Conversely, if not for the development of social norms in Israel which no longer totally oppose homosexual relations, it is possible that the Equal Opportunities Law would have been interpreted narrowly, similarly to the interpretation of my colleague, Justice Kedmi, which would not give the respondent the benefits that he claimed.

4.    The principle of equality does not operate in a social vacuum. The question whether a certain case involves discrimination between equals, or whether it merely involves different treatment of different people, is decided on the basis of the accepted social outlooks. Justice Wilson discussed this in the Canadian case of R. v. Turpin (1989) [38], at p. 1331:

‘In determining whether there is discrimination on grounds relating to personal characteristics of the individual or group, it is important to look… to the larger social, political, and legal context…

Accordingly, it is only by examining the larger context that a court can determine whether differential treatment results in inequality.’

See also the remarks of Lord Denning in Dyson Holdings Ltd v. Fox (1975) [34], at p. 1033.

5.    In the past, intimate relations between members of the same sex — relations that are considered a sin by all the monotheistic religions — constituted a criminal offence. Legitimacy was also given outside the criminal law to a distinction based on sexual orientation. Homosexuals (including lesbians) were fired from their jobs, were not accepted for positions requiring a security clearance, and were forbidden to raise their children. In the United States they were classified as psychopaths and were not allowed to immigrate into that country (The Editors of the Harvard Law Review, Sexual Orientation and the Law, 1990, at pp. 44, 65, 119, 132, 139, 150, 153).

This treatment has changed gradually. Legal literature criticized the definition of homosexual relations as a criminal offence, as well as discrimination against homosexuals in all areas of life, including areas of employment (R.A. Posner, Sex and Reason, Cambridge, 1992, at p. 308). Movements advocating the equality of rights for homosexuals were established. The trend today — which began in the seventies — is a liberal treatment of the sexual orientation of an individual, which is considered to be his private matter.

These changes in social outlook were given expression in law in the Western world, and homosexual couples have achieved equality, in accordance with the social norms in each country.

6.    In European countries, there is no longer a criminal prohibition of homosexual relations. Legislation in the field of public law and labour relations in France, Denmark, Sweden and Norway prohibits discrimination because of sexual orientation. Laws in Sweden, Holland and Norway equate the rights and duties of homosexual couples with the rights and duties of heterosexual couples, including tax benefits and property division arrangements upon separation. The law in Sweden also recognizes the right of inheritance of a homosexual spouse (see L.R. Helfer, ‘Lesbian and Gay Rights as Human Rights: Strategies for a United Europe’ 32 Va. J. of Int’l L., 1991-92, 157, 168). Homosexuals have achieved the most recognition in Denmark. The law in that country allows ‘marriage’ between two persons of the same sex by registering their life-partnership relationship. This registration entitles homosexual spouses to social rights granted to married couples (M.H. Pedersen, ‘Denmark: Homosexual Marriages and New Rules Regarding Separation and Divorce’ 30 Jour. of Family L., 1991-92, 289).

Article 8 of the European Convention for the Protection of Human Rights also provides protection for homosexual relationships as part of the protection given to the right to privacy (see decisions of the European Court of Human Rights in the Norris Case (1988) [35]; and Modinos v. Cyprus (1993) [36]). Recently, a proposal was made to amend the Convention to expressly prohibits discrimination of any kind because of sexual orientation (Draft Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms).

7.    Article 15(1) of the Canadian Charter of Rights and Freedoms, which is a part of the Constitution Act, provides protection for the right of every person to equality. In case-law this section has been interpreted as prohibiting discrimination on the basis of sexual orientation (Vriend v. Alberta (1994) [39]; Egan v. Canada (1993) [40]; Haig v. Canada (1992) [41]). By contrast, claims of homosexual couples for rights conferred on married couples were rejected. It was held that, since the purpose of marriage is raising children, the different treatment of the homosexual couple is not a breach of the charter (Haig [41], at p. 340; Layland v. Ontario (Consumer & Commercial Relations) (1993) [42], at p. 231).

8.    In the United States the change has been more moderate. In some States there is still a criminal prohibition — which is not enforced — against having homosexual relations. As recently as 1967, the United States Supreme Court held that, since the homosexual has a psychopathic personality, as defined in the Immigration and Naturalization Act, his immigration into the United States was prohibited, and he was liable to immediate deportation (Boutilier v. Immigration Service (1967) [28]). Six years later, however, in 1973, the American Psychiatric Association rejected the definition of homosexuality as a psychiatric disorder, and, in 1981, the rule in Boutilier [28] was reversed. It was held that because homosexuality is not a psychiatric disorder, it does not indicate bad character, and therefore it does not constitute grounds for rejecting a naturalization request (Nemetz v. Immigration & Naturalization Service (1981) [29]).

During the 1980s, 139 judicial districts (States and local authorities) enacted laws prohibiting discrimination on the basis of sexual orientation in employment, housing and education (Note: ‘Constitutional Limits on Anti-Gay Rights Initiatives’ 106 Harv. L. Rev. (1992-93) 1905, 1923-25). The municipal laws of 12 municipalities allowed homosexual couples to register at the municipality as domestic partners, for the purpose of receiving social rights given to families (Bowman and Cornish, supra, at p. 1168).

At the same time, the courts in several States have recognized the rights of a same-sex spouse on the basis of the ‘functional test’. According to this standard, recognition of the homosexual couple depends on the purpose of the law conferring rights on a ‘family’ or ‘spouse’. The homosexual spouse will enjoy the rights conferred by law, if this is consistent with the law’s purpose.

Thus, for instance, the New York State Court of Appeals recognized the life-companion of a deceased tenant as a protected tenant by virtue of his being the spouse of the deceased. It was held that, in view of the purpose of the tenant protection law, the difference between a heterosexual couple and a homosexual couple is irrelevant. If the life-companion were not recognized as the spouse, the purpose of the law would be frustrated, in that a remote relation would be entitled to the accommodation, whereas the person who shared his life with the deceased would be expelled from the apartment where he had lived for years (Braschi v. Stahl Associates Co. (1989) [30], at pp. 788-789; see also Yorkshire Towers Co. v. Harpster (1986) [31]; Two Associates v. Brown (1986) [32]; E. 10th St. Assoc. v. Estate of Goldstein (1990) [33]).

The accepted outlook in the United States was summarized in the article of Bowman and Cornish, supra, at pp. 1175-77, as follows:

‘… there is a general tendency to look at the characteristics of the particular relationship to determine whether it qualifies as a family for the purposes of the particular statutory scheme, especially when a statute uses a term such as “family”, “spouse”, or “parent” without defining it.

…

… Courts have identified certain elements as indicia of a “family-like” relationship, including financial commitment, exclusivity of the relationship, the reliance members place on each other, the length of the relationship, and the presentation of the relationship to the outside.’

9.    The law in Israel regarding homosexuals reflects the social changes that have occurred over the years.

Male homosexual relations were, in the past, included in the offence of deviations from nature, an offence punishable by 10 years’ imprisonment (section 351(3) of the Penal Law, 5737-1977, which was a new version of section 152(2) of the Criminal Law Ordinance, 1936, enacted by the Mandate). This prohibition was never enforced. As early as the year 1963, in CrimA 224/63 Ben-Ami v. Attorney-General [20], at p. 238, the court held that this offence has no basis in our present reality. Speaking for the court, Justice H. Cohn said:

‘Unnatural sexual relations, and homosexual relations, when done in private between consenting adults, are not acts involving moral turpitude, nor do they indicate that the persons who do them are criminals deserving of punishment. These are offences that we inherited from ancient systems and past generations and they have no place in the criminal law of a modern state… ‘Nature’, as such, no longer needs the protection of the criminal law. What needs, and is therefore entitled to, their protection are the human body and human dignity and liberty… one of the basic rights of the citizen is that the State will not interfere in the private life and his behaviour behind closed doors…’

Nonetheless, for many years the offence remained the law and was not repealed. Even in 1980, when the draft Penal Law (Amendment no. 14), 5740-1980 — which, according to its explanatory notes, was intended to replace the provisions of the Mandatory law with legislation suitable to the reality of our times — was tabled in the Knesset, it was suggested that the prohibition against homosexuality remain. Notwithstanding, it was proposed that the punishment for this offence be reduced to one year’s imprisonment. The explanatory notes said: ‘The question whether in our time there is a justification for the interference of the criminal law in sexual acts done between consenting adults in private is a controversial one’ (ibid., at p. 392).

This proposal did not reach the Knesset, and the criminal prohibition was repealed eight years later in the Penal Law (Amendment no. 22), 5748-1988.

This formal repeal reflects the current position of Israeli society that the law (as opposed to religion) should be indifferent to the sexual orientation of a person, so long as he does not harm anyone. There is widespread consensus that homosexuals should not be restricted or subject to discrimination (Rubinstein, The Constitutional Law of the State of Israel, supra, at p. 334). The amendment to the Equal Opportunities Law reflects this approach. M. Virshowski MK referred to this during the debate proposing the law at first reading:

‘… with this we are in fact establishing the rules accepted today in the enlightened world and allowing people to live in accordance with their sexual orientations, and not to suffer for them or be oppressed because of them’ (Knesset Proceedings 119, 1991, at p. 1034).

10. In our case, it is clear that there is a difference between a homosexual couple and a heterosexual couple. However, a ‘difference’ justifying different treatment must be relevant (Boronovski v. Chief Rabbis [16], at p. 35; HCJ 720/82 Elitzur Religious Sports Association, Nahariyah Branch v. Nahariyah Municipality [21], at p. 21; HCJ 4169/93 [22]).

The proper test is therefore to consider the relevance of the sexual orientation to the benefit conferred on the spouse. The functional test meets this requirement. According to this test, no distinction should be made between homosexual couples and heterosexual couples, if the spousal relationship between the spouses of the same sex meets the criteria that realize the purpose for which the right or benefit is conferred. By contrast, when the sexual orientation is relevant to realizing the purpose of the benefit, for instance if the purpose is to encourage having children, withholding the benefit from a same-sex spouse will not constitute discrimination. Justice L’Heureux-Dubé discussed this distinction in the judgment of the Canadian Supreme Court in Canada (A.G.) v. Mossop (1993) [43], at p. 560:

‘… “family status” may have varied meanings depending on the context or purpose for which the definition is desired… the Tribunal concluded that the potential scope of the term “family status” is broad enough that it does not prima facie exclude same-sex couples. In making this finding, the Tribunal used the proper interpretational approach, considered the purpose of the Act and the values at the base of the protection of families.’

Cf. also NLC 54/85-0 [25]. In that case it was held that a recognized partner is exempt from paying insurance premiums under s. 8 of the National Insurance Law [Consolidated Version], 5728-1968, exempting ‘a married woman whose husband is insured’ from making insurance premiums. Justice Goldberg, who wrote the judgment, explained that in view of the purpose of the law to place a recognized partner on an equal footing with the ‘lawful wife’, and in view of the definition in the law of the expression ‘his wife’ including a ‘recognized partner’, the recognized partner must also be regarded as a ‘married woman’.

11. Public authorities are first and foremost subject to the principle of equality, but this principle also applies in the field of labour relations in general (see, for instance, S. Almog, ‘A Guide to Labour Law’ The Employee’s Guide, 1994, 35-36). The employer’s contractual freedom retreats when faced with the employee’s right to equality (Flight Attendants Association v. Hazin [24]; HCJ 410/76 Herut v. National Labour Court in Jerusalem [23]; Nevo v. National Labour Court [7], ibid.). The legislation prohibiting discrimination in labour relations reflects this principle, but did not create it. See also F. Raday, ‘The “Privatization of Human Rights” and the Misuse of Power’ 23 Mishpatim, 1994, at pp. 21, 41.

12. In our case, the aeroplane ticket was not meant for a spouse who is married to the employee, and in any event the purpose of the benefit was not to encourage a lifestyle within a traditional family framework. The benefit is given to the employee for the spouse with whom he shares his life de facto. Indeed, although the petitioner did not intend the arrangement to apply to same-sex spouses, the sex of the spouse is not relevant to the purpose of giving the benefit.

Benefits for a spouse are a significant part of employees’ salaries. Professor Elbin’s calculations found that in the United States 27% of employees’ salary is made up of benefits (in his article, supra, at pp. 1068-1069).

In Israel, benefits (including ‘related conditions’) may lead even to the doubling of the salary (see the monthly periodical Calculation, M. Katzin, ed., October 1994, 50). A significant part of these benefits — such as pension plans and life insurance — are given for the spouse, including the recognized partner, and to deny benefits to a spouse with whom a homosexual lives is tantamount to reducing his salary. Consequently, denying these benefits is discrimination against the employee himself. Professor Elbin said of this:

‘Unable to marry, gay couples are generally excluded from the benefits afforded married couples in our society, including benefits commonly accorded spouses in employee and public benefit programs. For gay employees, the result is total compensation lower than that of other married co-workers performing the same job.

Domestic partner provisions lessen the economic discrimination that results from the ban on same-sex marriage.

…

… An employer who does not offer domestic partner benefits is, in fact, paying less in total compensation than he should be because employees with domestic partners are not being compensated equitably’ (supra, at 1068-69, 1082).

In the case before us, denying the benefit to the respondent would lead to a reduction of his salary in the amount of the price of the ticket, and there is no justification for this.

For these reasons, I agree that the petition should be denied.

 

 

Petition denied, by majority opinion (Vice-President A. Barak and Justice D. Dorner), Justice Y. Kedmi dissenting.

30 November 1994.

 

 

 

[*]                 NLC 3-160/53 El-Al Airlines v. Danielowitz IsrLC 26 339.

*                 Ibid., p. 349.

CA 6601/96 Appeal and Counter-Appeal

 

1.   AES Systems (appellant in appeal and respondent in counter appeal)

2. Bamberger Rosenheim Ltd. (appellant in appeal and respondent in counter appeal)

v.

1.  Moshe Sa’ar (respondent in appeal and appellant in counter appeal)

2.   State of Israel (respondent in appeal and appellant in counter appeal)

 

 

The Supreme Court Sitting as the Court of Civil Appeal

[August 28th, 2000]

Before President A. Barak, Justices T. Or, E. Rivlin

 

Appeal and counter appeal on the Judgments of the Tel-Aviv District Court (Justice A. Goren) on June18th, 1996 in CC 1331/87, 500/88, 565/89.

 

Facts: Appellant No.1 developed independent computer word processing systems.  Appellant no.  2 was the exclusive distributer of the systems in Israel, and also provided its customers in Israel with maintenance and repair services.  The respondent had been an employed by the appellant as a computer technician, and had at the time of his employment, signed both an agreement not to compete with the appellant in anything related to the marketing and repair of Linear systems, as well as an “Agreement to Protect Confidentiality,” according to which he was obligated to maintain the absolute confidentiality of information that he may obtain in the framework of his employment.

 

The respondent was fired after twenty eight months of work, and started a business of computer systems services.  He advertised his services in the newspaper as a repair and maintenance technician for computer systems, including Linear systems, he approached the customers of the appellant directly, using a customer list of the appellant’s.  The newspaper advertisement led to a contract with The Armament Development Authority (RAFAEL-operated by respondent number two), according to which respondent would provide Linear services to RAFAEL.  These services replaced the repair and maintenance services that had been given in the past to RAFAEL by the appellant.

 

Against the background of these events three suits were filed in the District Court.  In one suit, in the framework of which a temporary injunction was issued prohibiting the respondent from dealing directly or indirectly in the sale or provision of service to Linear word processors for a period of eighteen months from the day the respondent was fired, which did not apply to the contract with RAFAEL, the appellant sued the respondent, for violation of his obligations to it, for doing damage to its property rights and its reputation, and for appropriating its trade secrets.  In the second suit the appellants claimed that the respondent made use of the magnetic disks and diskettes which store backup programs, application programs and diagnostic programs that were developed by the appellant and disks that were prepared for use by them, thereby doing damage to their property rights, and violating their copyright.  In this suit it was claimed that RAFAEL is assisting the respondent in his prohibited actions.  The appellants demanded damages from the respondents, and from RAFAEL. RAFAEL filed a third-party notice.  The third suit, directed by the appellant against RAFAEL, sought the return of hardware equipment and software lists that were lent by the appellant to RAFAEL and for payment of fair use.  RAFAEL filed a countersuit in which it sought removal of a barrier that the appellant created in its workspaces.  It also demanded equipment that it purchased and did not receive, and payment in the amount of NIS 7,022 for expenses it incurred as a result of violation of the agreement that the appellant had with RAFAEL.  Consideration of all these suits was joined. 

 

The District Court (Vice-President, Justice A. Goren), in its judgment, dismissed the appellants’ claims inasmuch as they related to violation of copyright or damage to reputation.  It was also held that the respondent violated the agreement not to compete with the appellant’s business, and that the respondent made use of the customer list of the appellant within the eighteen month period, and that a contract with RAFAEL resulted from the violation of the agreement not to compete.  It was also held that it was not proven that contracts with other customers resulted in agreements between those customers and the respondent, within the eighteen month period, and therefore it was not shown that agreement of the respondent in this matter was violated.  The court also held that as a result of the agreement between the respondent and RAFAEL, RAFAEL ceased receiving Linear System maintenance services from the appellants.  The court determined compensation for the appellants in the amount of $25,000.  Additionally, the State of Israel (under whose aegis RAFAEL was operating) was ordered by the court to pay the appellant for the value of certain hardware and software items, which were given to RAFAEL by the appellants, and which remained in their possession.  The appeal and the counter-appeal were directed against the judgment of the District Court.

 

Held:  The Court allowed the respondent’s appeal voiding the award of damages to the appellant for the contract with RAFAEL.  The court denied the appellants’ appeal and the appeal of respondent no. 2.  The Court also denied the respondent’s appeal inasmuch as it related to software and hardware. The appellants were ordered to pay the respondent’s costs in the sum of NIS 15,000.

 

For the appellant—Z Hubers

For Respondent no. 1 —A. Loit

For Respondent no. 2 –R. Zakai-Newman

 

Basic laws cited:

Basic Law: Human Dignity and Liberty, s. 8.

Basic Law: Freedom of Occupation, s. 4.

Legislation cited:

Contracts (General Part) Law 5733-1973, ss. 19, 25(b), 30, 31..

Restrictive Trade Practices Law 5748-1988.

Commercial Torts Law 5759-1999.

Contracts (Remedies for Breach of Contract) Law 5731-1970, ss. 3(4), 4.

 

Israeli Supreme Court cases cited:

CA 614/76 Jane Doe v. John Doe IsrSC 31(3) 85.
CA 294/91 Chevra Kadisha KAHSHA “Kehillat Yerushalayim” v. Kestenbaum IsrSC 46(2) 464.
CA 239/92 “EGGED” Israel Transport Cooperation Society v. Mashiach IsrSC 48(2) 66.
HCJ 1683/93 Yavin Plast Ltd. v. The National Labour Court IsrSC 47(4)702.
LCA 5768/94 A.S.I.R Import, Manufacture, and Distribution v. Accessories and Products Ltd. IsrSC 52(4) 289.
HCJ 1703/92 C.A.L. Cargo Airlines Ltd. v. The Prime Minister, IsrSC 52(4) 193.
HCJ 28/94 Tzarfati v. Minister of Health IsrSC 49(3) 804.
CA 2247/95 General Director of the Antitrust Authority v. T’nuvah Center for Cooperation and Marketing of Agriculture Products in Israel Ltd. 52(5) 213.
LCA 371/89 Leibovitz v. Eliyahu Ltd. IsrSC 44(2) 309.
HCJ 588/84 K.S.R.  Asbestos Trade Ltd. v. President of the Antitrust Tribunal IsrSC 40(1)29.
CA 312/74 Cable and Electric Cable Company in Israel Ltd. v. Martin Christianpalour IsrSC 29(1) 316.
CA 4/74 Berman v. Misrad Lehovalat Masaot Pardes Hana – Carcur “Amal” Ltd. IsrSC 29 (2) 718.
CA 618/85 Ma’ayanot Hagalil Hamaravi Ltd. v. Tavori BEHAR Soft Drinks Ltd. IsrSc 40(4)343.
CA 2600/90 Elite Israeli Company for Manufacture of Chocolate and Candies Ltd. v. Serengah IsrSC 49(5) 796.
CA 1142/92 Vargus Ltd. v. Camax Ltd.  IsrSC 51(3) 421.
CA 136/56 Fuchs. v. Eylon and Etzioni Ltd. IsrSC 11 358.
CA 136/64 “Francitext”Ltd. v. Utzitel Ltd. IsrSC 18(3) 617.
CA 238/73 Sharabi v. Chamtzani, IsrSC 28(1) 85.
CA 157/88 “EGGED” Israel Transport Cooperation Society v. Meiron IsrSC 44(1) 522.
HCJ 935/89 Ganor v. State Attorney IsrSC 44(2) 485 at pp. 513.
CA 155/80 Rav Bariach Ltd. v. Amgar IsrSC 35(1) 817.
CA 566/77 Dicker v. Moch IsrSC 32(2) 141.
CA 1371/90 Damati v. Ganor IsrSC 44(4) 847.
CA 901/90 Nahmias v. Columbia Trade and Manufacture Ltd. IsrSC 47(1)252.
LCA 672/96 “EGGED” Israel Transport Cooperation Society v. Rachtman (not yet reported).
CA 369/74 “TromAsbest” Company for Assembly of Pre Structures Ltd. v. Zakai, IsrSC 30(1) 793.
CA 4628/93 State of Israel v. Efromim Residence and Initiative (1991) Ltd. IsrSC 49(2) 265).
CA 214/89 Avneri v. Shapira IsrSC 43(3) 840.

 

Israeli National Labour Court cases cited:

LA 164/99 Frumer and Checkpoint Software Technologies Ltd. – Redguard Ltd. (not yet reported).
LC 54 3-110/ First Class Service Ltd. – Mati Kosacks LCC 26, 451 at p. 462.
LC 42 3-74/ Vardi-City of Netanyah LCC 14 59.

 

English cases cited:

Hepworth Manufacturing Co. v. Riyott, [1920] 1 Ch 1, 12.
Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] A.C.535.
Gledhow Autoparts Ltd v. Delaney [1965] 3 All. E.R. 288, 291.
Esso Petroleum Co. Ltd. V. Harper’s Garage (Stourport) Ltd [1967] 1 All E.R. 699.
Kores Manufacturing Co. v. Kolok Manufacturing Co. [1959] Ch. 108.
Lansing Linde Ltd v. Kerr [1991] 1 W.L.R 251.

 

French cases cited:

Cass. 5OC. 14 Mai 1992 Droit Social No. 12, 976 (1992).

 

Israeli books cited:

D. Friedman and N. Cohen Contracts 15 (Vol. A, 1991).
E. Zamir Contract Interpretation and Supplementation (1996).
A. Barak Interpretation in Law, Vol. 2, Statutory Construction (1993).

 

Israeli articles cited:

Porat ‘Considerations of Justice Between Parties to a Contract and Considerations of Guiding Behaviors in Israeli Contract Law’ Iyunei Mishpat 22.
Friedman “Contracts of Adhesion, Good Faith and Public Policy” Iyunei Mishpat 7, 431 at p. 433 (1979).
Gilo, ‘Toward a New Legal Policy toward Non-Compete Terms,’ Iyunei Mishpat 23, 63 (2000).
Cohen, ‘Freedom of Trade and Commercial Competition’ Iyunei Mishpat 19, 353 (1995).
Hermon, ““Public Policy” and the Limitations on Freedom of Occupation in the Perspective of Israeli and English Case Law,” The Cohen Book, 393,403 (1989).
Goldberg, ‘Limiting Freedom of Occupation of the Employee by Contract’ Mechkarei Mishpat 4, 7 (1987).
Goldberg ‘Freedom of Contract in Labour Law’ 672, 678 (1972)
Goldberg ‘Good Faith in Labour Law’ Sefer Bar-Niv 13 (1987).

 

Foreign books cited:

I.  T.  Smith and G.  Thomas, Industrial Law 86 (1996).
R. Upex, The Law of Termination of Employment 432 (5th. Ed., 1997)). 
Cheshire, Fifort and Furmston's, Law of Contract 420 (13th. Ed., 1996);
Chitty, On Contracts 890 (Vol. 1, 28th ed., 1999).
Trertel, The Law of Contract 416 (9th ed., (1995).
M. Weiss, Labour Law and Industrial  Relations in Germany 105 (1995).
A. Berenstein, Labour Law and Industrial Relations in Switzerland 134 (1994).
R.W. Arthure et al, Labour Law and Industrial Relations in Canada 138 (1993).

 

Foreign articles cited:

Hanna Bui-Eve, ‘To Hire or Not to Hire: What Silicon Valley Companies Should Know About Hiring Competitor’s Employees,’ 48 Hastings L. J. 981 (1997).
Gilson, ‘The Legal Infrastructure of High Technology Industrial Districts: Silicon Valley, Route 128, and Covenants Not to Compete,’ 74 N.Y.U.L. Rev. 575 (1999).
O’Malley, ‘Covenants Not to Compete in the Massachusetts Hi-Tech Industry: Assessing the Need for a Legislative Solution,’ 79 B.U.L.Rev. 1215 (1999).

 

Other:

Restatement 2d, Contracts, §§188, 188(1)(a).

 

 

JUDGMENT

 

President A. Barak

The Facts

 1.  Appellant No.1 developed independent computer word processing systems.  It used systems called “Linear systems”.   Appellant no.  2 (hereinafter, “the appellant”) received from appellant no. 1 the right of exclusive distribution of the systems in Israel.  It provided its customers in Israel with maintenance and repair services.  The respondent was an employee of the appellant.  He was employed as a computer technician.  At the time of his employment, he signed an agreement not to compete with the appellant in anything related to the marketing and repair of Linear systems.  This is the language of the agreement:

“The employee hereby undertakes not to compete with B/R [the appellant A.B.]  either directly or indirectly, whether or not he acts in his capacity as an employee of B/R, to the extent that any loss is caused by such competition to the business of B/R as distributor, marketer and service provider for equipment made by Linear and/or any other name by which such equipment will be called in the future.  So too the employee undertakes not to take any action that would undermine, eliminate, or damage B/R’s relationships with its customers."

The respondent signed an “Agreement to Protect Confidentiality.”  According to it he was obligated to maintain the absolute confidentiality of information that he might obtain in the framework of his employment.  The respondent was obligated not to make use of such information nor utilize it for commercial purposes.  Information that the respondent already possessed before beginning his employment and information that was available to the public was outside the purview of the agreement.  Both agreements were not limited in time. 

2.  After twenty eight months of work, the respondent was fired.  He started a business of computer systems services.  He took out an advertisement in the newspaper offering his services as a repair or maintenance technician for computer systems, including Linear systems.  In addition, he directly approached the customers of the appellant, using a customer list of the appellant’s that he had. As a result of the newspaper advertisement a contract was signed between the respondent and the Armament Development Authority (RAFAEL-operated by respondent number two) according to which the respondent would provide Linear services to RAFAEL.  These services came in place of the repair and maintenance services which the appellant had given in the past to RAFAEL.

3.  Against the background of these events three suits were filed in the District Court.  In one suit, the appellant sued the respondent for violation of his obligations toward it, for doing damage to its property rights and its reputation, and for appropriating its trade secrets.  In the framework of this suit the District Court granted a temporary injunction which prohibited the respondent from dealing directly or indirectly in the sale or provision of services for word processors of the Linear type until the expiry of eighteen months from the day the respondent was fired.  The injunction did not apply to the contract with RAFAEL.  In the second suit the appellants claimed that the respondent made use, in the course of providing services to his customers, of the magnetic disks and diskettes which store backup programs, application programs and diagnostic programs that were developed by the appellant and disks that were prepared for use by them.  In this the respondents, according to the appellants’ claim, violated their property rights and infringed on their copyright.  In this suit it was claimed against RAFAEL that it is aiding the respondent in his prohibited actions.  The appellants demanded compensation from the respondents, and from RAFAEL, for causing by their behavior the breach of contracts between the appellant and its customers, the breach of an implied term that arose from the work relationship between the appellant and the respondent, and for unjust enrichment.  RAFAEL for its part filed a third-party notice.  The third suit was directed by the appellant against RAFAEL, for the return of hardware equipment and software materials that were lent by it to RAFAEL and for payment of fair use for them.  RAFAEL for its part filed a countersuit in which it requested removal of a block that the appellant created in its workspaces.  It also demanded the supply of equipment that it purchased and did not receive, and payment in the amount of NIS 7,022 for expenses it incurred as a result of breach of the agreement that the appellant had with RAFAEL.  All of these suits have been joined for the purpose of consideration by the court.

 4.  In a comprehensive and thorough judgment the District Court (Vice-President, Justice A. Goren) dismissed the claims of the appellants inasmuch as they related to infringement of their copyright or damage to their reputation.  On the other hand, it was held that the respondent breached the agreement not to compete with the appellant’s business.  So too it was held that the respondent had made use of the customer list of the appellant.  Breach of the agreement not to compete yielded – within the eighteen months during which the temporary injunction was issued (this being the period to which the appellant limited its claims) – the contract with RAFAEL.  As for contracts with other customers based on the customer list in the possession of the respondent, it was held that it was not proven that these yielded -- during the limitation period of eighteen months -- agreements between those customers and the respondent and therefore it is not to be said that the respondent’s agreement in this matter was breached.  The Court held that as a result of the agreement between the respondent and RAFAEL, RAFAEL ceased to receive maintenance services from the appellants for the Linear systems in RAFAEL’s possession.  For these losses the court held that the respondent was to compensate the appellants in the amount of $25,000.  So too, a court ordered the State of Israel (under whose aegis RAFAEL was operating) to pay the appellant the value of certain hardware and software items given to RAFAEL by the appellants, and which remained in their possession.

The Appeals

5.  The appeal and the counter-appeal before us are directed against this judgment.  The appellants’ claim that it should be determined that the respondent made prohibited use of the programs that were developed by them and these actions damaged their property rights and their reputation.  They also claim that the District Court erred in holding that the marketing and advertising actions undertaken by the respondent during the eighteen months are not to be seen as a breach of their agreements with the appellants, even if this breach did not result in transactions.  The respondent, for his part, appeals the decision requiring him to pay damages to the appellant for his contract with RAFAEL.  He also appeals (alternatively) the amounts that were awarded.  The State of Israel (which operates RAFAEL) claims, in an appeal that was filed on its behalf, that it was inappropriate to require it to pay the appellants the value of the software and hardware items, either because they were not supplied to it at all or because the appellant is not entitled to payment for them.

Property Rights of the Appellant, Damage to Reputation, and Compensation for Software and Hardware Items

6.  The parties’ claims on these matters ask us to intervene in the factual findings of the trial court.  We will not do so.  The decisions of the District Court are based on findings that were determined on the basis of expert opinions and testimony.  These findings are well anchored in the evidentiary material and we will not interfere in them.  This also applies to the property rights of the appellant and to the damage to its reputation.  We have also not found that it would be appropriate to intervene in the judgment of the District Court as to the compensation for software and hardware items that were handed over to RAFAEL.  The factual findings in these matters rely on proper interpretation of the relevant documents and of the evidence that was brought before the District Court; we will not interfere in them.

Limiting Freedom of Occupation

7.  There are two questions before us: The one is whether the obligation of the respondent not to compete with the appellant is lawful; the second is whether it was lawfully determined that the respondent is not liable for the use that he made of the customer list, as this usage did not result in a contract with the customers within the period of eighteen months.  These two questions are related to one central issue, which relates to the validity of agreements which limit the freedom of occupation.  But the fundamental starting point for examining these issues is found in the provisions of section 30 of the Contracts (General Part) Law 5733-1973 which establishes:

"a contract whose execution, content, or purpose are illegal, immoral or against public policy -- is void."

"Public policy" reflects the fundamental approaches of Israeli society as to the appropriate level of behavior in contractual relationships.  It expresses the position of Israeli law as to what is permitted and what is prohibited in contractual relationships.  The content of public policy changes from society to society; it changes in any given society from one point in time to another point in time (see CA 614/76 Jane Doe v. John Doe [1] at p. 94).  The judge learns about the core values of Israeli society and the approach of Israeli law as to what is permitted and what is prohibited from the totality of values of the legal system.  Primary among these values are the constitutional values of the law and the regime.  Therefore, human rights anchored in the basic laws constitute a central source – even if not the only source -- from which the judge draws the values which come together to form the Israeli “public policy".  And note: human rights in the basic laws are directed toward public entities.  They do not grant, on their own and directly, rights to an individual as against another individual.  However, the basic rights -- and other constitutional provisions anchored in the basic rights -- establish a system of values and core concepts in the framework of which the law (the public and the private) operates and develops (see CA 294/91 Chevra Kadisha KAHSHA “Kehillat Yerushalayim” v. Kestenbaum  [2] at p.  531; see CA 239/92 “EGGED” Israel Transport Cooperation Society v. Mashiach [3]).  These core values also determine the content of "public policy."  They are not the only ingredients of "public policy."  The approaches of Israeli society to what is permitted and prohibited in contractual relationships are not only determined by the values which express human rights.  Public policy extends over further values, goals and interests, which reflect the policy of Israeli society (its public policy).  Therefore, national security, public peace, the welfare and strength of the nation are also values and interests which shape its  "public policy."

8.  The values of a legal system, its core values, purposes and interests, are in constant conflict.  When this conflict takes place in the framework of the basic laws themselves, it is resolved by the balances (vertical and horizontal) which apply to the matter (as to the vertical balance, the limitation clause in section 4 of the Basic Law: Human Dignity and Liberty and in section 8 of the Basic Law: Freedom of Occupation).  When this conflict takes place in the framework of private law -- and in our case, in establishing the parameters of "public policy" -- it is resolved by the proper balance between the conflicting values and interests.  This balance is determined by the relative weight of the competing interests and values in the framework of the private law.  And it should be noted that these values and interests are not solely the values and interests of the individual versus another individual.  These are also and primarily the values and interests of society as to the validity of contracts between individuals.  Indeed, "public policy" reflects the public interest which within its purview also takes into consideration the interests of various individuals.  It constitutes, by its very essence, a limitation on the parties’ free will.  Against this background we will focus our gaze on terms limiting the freedom of occupation.

Public Policy and Clauses Limiting Freedom of Occupation

9.  What does "public policy" require as to terms between employer and employee which limit the freedom of occupation, and in our case, terms by which upon termination of employment an employee agrees not to compete with the employer and not to make use of information received during his period of employment?  In order to develop "public policy" in this context it is necessary to understand the values, principles and interests competing for primacy, and the proper balance between them (see the judgment of the National Labour Court LA 164/99 Frumer and Checkpoint Software Technologies Ltd. – Redguard Ltd. [29] (para. 11) (hereinafter: "the Checkpoint case”)).  We will open with values, principles and interests which support granting validity to the contractual obligations the parties have taken upon themselves.  A first principle that is to be taken into account is freedom of contract.  From this principle the approach is derived that contracts are to be kept: pacta sunt servanda.  The contract is the "law" that the parties have established between themselves and which they must keep.  A civilized society cannot exist and develop if contracts that are made are not honored.  The public interest – an interest that reflects concepts of justice, morality and social efficiency together – is that obligations that a(n adult) person takes upon himself will be honored by him (see D. Friedman and N. Cohen Contracts 15 (Vol. A, 1991)[39]; E. Zamir Contract Interpretation and Supplementation (1996)[40]; A. Porat ‘Considerations of Justice Between Parties to a Contract and Considerations of Guiding Behaviors in Israeli Contract Law’ [42] at 647).  And note: I do not hold that it is "public policy" that contracts are to be kept.  Public policy is the weighted result which results from the internal balancing of values and principles which are under consideration.  However, I am of the opinion that freedom of contract and the performance of contracts are central values and interests which come together to form – in their balancing with other interests and values -- "public policy" in Israel (see Friedman “Contracts of Adhesion, Good Faith and Public Policy” [43] at p. 433).  The principle of freedom of contract is to be given substantial weight, as it reflects a constitutional right and a central public interest.

10.  A second interest that is to be considered is the personal advantage (to the employer) and the public advantage (to society as a whole) in protecting the employer from competition by the employee in general, and from use of information that he acquired from the appellant, in particular (see HCJ 1683/93 Yavin Plast Ltd. v. The National Labour Court [4] at p. 708).  In this context the investment of the employer in his business overall is to be particularly emphasized, as well as his investment in training his employees and in his trade secrets, in particular.  (See Gilo “Toward a New Legal Policy toward Covenants not to Compete” [44] at 63).  This would be the interest (private and public) that the employer be given protection for his investments in training his employees, and in building a client base and work methods.  Certain aspects of this interest are anchored in the freedom of property itself.  Other aspects stem from the public interest.  Indeed, there is a concern that if the employer is not able to protect these interests, he will not invest the necessary investments, and the public interest will be damaged (compare LCA 5768/94 A.S.I.R Import, Manufacture, and Distribution v. Accessories and Products Ltd. [5]).

11.  I have explained two considerations which support the validity of clauses limiting freedom of occupation.  What are the values, principles, and interests which are found at the core of the approach which desires to invalidate these clauses?  A first principle that is to be considered is freedom of occupation.  This is a constitutional principle, and is anchored in the Basic Law: Freedom of Occupation.  It is derived from human dignity, and from freedom of thought and action.  The significance of freedom of occupation is, inter alia, the freedom of an employee who concluded an employment relationship with his employer to contract with any employer with whom he desires as well as the freedom of the employee to start a business of his own, without being bound by agreements limiting trade.  Freedom of occupation is derived from freedom of competition.  (See HCJ 1703/92 C.A.L. Cargo Airlines Ltd. v. The Prime Minister [6]; HCJ 28/94 Tzarfati v. Minister of Health [7]).  However, freedom of competition is a public interest that stands on its own (see CA 2247/95 General Director of the Anti-Trust Authority v. T’nuvah Center for Cooperation and Marketing of Agriculture Products in Israel Ltd. [8] at p. 229). It was justly noted that "free competition is likely to bring about reduced prices, improved quality of the product and improvement of the service which is given with its sale" (President Shamgar in LCA 371/89 Leibovitz v. Eliyahu Ltd. [9] at p. 327; HCJ 588/84 K.S.R.  Asbestos Trade Ltd. v. President of the Antitrust Tribunal [10] at p. 37; Cohen “Commercial Competition and Freedom of Occupation [45] at p. 354 (1995)).  Expression for this public interest has been given in Israeli law inter alia  in anti-trust legislation (See the Restrictive Trade Practices Act 5748- 1988)  At the foundation of this law is competition, which was intended to ensure efficient allocation of resources and increased efficiency (see 2247/95 supra, at 229)  Judge Adler rightly emphasized in the Checkpoint case that: 

“The modern market is based on the existence of free competition in the open market and a free economy, inter alia, as to capital, and particularly human capital....  Free competition advances the marketplace and brings about, inter alia, reduction in prices for the consumer.  A competitive market encourages establishment of new companies, including companies started by employees who compete with their previous employers.  The employees offer their talents to various employers and compete with each other for places of work.  The employers on their part, offer improved working conditions with the goal of attracting skilled labor. . .  Society is interested in rapid and free transfer of information in the marketplace."  (Ibid. para. 14).  

This principle of freedom of occupation -- and the freedom of competition derived from it -- is to be given heavy weight, as it reflects a constitutional right and important public interest.

12.  A second interest which is to be considered is the employee himself.  His labor is his property, spiritual and physical.  It is the basis for his self-realization and fulfillment.  His freedom of choice is his life.  His capacity to choose an occupation for himself is the source of his existence and his property.  His training is the means by which he will be able to compete in the workplace.  Keeping him from his work for a specified period of time may remove him entirely from the workforce and bring about the destruction of many years of training.  "A person's place of work, where he spends at least a third of his day, is not merely a means of support, but a place from which he hopes to achieve self-realization and fulfillment.  Limiting the mobility of the employee will damage his right to personal fulfillment" (The Checkpoint case, paragraph 14).  This is primarily so in the context of employment in the field of high-tech.  These interests are first and foremost the interests of the employee.  But they also constitute the interest of the public.  "The good of the public demands that generally, knowledge, rules and professional skills acquired by an employee in his work will be used without limitation, as such use is a blessing to the individual and the public as one" (Justice Berinson in CA 312/74 Cable and Electric Cable Company in Israel Ltd. v. Martin Christianpalour [11] at p. 320; Hermon, ““Public Policy” and the Limitations on Freedom of Occupation in the Perspective of Israeli and English Case Law,” [46] 403).  This is primarily so in the fields of high-tech, in which the public as a whole has an interest in their development for the good of society.  Indeed, the public good justifies recognizing the freedom of the employee to choose for himself employment at his will.  This was justly noted by Judge Astbury in the Hepworth case (Hepworth Manufacturing Co. v. Riyott [1920] [32]) when he said:

“A man’s aptitude, his skill, his dexterity and his manual and mental ability may not, nor ought to be, relinquished by an employer.  They are not his masters [sic] property, they are his own, they are himself.”  Moreover, in a contractual relationship, the employer and the employee are not of equal status.  The employer generally is in a stronger bargaining position.  Justice Berinson discussed the “weakness of the employee versus the employer, who may dictate the terms of the employment contract."  (CA 4/74 Berman v. Misrad Lehovalat Masaot Pardes Hana – Carcur “Amal” Ltd. [12] at p. 722). 

The National Labour Court emphasized that "labour law is guided by a basic principle, which is based on the presumption of the fundamental inequality between the power of the employee and the power of the employer".  (Checkpoint case, paragraph 14).  Of course, this inequality changes over time.  The matter is conditioned on the structure of the labour market and the strength of the professional association.  However, in principle it may be said that the employee's interest and the public interest is to protect the work capacity and creative capacity of the employee.

Balance between Conflicting Considerations

13.  The various considerations which come together to form "public policy" do not all lead in one direction.  We have before us "competing" considerations (Vice-President Ben-Porat in CA 618/85 Ma’ayanot Hagalil Hamaravi Ltd. v. Tavori BEHAR Soft Drinks Ltd. [13] at p. 348; see also CA 2600/90 Elite Israeli Company for Manufacture of Chocolate and Candies Ltd. v. Serengah [14] at p. 808).  The one pair of considerations leads in most cases to the recognition of the validity of contractual clauses limiting the freedom of occupation of the employee.  The second pair of considerations also leads in most cases to invalidating such contractual terms.  The normative content that will be given to the concept of "public policy" constitutes, therefore, the result of the balance between the conflicting values, principles, and interests.  I have explained this in one of the cases, when I noted:

“As against the freedom of occupation stand other values, which the law also seeks to protect.  The protection given to freedom of occupation is a result of the balance that stems from the confrontation between freedom of occupation on the one hand and other individual liberties (such as freedom of property, freedom of contract (as part of human dignity and liberty) on the other, and the confrontation between the freedom of occupation and the public interest (such as the public interest in the protection of professional secrets).  . . . as against the freedom of occupation of the employee and the new employer stand the interests of the original employer that are worthy of protection, including his property (section 3 of the Basic Law: Human Dignity and Liberty) and perhaps also his privacy (section 7).  The freedom of contract of the original employer and the public interest are also to be considered.” (HCJ 1683/83 [4] supra at p. 708; see also CA 239/92 supra, at p. 72; CA 1142/92 Vargus Ltd. v. Carmax Ltd. [15]; see also LC 54 3-110/ First Class Service Ltd. – Mati Kosacks [30] at p. 462).

14.  Israeli case law, in the footsteps of English case law, has determined that the criterion for balance between the competing interests is reasonableness.  A contractual limitation on the freedom of occupation of the employee will not damage “public policy” if the limitation is reasonable in terms of the interests of the parties and in terms of the public interest.  Lord MacNaghten’s words are well known:

 “It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable -- reasonable, that is, in reference to the interest of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public” (Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] [33]).

These words and similar ones have been quoted at length in Israeli case law (see CA 136/56 Fuchs. v. Eylon and Etzioni Ltd. (hereinafter: “the Fuchs case”) [16] at p. 361; CA 136/64 “Francitext”Ltd. v. Utzitel Ltd. [17] at p. 626; CA 238/73 Sharabi v. Chamtzani [18]; CA 4/74 [12] supra; CA 157/88 “EGGED” Israel Transport Cooperation Society v. Meiron [19] at p. 526).  Of course the reasonableness test is an appropriate and good test.  However, it does not advance us very much, as the key question is what are the tests for determining the reasonableness of the contractual limitation.  Reasonableness means proper balance between competing values, interests and principles.  (See HCJ 935/89 Ganor v. State Attorney [20] at p. 514; A. Barak Interpretation in Law, 663 (volume two, 1993) [41]).  The balance is appropriate if we give the correct weight to the various considerations that are to be taken into account.  What is the proper weight -- and what, therefore, is the proper balance -- among the various considerations that are to be taken into account in providing an answer to the question whether the employee’s agreement not to compete is reasonable?

"Legitimate Interests”

15.  The fundamental starting point should be to avoid the approach of "all or nothing".  It is not to be said that all clauses limiting the freedom occupation of the employee who departs his workplace are consistent with "public policy."  So too, it is not to be said that all such clauses go against "public policy."  The validity of clauses which limit freedom of occupation should be determined by the legitimate interests which they protect.  Indeed, this was the approach taken by the Supreme Court when it placed the "legitimate interests of the parties and the public” in the center of its analysis.  Justice Berinson explained this, noting:

"the limitation must meet the double condition that it is necessary for the protection of the legitimate interests of the employer from whose workplace the employee has departed and that it is for the good of the public" (CA 312/74 [11] supra  at  319). 

Justice Bechor reiterated this approach noting:

"the general law is that there exists the right to freedom of occupation in the field of the employee who has left a place of work with an employer.  And if there is an agreement which limits him in this freedom of occupation after the conclusion of his work with the employer, two conditions must be met, in order for this limitation to be valid.  The first condition is that it is necessary to protect the legitimate interests of the employer from which the employee has left, and the second condition is that this is also necessary for the good of the public in terms of the interests of the two parties" (CA 155/80 Rav Bariach Ltd. v. Amgar  [21] at p. 825).

M. Goldberger wrote in a similar vein:

"there is nothing wrong with limiting the right of a person to choose their occupation and employment up to the boundaries of the ‘limited right’ of his former employer in protecting his legitimate interests" (Goldberg, ‘Limiting Freedom of Occupation of the Employee by Contract’ [47] at 27 (1987)).

Professor Cohen takes a similar approach:

"a valid limitation of freedom of occupation is one that protects a legitimate interest of one in whose favor it is applied, and it must be reasonable both in terms of the parties and in terms of the public (Cohen, ‘Freedom of Trade and Commercial Competition’ [45]).

Comparative law undertakes a similar approach (as to the appropriate use of comparative law in the matter of limitation of freedom of occupation see CA 566/77 Dicker v. Moch [22] at p. 146).  The American Restatement 2d (Contracts) [61] establishes that a non-competition clause between an employer and employee is not reasonable if (section 188(1) (a)):

"The restraint is greater than is needed to protect a promisee’s legitimate interests."

English law takes a similar approach (see I.  T.  Smith and G.  Thomas, Industrial Law 86 (1996) [50] as well as Gledhow Autoparts Ltd v. Delaney [1965] [34]).  This approach is also common in French law (see Cass. 5OC. 14 Mai 1992 Droit Social No. 12, 976 (1992) [38].  Indeed, the relevant question is what are the interests considered legitimate -- in terms of the parties and the public --by the legal system, which clauses limiting freedom of occupation lawfully protect.

16.  In connection with "legitimate interest" it has occasionally been emphasized in the case law that both the legitimate interests of the parties and the legitimate interests of the public are to be considered, and that the public interest is secondary to the legitimate interests of the parties.  The following words of Justice Berinson which relate to the consideration of "the public good" are typical:

"the public good remains important; however, it has always been of secondary importance compared with the first reason which relates to the interest of the parties themselves" (CA 4/74 [12] supra, at p.722; see also CA 1371/90 [23] supra; CA 238/73 [18] supra at p.  91).

However, it has been emphasized "there exist extraordinary cases, as in the example of the creation of a harmful monopoly, in which the public interest would be sufficient to justify invalidating a clause of that type" (CA 901/90 Nahmias v. Columbia Trade and Manufacture Ltd. [24] at p. 264).  Personally, I do not believe it is appropriate to distinguish between the legitimate interests of the parties and the legitimate interests of the public.  This is a matter of invalidating a contractual clause on the grounds of "public policy."  It appears that the perspective is that of the public.  The legitimacy of the parties’ interest is determined, therefore, from the perspective of public policy.  Moreover: the various human rights -- such as freedom of contract, freedom of occupation, property rights and other human rights -- express both the private interest and the public interest.  Indeed, we must not separate between the legitimate interests of the parties (as opposed to an undefined interest) and the public interest.  This is a matter of the public interest, which takes account of the totality of the facts, including the legitimate interests of the parties.  Lord Pierce discussed this in a key case on this issue:

“Although the decided cases are almost invariably based on unreasonableness between the parties, it is ultimately on the ground of public policy that the court will decline to enforce a restraint as being unreasonable between the parties...  There is not, as some cases seem to suggest, a separation between what is reasonable on the ground of public policy and what is reasonable as between the parties.  There is one broad question: is it in the interest of the community that this restraint should, as between the parties, be held to be reasonable and enforceable?"(Esso Petroleum Co. Ltd. V. Harper’s Garage (Stourport) Ltd [1967] [35] 724).

Indeed, the employer has his own interest and the employee his own interest.  Those interests may be different from the public interest.  But we are not interested in the parties’ interest.  We are interested in the legitimate interests of the parties.  And the legitimacy of the interest is determined by general considerations of the legal system, its principles and approaches.  The public interest and the legitimate interests of the parties are one and the same.  Therefore, whilst I will continue to discuss the legitimate interests of the parties and the legitimate interests of the public, I do not see them as separate concepts, but a uniform concept of the legitimate interests of the public ("public policy") which takes into account for its part, inter alia, the parties’ interests, whereby some of them will be protected (the "legitimate" ones) and the others will not be protected.

17.  From the perspective of the legitimacy of the interests the following conclusion is warranted: as a rule, the employer does not have "a legitimate interest" that a non-competition agreement will be given validity, without any other connection to the other interests of the employer; similarly, as a rule the employee does not have a "legitimate interest" that a non-competition agreement will be invalidated, without any connection to the other interests of the employer.  Indeed, as a rule, the employer's interest in preventing a former employee from competing with him, without this coming to protect additional interests (beyond the non-competition), such as trade secrets or customer lists, is not a legitimate (nor a "protected") interest.

Non-Competition for its Own Sake

18.  I will open with the employer’s interest that a former employee not compete with him.  In this matter we must presume that the employer does not have trade secrets or customer lists or another “legitimate interest” which he seeks to protect.  The single interest claimed by the employer is his wish – a wish that is expressed in a non-competition clause– that his employer not compete with him.  Is this “bare” interest – non-competition “on its own” – a “legitimate” interest to be protected, in such a manner that a non-competition clause will not be considered against “public policy”?  This problem came before the court in the Fuchs case, in which Justice Landau distinguished between an employee’s agreement with his employer not to compete with him and a contract in which the seller of goodwill undertakes an obligation vis-à-vis the buyer not to deal in a competing business.  In relating to the first type of case – the type we are dealing with in this appeal – Justice Landau writes:

“The tendency to invalidate the agreement is much greater in the first type.  The reason for this is that in such cases the employer is not protecting an existing interest but is trying to obtain an advantage he is not entitled to, as the rules of commerce require him to resign himself to the competition of any person dealing in similar trade, and this includes the competition of his employee, after he has left his employment, with the condition that the employee is not utilizing to his advantage the trade secrets of his employer or the special ties which he made with the clients of his employer during the period of his employment with the employer.  Therefore, the court provides a remedy for the employee on whom the employer has imposed, due to his superior bargaining position, an agreement which limits his freedom of occupation – and permits the prohibited.” (Fuchs case, p. 361)

In a similar vein Justice Bechor held:

“The general law is that there exists a right to freedom of occupation in the profession of the employee who has left his employer’s workplace.  If there is an agreement which limits him in this freedom of occupation after the conclusion of his work with the employer, two conditions must be met so that this limitation will be valid.  The first condition is that it is necessary for the protection of the legitimate interests of the employer which the employee has left, and the second condition is that the matter also is necessary for the good of the public in terms of the interest of both parties.  The good of the public requires that the departing employee will generally be able to make use, without limitation, of the general knowledge and skill that he acquired in his work.  The legitimate interest of the employer is to protect his trade secret, and that is the first condition necessary to justify the conditioning of the limitation of freedom of occupation” (CA 155/80 [21] supra, at p. 825).

Justice Bejski repeated the same principal:

“Inasmuch as it is a matter of general knowledge and even professional skill that was acquired during the course of employment, the public interest requires that the employee will be able to used them with another employer or as an independent.  If you say otherwise, this may sentence the employee to abandoning the immediate profession for which he has qualified and he may become a burden on the public.  Not so as to special trade secrets which typify a specific business, the use of which by the employee may cause a loss to the employer.  As to the latter, and this includes ties with suppliers and customers, the employer is entitled to protection” (CA 1371/91 [23] supra, at p. 854).

This is also the approach of the National Labour Court.  In the Checkpoint Case the National Labour Court emphasized that “absent ‘trade secrets’ the principal of freedom of occupation prevails over the principal of freedom of contract” (Ibid, para. 14). 

President Adler noted that “a legal system protects the property of the employer, even during consideration of suits whose purpose is to limit an employee who worked with an employer from handing over trade secrets which belong to him.”  We find that as a rule a “bare” agreement not to compete, which does not protect the interests of the employer beyond the interest of non-competition “for its own sake” (such as his interests in protecting trade secrets and customer lists) does not shape a “legitimate interest” of the employer, and is subject to be invalidated as being against “public policy” (but see LCA 672/96 “EGGED” Israel Transport Cooperation Society v. Rachtman [25]).

19.  This is also the law in England.  In discussing non-competition agreements by an employee Professor Upex writes:

“To be enforceable, such covenants must protect the employer’s legitimate business interests, either trade secrets or goodwill and trade connections. It is not possible to prevent competition as such” (R. Upex, The Law of Termination of Employment 432 (5th. Ed., 1997)) [51].  Cheshire, Fifort and Furmston's, Law of Contract 420 (13th. Ed., 1996) [52]; see also Chitty, On Contracts 890 (Vol. 1, 28th ed., 1999) [53]; Trertel, The Law of Contract 416 (9th ed., (1995) [54]).

Jenkins, L.J. discussed this, noting:

 “An employer has no legitimate interest in preventing an employee, after leaving his service, from entering the service of a competitor merely on the ground that the new employer is a competitor” (Kores Manufacturing Co. v. Kolok Manufacturing Co. [1959]  [36] 125). 

Similar law applies in the United States.  The employer does not have a legitimate interest in preventing competition for its own sake.  He must point to an additional interest beyond the non-competition itself, such as trade secrets or customer lists (see Restatement [61] ibid, par. 188).  The German, Swiss, and Canadian, law take a similar approach. (see M. Weiss, Labour Law and Industrial Relations in Germany 105 (1995) [55]; A. Berenstein, Labour Law and Industrial Relations in Switzerland 134 (1994) [56]; R.W. Arthure et al, Labour Law and Industrial Relations in Canada 138 (1993) [57]).

20.  We will now turn to the employee's interest in competing with the employer.   Our premise here is that the employee undertook not to compete with his employer after the conclusion of his employment.  The employee seeks to be released from this obligation.  His claim is that this obligation damages his ability to compete with his employer.  Is this "bare" interest -- the competition "for its own sake" -- a "legitimate" interest that is to be protected, in a manner that a contractual obligation which limits it will be against "public policy"?  Similar to the matter of the employer, here too the answer is that only a legitimate interest of the employee will be sufficient to justify invalidating clauses limiting freedom of occupation.  The employee does not have a "legitimate interest" in competing with his employer under all circumstances.  There exist employer interests (such as his interest in protecting trade secrets and customer lists) which are worthy of protection.  In the framework of these interests, the employee's interest in competing retreats, and the employee's obligation not to compete with his employer is validated (see the Fuchs case, p. 361; CA 155/80 [21] supra, at p.  825).  Justice Berinson explained this, noting:

"The big difference between the employee's duty to protect the employer’s professional secrets and secret information and the limitation of freedom of occupation of the employee after his departure from employment with the employer must be pointed out.  Trade secrets and secret information are property rights of their owners and the employee is prohibited from using them for his own purposes or from revealing them to others at any point in time" (CA 312/74 [11] supra at 319). 

In a similar vein Justice Bejski noted, when relating to a term between an employer and employee limiting the freedom of occupation of the employee:

"The tendency to invalidate a restrictive clause  in an agreement of the first type is stronger -- because in that case the employer attempts to achieve an advantage that he is not entitled to, and this is as long as the employee does not take advantage of trade secrets or commercial ties that he established  during his work with the employer.” (CA 369/74 [26] supra at 796)

21.  What are the reasons that lie at the base of the approach that freedom of competition is not absolute, and that it does not always exist (as the employee claims) and is not always to be prevented (as the employer claims relying on a contractual obligation)?  My answer is that at the base of this approach there are three reasons: First there is the proper balance between the constitutional rights of freedom of contract on the one hand and freedom of occupation on the other.  This balance requires mutual concessions.  Freedom of contract is recognized.  The obligation of the employee not to compete with his employer is fulfilled.  However, it holds only where it protects a legitimate interest of the employer.  Similarly, freedom of occupation and the right to compete which derives from it -- are recognized.  The right of an employee to find himself an occupation, even if he is competing with his employer, is fulfilled.  However, it does not apply where it damages a legitimate interest of the employer.  Thereby, a proper balance between human rights which are competing for supremacy is found; second is the proper balance between the employer's interest in protecting his business and the employee's interest in fulfilling his employment potential.  This balance is achieved according to considerations of the public good.  As a rule, the public good demands that the trade secrets and customer lists of the employer are protected from use by an employee after his departure.  The same public good generally demands that the employee be enabled to compete with his employer and develop his employment potential, without being bound by an obligation that he undertook under conditions of what are largely unequal bargaining conditions.  Goldberg explained this, noting:

 “The public, as such, has an interest in developing the potential of the employee, and an employer is not entitled to prevent competition by his former employee even if said employee obtained all his knowledge from the employer.  However, if the employer has "a pure property interest" in preventing competition of this type, it is possible... to enforce a clause limiting freedom of occupation." (Goldberg ‘Freedom of Contract in Labour Law’ [48] at 678 (1972); 1371/90 [23] at 854).

Third, this balance reflects the relationship of trust that exists between an employee and employer.  This relationship of trust justifies obliging the employee not to do damage to the employer by means of use of secret information that has come into his possession during his employment (see LC 42 3-74/ Vardi-City of Netanyah [31] 59; Goldberg ‘Good Faith in Labour Law’ [49]).  I explained this in one of the cases when I noted:

"The employee has an obligation, derived from the relationship of trust between him and his employer and anchored in the contract with the employer and in the need to implement a contract in good faith, to protect the employer's trade secrets, not to use them for his own purposes or for the purposes of others and not to reveal them other than with the employer's permission" (HCJ 1683/93 [4] supra at 707).

So too this balance reflects the proper laws of commerce (see Commercial Torts Law 5759-1999), the principle of good faith and the fair conduct between employer and employee in our society (compare LCA 5768/94 [5] supra).  Justice Strasberg-Cohen explained this in one of the cases:

"One must consider the public interest in establishing a behavioral norm characterized by fairness and good faith.  In principal, such a balance requires that an employee who has left a workplace protect the trade secrets of his previous employer, live up to his duty of trust in him and not be unjustly enriched at his expense" (CA 1142/92 [15] supra at 429).

22.  Thus, the reasons I have explained justify a middle ground, according to which in the overall balance freedom of occupation prevails when all that stands against it is the employer's interest in non-competition, while freedom of contract prevails when alongside it stands a legitimate interest of the employer such as a "proprietary" or "quasi-proprietary” interest of the employer.  It is then the case that limiting competition “for its own sake” – a “bare” limitation which does not protect the employer’s interest beyond the interest in non-competition – does not protect any “legitimate interest” of the employer at all.  It goes against the public good and it will be invalidated in the framework of “public policy”.

On the other hand, limitation of competition which is intended to protect the interests of the employer in trade secrets, customer lists, reputation and the like the "legitimate interests" of the employer, and as a rule does not go against public policy.  This overall balance is achieved entirely in the framework of “public policy” and is shaped by “public policy” considerations...  ,There may therefore in a special case be a public interest that will justify deviation from this overall balance (see Gilo, ‘Toward a New Legal Policy toward Non-Compete Terms’ [44] at p. 75 (2000)).

Protection of the “Legitimate Interests” of the Employer

23.  Thus, limitation of freedom of occupation operates, as a rule, in the framework of the “legitimate interests” of the employer.   Examining  these interests raises three questions: the first, what are these interests, and how are they characterized; the second, what is the extent of the protection given to “legitimate interests” and what are the limitations which apply to a contractual obligation not to compete in the framework of the “legitimate  interests”; the third, what are the remedies that the employer is entitled to when the employee breaches his obligation not to compete in the framework of the “legitimate interests.”  We will discuss these questions separately.  We will do so only to the extent that the appeal before us raises those questions.

The Essence of the “Legitimate Interests”

24.  The case law recognizes trade secrets and customer lists as legitimate interests of the employer worthy of protection.  Occasionally these interests are described as “proprietary rights” of the employer (see for example CA 312/74 [11] supra, at 319).  In English literature the “proprietary interests” of the employer are referenced (see Upex [51] Ibid. at 433).  This list is not comprehensive and is not closed.  The “proprietary” language in this context raises difficult questions.  In my opinion, it is appropriate to move away from these characterizations.  The reasons found at the basis of the law, and not the label given to them, should determine the scope of the “legitimate interests” of the employer.  In the framework of this appeal it is not necessary to examine these questions in depth.  Thus, for example, I accept that the appellant’s customer list, in the circumstances of the matter before us, constitutes a “legitimate interest” for the appellant which enables limitation of the freedom of occupation of the respondent.

The Scope of the Protection Given to the Protected Interests

25.  Identifying the “protected interests” – such as trade secrets and customer lists – is only the beginning of the road in establishing the legality of limitation on freedom of occupation.  After it was determined that the contractual clause limiting freedom of occupation relates to the employer’s “legitimate interests”, the question arises whether the extent of the limitation is lawful.  Smith and Thomas discussed this, noting:

“Once there is a legally protected interest, the question which then arises concerns the extent to which the employer can bind the employee’s future conduct in order to protect that interest” (Ibid. [50] p. 88).

In a similar vein Chestire, Fifoot and Furmston note:

“The existence of some proprietary or other legitimate interest... must first be proved, and then it must be shown to the satisfaction of the court that the restraint as regards its area, its period of operation and the activities against which it is directed is not excessive”  (Chestire, Fifoot and Furmston’s, Law of Contract 420 (13th.  Ed., 1996)).

Even if an employer is entitled to the protection of his “legitimate interests” such protection is not absolute.  This is relative protection which must take into account the public interest (including the “legitimate interests” of the employee).  Justice Strasberg-Cohen explained this when she noted:

“Hand in hand with the recognition of the right to protect trade secrets, barriers and brakes have been created and relevant considerations have been established for bounding the limits of the protection that is afforded . . .  the confidentiality is relative and is not viewed as absolute.  It changes in accordance with the circumstances” (CA 2600/90 [14] supra at 807).

The test is one of reasonableness or proportionality.  The employer is entitled to protection of his “legitimate interests” to the appropriate proportion.  Beyond this proportion, the interest ceases to be legitimate.  What is this reasonableness or proportionality and how does it operate?

26.  The reasonableness or proportionality test seeks to ensure that the protection of the “legitimate interests” of the employer do not deviate beyond that which is necessary.  In this context the extent of the limitation is to be examined in terms of time, place, and type of activity.  The question in every case is whether the timeframe, limits, and type of limitation do not deviate beyond that which is reasonable and necessary in order to protect the legitimate interests of the employer.  President Adler explained this in the Checkpoint case, noting

"In the framework of the judicial balance, the courts must apply the proportionality and reasonableness test; –that is, they must examine whether the limitation on freedom of occupation passes the reasonableness test under the circumstances.  In this context, one must consider the reasonableness of the period of limitation, including the need to safeguard the trade secrets which belong to the prior employer, its scope, and its geographic range...  So too the measure of damage to the employee is to be examined as well as the measure of damage to the prior employer...  It is to be noted that the reasonableness test is a broad test, which includes the protection of many and varied interests of the employer.  However, the protected interest, generally, is the trade secrets which belong to him" (Ibid. paragraph 12).

The restrictive means must be adapted to the "legitimate interest" entitled to protection, and must not deviate from it (the test of time, place and type).  In this context the “legitimate interests” of the employee are also to be considered.  A limitation which denies to the employee the capacity to work in his field of expertise should not be recognized.  A limitation that denies to the employee his ability to make a living is not to be justified.  The restatement explains this, noting:

"The harm caused to the employee may be excessive if the restraint inhibits his personal freedom by preventing him from earning his livelihood if he quits” (Restatement, Second, Contracts [61] par.  188, comment c.  p. 43).

It is in this context that one may consider, inter alia, the question whether an employment contract guarantees the employee a (full or partial) salary during the period of limitation.  This practice (known as "Garden leave") is common in England (See I.T. Smith and G.H. Thomas, Industrial Law 306 (3th. Ed., 1996) [50]).  In Germany the law itself establishes that a contractual clause limiting freedom of occupation is legal only if the principal promises the agent a salary payment equal to at least half of his salary during the period of limitation (section 74(a) of the Commercial Code).  The case law has broadened this approach to include all employer-employee relations (See. M. Weiss, Labor Law and Industrial Relations in Germany 105 (1995) [55]).

27.  Alongside the employee interest one must also consider the public interest.  The public interest may demand invalidation of the limitation on freedom of occupation, which from other perspectives appears proportional.  The public interest is expressed, inter alia, in the needs of the marketplace, the development of industries and encouragement of competition.  Such is generally the case (see Gilo [44] Ibid.).  This is so in particular in high-tech industries (see Hanna Bui-Eve, ‘To Hire or Not to Hire: What Silicon Valley Companies Should Know About Hiring Competitor’s Employees’[58];Gilson, ‘The Legal Infrastructure of High Technology Industrial Districts: Silicon Valley, Route 128, and Covenants Not to Compete’ [59]; O’Malley, ‘Covenants Not to Compete in the Massachusetts Hi-Tech Industry: Assessing the Need for a Legislative Solution’ [60]).

28.  One may ask: if the validity of clauses limiting freedom of occupation is  limited only to situations in which the employer has a "legitimate interest," what need is there for such clauses, as generally the "proprietary" interest or the "quasi-proprietary" interest of the employer is protected without the need for an explicit clause (see HCJ1683/93 [4] supra)  The answer is that with the development of duties in the law which protect the "legitimate interests" of the employer, indeed the importance of clauses limiting freedom of occupation has diminished.  However, they are not superfluous, and this is so for two primary reasons: First, there is not complete overlap between the protection given by the general law to the "legitimate interests" of the employer and the protection given them in the framework of clauses limiting freedom of occupation; this is primarily so in all that relates to considerations of trust, fairness, good faith and fair dealing.  In these matters the general law is still in its early stages of development (compare LCA 5768/94 [5] supra) and therefore there is importance to the explicit contractual clause; second, the contractual clause has “evidentiary” importance.  On can see by it what is regarded by the parties as a trade secret or customer list or other "legitimate interest,” the importance attributed to it, the degree of knowledge that they had as to it, and the proportionality of the limitation (see Chitty [53] at 891).

Remedies

29.  Clauses limiting freedom of occupation beyond the legitimate interests of the parties go against "public policy," and are therefore void (section 30 of the Contracts (General Part) Law, also taking into consideration section 31 of the Contracts Law).  A clause which limits freedom of occupation in the framework of the legitimate interests of the parties is valid, and the party in breach is entitled to all the remedies given for breach of contract.  These remedies raise complex questions inasmuch as they relate to fulfilling the "legitimate interest" of the employer and to his protection.  These questions do not arise before us and I will not express an opinion on them.  I will only note that occasionally the question arises as to whether the court may limit the scope of a limitation on freedom of occupation in order to bring it within the requirements of reasonableness and proportionality.  Such was the action of the court in the case before us in limiting a limitation which had no timeframe to the timeframe of eighteen months.  The court will do so first and foremost through the use of the rules of construction.  “Where a contract is open to various interpretations, an interpretation which validates it is preferable to an interpretation according to which it is void” (section 25(b) of the Contracts (General Part) Law).   Indeed the presumption is that the purpose of a contract is that the freedom of occupation of the employee is limited as far as the legitimate interests of the employer.  If this presumption can be realized – taking into consideration other presumptions and the parties’ perspective, as it emerges from the contract and from the circumstances (see CA 4628/93 State of Israel v. Efromim Residence and Initiative (1991) Ltd. [27]) – via the language of the contract, the court will do so.  In this context, it is possible, in a suitable case, to limit general language by the purpose at its core, in such a manner that it will be constructed as applying only to the “legitimate interests” of the employer.  But what if the general rules of construction are not sufficient to save the clause from being voided?  In such a case the court may bring the limitation on freedom of occupation within the boundaries of the proportional or reasonable, and this by way of “severance” between the void portion and the valid portion (section 19 and section 31 of the Contracts (General Part) Law), but even in the absence of the option of severance -- and as a condition of enforcement (section 3(4) and section 4 of the Contracts (Remedies for Breach of Contract) Law 5731-1971) -- the court may limit the scope of the limitation to its proper proportion (see CA 1371/90 [23] supra at 856).  “If a person has undertaken an obligation as to the protection of a trade secret of another and it is too broad an obligation, there is no bar to limiting it and adjusting it to the proportionality of the secret within the information” (Justice Strasberg-Cohen in CA 2600/90 [14] supra at 808).

30.  Frequently in the type of case before us an interlocutory order is sought.  Generally the granting of an interlocutory order is sufficient to determine the entire conflict as the final order may be granted after the period of limitation has passed.  From this derives the importance of taking great care in this area.  An interlocutory order should not be general, and should be adapted to the legitimate interests of the employer.  Thus, for example, the order would not prevent employment of the employee by a new employer, but would prohibit him from handing over trade secrets and customer lists (see Lansing Linde Ltd v. Kerr [1991] [37]).  Such a careful approach is necessary partially due to the nature of freedom of occupation as a constitutional right (compare CA 214/89 Avneri v. Shapira IsrSC [28]).  The remedy of the employer will be in the proportion of damages he will be awarded, if it turns out at the end of the day that limiting the employment protected his “legitimate interests".

Interim Conclusion

31.  Before I move on to the special circumstances of the appeal before us, it would be proper to summarize the main points.  My position can be summarized by the following four propositions: first,  a clause between employer and employee limiting the freedom of occupation of the employee after the conclusion of his employment without protecting the ”legitimate interests" of the employer is void as going against "public policy"; second, a "legitimate interest" of the employer -- that gives validity to a clause limiting the freedom of occupation of the employee -- is a "proprietary" or "quasi-proprietary" interest of the employer in his trade secrets and customer lists (to the extent they are confidential).  This is not a closed list, and in determining the list of "legitimate interests” the relationship of trust between the employer and the employee, proper trade laws, and the duty of good faith and fairness between the employer and employee are to be considered; third, the protection given to the "legitimate interests" of the employer are not absolute.  Its extent is determined by tests of reasonableness and proportionality, which take into account its timeframe, scope and the type of the limitation; fourth, as a rule, an employer does not have a "legitimate interest" in his employee not competing with him after conclusion of his employment.  Therefore, limitation of the freedom of occupation of the employee which only realizes the employer’s interest that the employee not compete with him ("non-competition for its own sake") is against public policy.  The voidness of this limitation stems from the lack of a "legitimate interest" at its core, and therefore, as a rule, it is not appropriate to examine the reasonableness or proportionality of such a limitation.

From the General to the Specific

32.  The factual basis in the framework of which the legal problems in this appeal are examined is the one established by the District Court.  According to it the one legal question before us is whether the respondent breached a duty to the appellant by contracting with RAFAEL?  In my opinion, the answer to this question is in the negative. 

33.  What is the duty that was breached by the respondent in the RAFAEL case?  The respondent did not breach his duty not to make use of the customer list of the appellant.  The reason for this is that it has not been proven that the respondent approached RAFAEL on his own initiative and in any case his business ties with them are not to be seen as a result of use of the appellant's customer list.  Indeed, the duty that was breached by the respondent is the duty not to compete with the appellant. This agreement of the respondent not to compete with the appellant is a "bare" agreement (see paragraph 18 supra).  This is an agreement of "non-competition for its own sake".  Let us re-examine (see paragraph 1 supra) this agreement:

“The employee hereby undertakes not to compete with B/R [the appellant] either directly or indirectly, whether in his capacity as an employee of B/R or not, to the extent that there shall be in such competition any loss caused to the business of B/R as a distributor, marketer and service provider for equipment made by Linear and/or any other name by which such equipment will be called in the future.  So too the employee undertakes not to take any action that would undermine, eliminate, or damage B/R’s relationships with its customers."

This agreement-- in accordance with its construction, language and purpose – was intended to protect the appellant from competition “for its own sake”.  When the appellant wanted to protect itself from damage to its property, it did so in the framework of an additional agreement signed by the respondent, which included an “Agreement to Protect Confidentiality,” according to which the respondent undertook to keep in confidence information that he might obtain in the framework of his employment.  Indeed, the obligation of the respondent not to compete with the appellant – and this is the only obligation that was breached by the respondent – does not protect the “proprietary” or “quasi proprietary” interest of the appellant.  It does not protect a “legitimate interest” of the appellant.  It goes against “public policy,” and therefore is to be declared void.  All the appellant sought was to ensure for itself immunity from competition.  It is not entitled to do this, as such immunity goes against “the public interest.”  As to this, there is no significance to the reasonableness or proportionality of the obligation that the respondent took upon himself.  It is not proper to examine whether the limitation to eighteen months is reasonable or proportional.  The obligation in its entirety is void and voided.

34.  Until now I dealt with the obligation of the respondent not to compete with the appellant.  What about the additional obligation that he undertook to keep in confidence any information that he may obtain in the framework of his employment?  As to this matter, the appellant’s appeal is to be denied, if only for the reason that no causal connection has been shown between the breach of the obligation and the appellant’s losses.  Indeed, even if in the use of the respondent’s customer list the respondent breached his obligation, this breach did not cause the appellant any loss, as it has not been proven that within the eighteen months to which the obligation was limited, relationships between the respondent and those customers were developed.  This is sufficient to deny the appellant’s appeal on this matter.  Therefore, there is no need for me to deal with the question as to whether limiting the extent of the obligation not to make use of the information that he obtained in the framework of his employment, is reasonable and proportional.  As to this it is acceptable to me that this information is, under the circumstances, confidential information, entitled to protection in the framework of the “legitimate interests” of the employer.  But is the scope of the protection proportional and reasonable?  This question is not simple in the least.  It is sufficient for me to note, without making a determination on the matter, that there is room for the argument that the scope of this obligation under the circumstances is not reasonable and is not proportional.  We are dealing with the field of computers, this is a dynamic arena.  The scientific developments in this area are many.  Within a matter of months the reality changes unrecognizably.  Against this background there is room for the argument that a period of eighteen months is too long.  Indeed, I would be ready to examine whether in this evolving arena – in which not taking advantage of expertise for such a long period of time may do significant damage to work capacity– a stricter approach is not necessary.  However, as said, this is not to be determined in this appeal and I will leave it as open for future discussion.

In conclusion, we allow the respondent’s appeal and cancel the award of damages to the appellant for the contract with RAFAEL.  We deny the appellants’ appeal and the appeal of respondent no. 2.  So too, we deny the respondent’s appeal in all that relates to software and hardware. Under the circumstances, the appellants shall pay the respondent’s costs in the sum of NIS 15,000.

 

Justice T. Or  

I agree.

 

Justice E. Rivlin

I agree.

 

Decided as per the judgment of President Barak.

 

27 Av 5760

August 28, 2000