Employment

C.A. 176/53

 

           

MORDECHAI ATIA

v.

MOSHE ROSENBAUM

 

 

In the Supreme Court sitting as a Court of Civil Appeal

[September 24, 1954]

Before Goitein J., Landau J., and Berinson J.

 

 

Tort - Factories Ordinance, 1946, s. 18(1) - Breach of statutory duty - Dangerous machinery - Failure to fence - Injury to employee - Liability of employer - Assessment of damages - Expectation of life - Loss of future earnings - Pain and suffering.

 

            The plaintiff was employed by the defendant to work an electrically-driven wool-teasing machine. On January 17, 1951 the plaintiff was cleaning the machine when his hand got caught and, before it could be released, was seriously injured. The plaintiff sued the defendant for damages for negligence and breach of the statutory duty to fence securely every dangerous part of any machinery or to provide the other safety measures set out in s. 18(1) of the Factories Ordinance, 1946.1⁾

           

            The Court of first instance, in dismissing the claim, held that there had been no breach of statutory duty because the employer had put the necessary fence on the machine and although there might be greater protection for the worker by use of a morticed lock, in fact no such lock was in use or available in Israel nor was it used to a great extent outside Israel.

           

            Held, allowing the appeal, that the duty to secure the safety of the employee was absolute, and that this duty was not discharged by employing a method by which the safety of the employee was in fact not secured although such method was the one generally employed.

           

                The appellant was awarded IL.15,000.- as damages for the injuries received.

           

Israel cases referred to:

 

(1) C.A. 70/52 Yehoshua Grossman and Egged Ltd. v. Henry Roth (1952), 6 P.D. 1242.

(2)   C.A. 62/53 Yehoshua Daum and Egged Ltd. v. Nissim Aharonof and Others (1954), 8 P.D. 128.

 

English cases referred to:

 

(3) Dennistoun v. Charles E. Greenhill Ltd.; [1944] 2 All E.R. 434.

(4) Davies v Thomas Owen and Company, Ltd.; [1919] 2 K.B. 39.

(5) Pugh v. Manchester Dry Docks Company, Ltd.; [1954] 1 All E.R. 600.

(6) Carroll v. Andrew Barclay and Sons, Ltd.; [1948] 2 All E.R. 386.

(7) Sutherland v. Executors of James Mills, Ltd.; [1938] 1 All E.R. 283.

(8) Harris v. Bright's Asphalt Contractors, Ltd.; [1953] 1 All E.R. 395.

(9) Roach v. Yates; [1937] 3 All E.R. 442.

(10) Rowley v. The London and North Western Railway Company; (1873), 29 L.T. 180.

(11) The "Swynfleet"; (1947), 81 Lloyd's List Law Reports 116.

 

Katz for the appellant.

Rotenstreich for the respondent.

 

BERINSON J. giving the judgment of the court. The appellant was employed as a labourer by the respondent, the owner of a wool factory for a period of about two months. During this time he was engaged in various tasks, including the operation of a wool-teasing machine.

 

            On January 7, 1951, the appellant was temporarily engaged in operating the machine in question. He started this work at 4 p.m. and at 8 p.m. he put his left hand into the machine while cleaning it. His hand was caught in one of the wheels of the machine and was severely injured.

           

            The appellant sued his employer under the Civil Wrongs Ordinance for damages in respect of the physical injury suffered by him, basing his claim upon two causes of action:

           

            (a) breach of the statutory duty imposed upon the employer by sections 10(1)1⁾ and 18(1) of the Factories Ordinance, 1946 relating to the illumination and fencing of dangerous machines in places of work:

           

            (b) negligence.

           

            The learned judge held that not only had the plaintiff failed to establish even one of the causes of action upon which he relied, but that it was his own negligence that had caused the accident. He therefore dismissed the claim. The appellant appealed to this court. Before us his counsel confined his submissions to one point alone, namely, the breach by the respondent of his statutory duty to fence the machine operated by the appellant - a duty imposed upon him by section 18(1) of the Factories Ordinance, 1946 (hereinafter called "the Ordinance"). That section provides as follows:

           

            "Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced:

 

            Provided that, in so far as the safety of a dangerous part of any machinery cannot by reason of the nature of the operation be secured by means of a fixed guard, the requirements of this subsection shall be deemed to have been complied with if a device is provided which automatically prevents the operator from coming into contact with that part."

 

            Before dealing with the accident itself, it is desirable that we have a clear picture of the machine involved in the accident and the way in which it works. We adopt the description of the learned judge in the court below who said:

           

            "I held an inspection in loco on two occasions. I examined the machine and found it to be composed of the following parts: 1) a table which oscillates while the machine is being operated; 2) a wooden cylinder at the end of the table; 3) a metal rod; (Note: there are in fact two metal rods, one above the other). 4) a cog wheel; 5) a guard above the cog-wheel.

 

            The method of operating the machine is as follows: the workman stands in front of the table and places the wool upon it. The wool is then conveyed towards him (by the oscillating table) from under the wooden cylinder, it enters the metal rod and is conveyed to the cog-wheel. The metal pivot is protected by a metal guard. The cog-wheel remains clean, but the wool accumulates under the metal rod and must be extracted from time to time with the help of a device called by the workmen a "hook".

           

            The machine is operated by electric power, the starter switch being situated close to it. To stop the machine completely, however, one operates another switch. situated about three meters from the machine. Even when the electric current is cut off, the machine continues to work - that is to say, the table still oscillates and the wheel, the rod and the cylinder continue to revolve for some seconds."

           

            This is the description given by the judge, to which must be added two important details which also emerge from the evidence:

           

            a) the table moves at a relatively slower speed than the cogwheel, which oscillates at a great speed. When the electric current is cut off, the various parts of the machine continue to move under their own power, but the table - which is a slow-moving object - comes to a stop before the cog-wheel which moves at a higher speed. A person unaware of these facts may therefore fall into error and think that when the table stops moving the wheel also stops. In fact however, the cog-wheel continues to revolve at a high speed for some time after the table has ceased to oscillate.

 

            b) The workman operating the machine stands facing it in front of the moving table. and in that position his hands - even when stretched straight out - do not reach the metal rods and also, therefore, do not reach the cog-wheel, which is even further away from them.

           

            How did the accident occur? The appellant was the only workman at the machine which stood in a room by itself. There was no eye-witness to the accident nor to what preceded it. The appellant stated in his evidence that on the day of the accident, at about 8 o'clock in the evening, the wool accumulated in the machine, and new material could not be served to it but kept flying back towards him. He therefore cut off the electric current by operating the two switches. and when the machine had stopped altogether he put in his left hand in order to clean away the wool. He did not see then that the cog-wheel was still turning since it was full of wool. and this wheel drew his hand inwards. The appellant added that the metal guard over the rods was not in position and that "had the guard been in position then, the wool would not have blown towards me and I would have been able to see the wheel". Under cross examination, however, he said that he could not remember if the guard was there at that time.

           

            The learned judge repeats the story of the appellant in his judgment, his only comment relating to the question of the metal guard. He says that he prefers the version of the respondent that the guard was in its place on the day of the accident, such version being supported by the clear evidence of the respondent and the works manager whose evidence on this point was unshaken.

           

            The remaining details in the appellant's story of the occurrence are not only uncontradicted by the other witnesses, but are in fact supported in the main by the witnesses Pessah Cohen and Simha Sverdlik. These witnesses, who are also workmen in the factory, were attracted to the scene by the cries of the appellant immediately after the accident, and it is they who dismantled the machine and removed the injured hand of the appellant. Moreover during one of the visits of the learned judge to the factory Sverdlik demonstrated the position in which he found the appellant after the accident and this demonstration coincided with the appellant's story. From all this it must be assumed that the learned judge accepted this portion of the appellant's evidence.

           

            The findings of the learned judge that the machine operated by the appellant is dangerous and that the metal rods were guarded on the day of the occurrence were not disputed before us. The real dispute, however, related to the question whether the guard conformed with the requirements of the law. The learned judge reached the conclusion that the respondent had discharged his duty by providing "reasonable means to make that portion of the machine safe". Counsel for the respondent, of course, supports this view of the matter while counsel for the appellant, in arguing against this finding, submits that reasonable means are not sufficient. Section 18(1) of the Ordinance requires, that the dangerous part of the machinery be securely fenced" or, in certain circumstances, that alternative means be taken to provide the same measure of safety. If, by reason of the nature of the operation, the safety of a dangerous part of the machinery cannot be secured by means of a fixed guard, it is necessary to provide what is called an interlocking guard. This device automatically prevents the operator of the machine from coming into contact with the dangerous part while it is in motion since the lifting of the guard in itself brings the machine to a standstill.

           

            The English courts1⁾, on the basis of a similar provision in the English statutes requiring safety in the operation of dangerous machinery, have held repeatedly over a period of decades that the duty of fencing machines securely is an absolute duty in the sense that the safety to be provided by the fencing must be absolute. In other words, the fencing must provide the workers who come into contact with the machine with an absolute guarantee that they will not be injured by it. The factory owner, therefore, does not discharge this duty even if he fences the dangerous machine in accordance with the best and most modern system known at the time if, in fact, the machine is not guarded thereby as the law requires (see Dennistoun v. Charles E. Greenhill Ltd. (3)). In the same way the factory owner does not discharge his duty if he does not provide the safety required for his workmen because to do so is technically impossible or commercially unfeasible. It has accordingly been held by the English courts that in cases such as these there is no alternative but to withdraw the machine from use. (Davies v. Thomas Owen and Company Ltd. (4), and Pugh v. Manchester Dry Docks Company, Ltd. (5).)

           

            In the case before us evidence was given by two labour inspectors who are responsible for ensuring compliance with the provisions of the Ordinance. They both stated that the guard over the metal rod is inadequate because it is possible to raise it while the machine is working without thereby stopping the machine. Both these experts stated, therefore, that there can be no absolute protection for the operator of this machine unless by means of an interlocking guard (by the raising of which the operation of the machine is stopped automatically, while it is impossible to set the machine in motion unless the guard is in position) although they had not demanded up to that time that such a guard be provided. The learned judge, however, did not accept these opinions but upon the evidence of the defendant and an expert engineer called Avni, who gave evidence on the defendant's behalf, he reached the conclusion that in providing the guard as it was, the defendant had taken reasonable steps to discharge his statutory duty. The defendant, who is very experienced in his profession, stated in evidence that he had visited many factories of the same kind in the country and that in not a single one had he seen an interlocking guard. He also said that "the guard must be free and flexible so that it can be raised with ease" - in other words, that in view of the nature of the work it is impossible to use a guard that is absolutely rigid. The engineer Avni also confirmed that the guard in the present case must be flexible, so that it can be raised in order to enable the wool to pass in accordance with the thickness of the material and that it is therefore impracticable to operate this machine with a morticed fence. He also stated that he had not seen such a fence on machines of this kind either in this country or elsewhere, and that only recently he had seen a modern machine of this type made in Belgium, and that even on that machine there had been no interlocking guard. On the basis of this evidence the judge concluded that the metal guard constituted reasonable protection, sufficient to satisfy the requirements of section 18(1) of the Ordinance, and that there is no necessity in this case for an interlocking guard in terms of the proviso to that section.

 

            It seems to us for more than one reason that the learned judge erred in his conclusion.

           

            In the first place it is clear that the metal guard does not allow for the machine to be "securely fenced". It moves up and down according to the amount of material which enters the machine, and sometimes it rises to such an extent as to enable the operator of the machine to put in his hand and reach the point between the two metal rods which revolve at a high speed (see the evidence of the labour inspector Stein and of the defendant). In other words, the guard does not constitute a reliable and fixed partition which would prevent a workman from coming into contact with the dangerous parts of the machine, and as long as this is so the requirement that the machine should be securely fenced has not been fulfilled (see, for example, the remarks of Lord Porter in Carroll v. Andrew Barclay & Sons Ltd. (6) at pp. 390-1). Moreover, when the metal guard is lowered it covers the metal rod and protects the workman from the cog wheel, but when it is raised - and there is no difficulty or impediment in raising it at any time - it exposes both of them, and there is then nothing to prevent the workman from coming in contact with them. This arrangement does not fulfil the requirements of section 20 of the Ordinance which provides, inter alia, that all fencing or other safeguards provided in pursuance of that Part, namely Part IV of the Ordinance, shall be constantly maintained and kept in position while the parts required to be fenced or safeguarded are in motion or in use, save in certain exceptional circumstances which are not relevant to the present case. In the case before us, as we have seen, it is possible to raise the guard with ease and expose the dangerous parts even when they are in motion, and we know from the story of the appellant that his hand was drawn towards the cog wheel while it was still in motion.

 

            In the second place, it is clear from the evidence of the respondent and the engineer Avni - which was accepted and relied upon by the learned judge - that because of the nature of the machine it is impossible to secure the safety of the workman from the metal rods. Their evidence was that the guard must be flexible and free, so as to be raised and lowered in accordance with the thickness of the layer of wool entering the machine. In this case, therefore, the proviso to section 18(1) of the Ordinance applies, in terms of which a device is to be provided which automatically prevents the operator from coming into contact with the dangerous part of the machine, viz., a device called an interlocking guard. There is no doubt that it is a matter of great, if not insuperable, difficulty to fix an interlocking guard to this type of machine. As we have already seen, however, there is no solution other than to fulfil the statutory obligation or to cease to use the machine. The fact that this machine has been used as it is in the respondent's factory and in other factories for a considerable time without any accident having occurred, and that the labour inspector did not demand an interlocking guard on this type of machine, is immaterial. See Sutherland v. Executors of James Mills, Ltd. (7).

           

            This brings us to the second question, namely, whether the appellant was negligent, and if it was his negligence which caused the accident. The learned judge found that the appellant well knew from the directions and instructions which he had received from the respondent and the Works Manager that the machine was to be cleaned by means of a hook, and not by hand, and that the appellant's negligence consisted in acting against this directive. The learned judge found additional negligence on the part of the appellant in his standing at the side of the machine instead of facing it - as he was obliged to do - and in his introducing his hand under the metal rod, although this part of the machine is always free of wool. Had there been some foundation in the evidence for the findings of fact upon which the judge based his conclusion of negligence we could not have interfered with that conclusion. However, after having examined and re-examined the evidence in its entirety, we have been unable to discover any basis for the findings of the learned judge. We shall deal with them separately.

           

            (a) The appellant acted against the directions and instructions which he received. In connection with this the respondent stated in evidence: "When the appellant started to work, I showed him how to clean the machine and I explained to him that the electric current must be stopped before the cleaning and that he must not touch any part of the machine as long as it is in motion... I told him that when the machine is already working he must only use the hook in order to clean it and must not use his hands...... The worker who operates this machine is the one who must clean it and he is not to rely on any one else to do it". And the Works Manager stated in evidence: "When it is desired to clean the machine it must be turned off. It is possible to remove the wool both with the hook and also by hand where there are no cogs... I told the plaintiff that it was forbidden to introduce the hand while the machine was in motion.. ."

           

            And what did the appellant do? He first turned off the electric current with both switches, and when it seemed to him that the machine was no longer in motion he started to clean it by hand. This was in accordance with the instructions given to him and not contrary to them. The appellant did not know that the cog wheel continues to move for some little time after the current is turned off, and there was no evidence that instructions were given to him not to approach the machine for some time after the current had been turned off.

 

            (b) The appellant stood at the side of the machine at a time when he should have stood facing it. It is true that the appellant stood at the side of the machine while he was cleaning it, and not facing it, but according to all the evidence he was not obliged to stand facing the machine at that time. It is only while the machine is in motion and the workman is operating it or cleaning it with a hook, that he is obliged to stand facing it. When, however, he has to clean it by hand after it has ceased to operate, he is obliged to stand to one side, otherwise his hand cannot reach the machine at all.

           

            (c) The appellant introduced his hand underneath the metal rod, although that part of the machine is always clear of wool. In point of fact the appellant did not introduce his hand into that portion of the machine. The eye-witnesses, Pessah Cohen and Simha Sverdlik, who helped to extract the appellant's hand from the machine immediately after the accident, stated clearly that "the hand was caught between the big cylinder and the cogs" and that "he held his hand above the cylinders between the drum (that is to say, the cog wheel) and the upper cylinder (that is to say, the rod)..."

           

            It is clear, therefore, that there is no proof of negligence on the part of the appellant which caused the accident. The accident was caused in fact by the breach of the statutory duty imposed upon the appellant relating to the fencing of the machine.

           

            The plaintiff, in his Statement of Claim, claimed damages in an inclusive sum of I.L. 17,000.- Of this amount I.L. 500.- were claimed as special damages for loss of past wages, that is to say, from the date of the accident, January 7, 1951, until the date of the institution of action, July 1, 1952, less the amount received by him until then, and general damages in an amount of I.L. 16,500.-.

           

            In the course of argument before the District Court counsel for the plaintiff amended this account and argued that on the basis of the evidence led by him his client was entitled to damages for loss of wages until that date (April 1, 1953) in an amount of I.L. 1,534.-. In this court counsel for the appellant again amended the account for damages and in his written argument filed in this court on June 10, 1954, claimed an amount of approximately I.L. 4,000.-. He based his claim for this sum on his client's total inability to work during the whole period, and he argued that this amount should be awarded to his client in full as the actual loss which he had sustained for the period which had already passed, as special damages.

 

            It is clear that this contention is erroneous. Special damages must be proved in a trial as the actual loss or expense sustained by the plaintiff until the date of his claim or, at the latest, until the date upon which the case is heard. All other loss, expense, or damages which are anticipated in the future form a portion of the general damages.

           

            The learned judge dealt with the question of damages only to meet the eventuality of an appeal, and he expressed the opinion that the loss of past wages should be assessed in the amount of I.L. 500.-and that the claim for general damages in the amount of I.L. 16,500.-should be dismissed for lack of proof.

           

            We do not think it would be right in this case to vary the amount awarded by the learned judge in respect of damages for loss of past wages - down to the date of the institution of the action - in the sum of IL. 500.-, since this is the sum which was claimed by the plaintiff in his Statement of Claim, and he did not claim that damages under this head should be calculated until the date of the hearing of the case.

           

            We turn now to the question of general damages. The plaintiff in his Statement of Claim did not claim the general damages claimed in the amount of I.L. 16,500.- under the two heads of damage of which they are composed, namely, loss of wages or profits in the future, and pain and suffering. Only in the course of argument in the District Court was it stated by counsel for the plaintiff that, in accordance with the accepted standard in the courts of this country in such matters, it was in his opinion proper to fix the amount of damages for pain and suffering caused to the plaintiff at I.L. 5.000.-and damages for loss of wages from the date of the institution of action until the end of the plaintiff's life in the amount of I.L. 11,500.-as was done in the case of Grossman & Egged Ltd. v. Henry Roth (1) and the case of Daum & Egged Ltd. v. Aharonof (2).

 

            As far as damages for pain and suffering are concerned it seems to us that the damage in this case is less serious than in that of Grossman, in which the damages awarded were fixed at I.L. 5,000.-and in that of Daum, in which the greater part of the sum of nine thousand two hundred and thirty pounds was awarded. In Gross man's case the left hand of the injured man was amputated completely leaving only a stub the length of which was 16 cm. In the case of Daum the victim suffered severe injuries to his head and remained with a deep hollow in his forehead. After an operation and lying in hospital for twenty-six days, a further period of five months elapsed before he started any work at all. He lost his sense of taste and his sense of smell, and at times even his sight was affected. The doctors were also of opinion that it was possible he would become epileptic as a result of the accident. It is true that in the case before us the appellant lay in hospital on more than one occasion and underwent four operations in the course of nine months, and that after all this he remained with a permanent disability in his hand. The hand itself, however, was not amputated, although it has remained patently deformed. Having regard to all the circumstances of the case it seems to us that an amount of I.L. 4,000.-is a reasonable sum of damages under this head.

 

            It remains to consider the measure of damages to be awarded for loss of ability to work in the future. There is no rigid rule to be applied to this matter and the court will assess these damages to the best of its judgment having regard to all the circumstances and the factors affecting the case before it. As a general rule the court must assess "how much the injured man would have earned but for his disability and how much he is likely to earn with his disability" during the rest of his life, and must determine the damages upon the basis of the difference between these two amounts. See Grossman's case (1).

           

            It follows that the learned judge was correct in saying that it was for the plaintiff to prove his age and his prospects of living in order to estimate thereby his expectation of life. We are not however, in agreement with the conclusion of the learned judge that the plaintiff's prospects of life were not proved.

           

            It is true that these two elements, namely, the age of the plaintiff and the length of life which he could be expected to live were not mentioned in his Statement of Claim. The plaintiff stated in evidence, however, that he is twenty one years of age and that he completed his army service with medical category "A" about three months before the accident. Counsel for the defendant did not object to this evidence at the time nor did he bring any evidence to contradict it. In these circumstances there was nothing to prevent the learned judge from accepting the age of the appellant and his state of health in general, as facts which had been proved.

 

            What, however, is the appellant's expectation of life for the purpose of assessing general damages? No positive evidence on this point was adduced, but in his argument before the lower court, counsel for the plaintiff relied upon the statistical tables published in Bingham's book on Claims in Vehicle Cases, second edition, p. 372, and on the Israel Statistical Monthly, from which it appears that the average expectation of life of a normal man of twenty one years of age in England and in Israel is about 45 years. The learned judge, however, apparently following an obiter dictum of Cheshin J. in Grossman's case (1), paid no attention to all this and did not even mention it in his judgment. In our opinion once the judge had seen the plaintiff in the witness box and his age and state of health were known to him, there was no reason not to estimate the expectation of life of the plaintiff - upon the basis of his general knowledge of the average and usual length of life of the inhabitants of this country. It has been an accepted practice in the courts of England in recent times to estimate the expectation of life of a plaintiff upon the basis of their general knowledge and experience without any additional positive evidence. (See Harris v. Bright's Asphalt Contractors Ltd. (8), and Roach v. Yates (9).)

           

            That is also the law in the United States, as appears from Sherman and Redfield on Negligence, Revised Edition (1941), vol. 4, p. 1972, in which the following two cases are cited:

           

            "Where the plaintiff was personally present held that the jury might judge her life expectancy without any other evidence on the subject."

           

            "Where the evidence discloses the age and health of the deceased, it is competent for the jury to estimate his probable duration of life without the assistance of mortality tables".

           

            After all, every case of the possible expectation of life of a particular person is in the realm of conjecture, even after consideration of tables of life and mortality, and evidence of experts regarding them. In the absence of special circumstances pointing to the necessity of departing from the general rule in respect of any particular person, the expectation of life of an ordinary man must be assessed according to the average that is proved in the case or which is determined by the court upon the basis of its own knowledge and personal experience.

 

            "If there are special considerations such as these, the party who relies upon them to reduce the period of life must prove that they exist." See Rowley v. The London & North Western Railway Company (10), at p. 184.

 

            In the present case the respondent has not established the necessity of departing from the general rule in the case of the appellant. It seems to us, therefore, that it would be right to fix his future expectation of life at 40 years.

           

            As far as the wages of the appellant at the time of the accident - and thereafter - are concerned, it has been proved that his daily wage at the time of the accident was I.L. 1.659.- and that the daily wage of a healthy workman of the type of the appellant at the time of the institution of action in July, 1952, had risen to I.L. 4.333. When this evidence was heard in January 1953, the daily wage was I.L. 4.854. As is known, wages in general have continued to rise, regularly and continuously, but since we must take into account a length of life of 40 years which the appellant may expect from July, 1952, and that there may be in the course of that time both rises and falls in the wages which can by no means be anticipated, it seems to us that we are entitled to assume, on the basis of the position of today, that were it not for the appellant's disability he would in the course of the whole period mentioned earn an average of I.L. 5.- per day, together with the rises and increments which he would receive as a result of expert knowledge and progress in his work which would increase with time.

 

            In view of the judgment in the case of The "Swynfleet" (11), it is clear that in fixing the estimated wage which would be earned by an injured man for the rest of his life were it not for the accident, we are not entitled to disregard the general changes which operate in the meantime on the wages of workmen of the same type as the injured man. We must take them into account as the basis of our assessment in place of the actual wage earned by the injured man at the time of the accident. In that case the damages payable to the family of two workmen in a French ship who lost their lives when the ship sank as a result of a collision with the British ship "Swynfleet" in December 1939, fell to be considered. By reason of the second World War the matter came to trial only in 1947, and a number of major changes in the wage of shipworkers of the type of the two deceased persons (and also in the rate of exchange between the French franc and the pound sterling) had taken place in the meanwhile.

 

            The court held that in assessing the damages payable to the families of the victims the wage which the victims would have earned had they remained alive until the hearing of the case was to be taken into account. In so holding the court based itself upon the principle that damages must replace what the deceased would have given his family had he remained alive and continued to support them. The same principle applies in the case of bodily injury in which case, too, the damages must compensate the injured man as far as possible for the anticipated loss which was caused to him by his injury. Since we know today, more than three and a half years after the occurrence, what has happened in the meantime in regard to wages generally, we must make use of this knowledge and not be content with considering the state of affairs that existed at the time of the accident as if nothing had happened since.

           

            It is more difficult to assess what the appellant is likely to earn, with his disability, for the remaining portion of his life. More particularly is this so since up to the date upon which he gave evidence he had not yet succeeded in obtaining any kind of work, despite continuous efforts to do so, nor has it been proved what his prospects of work are in the future. In the absence of any other criterion, we may derive assistance from the evidence of the doctors who stated that the appellant - as a result of the accident - suffered at least a thirty-five per cent disability in his capacity to engage in physical labour, and take this finding as a measure of his loss of wages. On the basis of I.L. 5.- per diem and an average of 300 working days per annum for a period of forty years, the loss - at the rate of 35 per cent of this sum - amounts to I.L. 21,000.-. Taking into account that the appellant will receive his damages in one lump sum instead of in weekly payments, and also having regard to the other factors and occurrences which may operate to reduce his income (sickness, unemployment, and other expected and unexpected eventualities), we fix the sum of damages under this head at half the estimated loss, namely, the sum of I.L. 10,500.-.

 

            In conclusion there remains the argument of the respondent that in view of the provisions of section 62 of the Civil Wrongs Ordinance, 1944, the appellant is precluded from bringing his present claim for damages since he has received damages for a year and a half under the Workmen's Compensation Ordinance. We see no substance in this submission.

           

            Section 62 of the Civil Wrongs Ordinance provides as follows:

           

            "Notwithstanding anything contained in the Workmen's Compensation Ordinance or any enactment as to workmen's compensation in force in Palestine for the time being, no workman (which term, for the purpose of this section, shall be deemed to include his dependants) shall, by reason of the happening of any event, recover from his employer both compensation under the provisions of this Ordinance and compensation under the provisions of the Workmen's Compensation Ordinance or such other enactment for any injury or damage caused by such event.

 

            For the purposes of this section, the expression 'dependents' has the same meaning as it has in section 2(1) of the Workmen's Compensation Ordinance."

 

            It is not disputed that the appellant received from the respondent and his insurance company various sums amounting to I.L. 647.- which were paid to him regularly from February, 1951, until June, 1952. These sums however were not payments of damages under the Workmen's Compensation Ordinance, and in the receipts signed by the appellant (which were submitted to the court) it is merely said that the amounts in question were paid "in respect of damages" without stating whether they were paid under the Workmen's Compensation Ordinance or The Civil Wrongs Ordinance. It was also not proved in evidence that the injured man knew and agreed to receive this money as damages under the Workmen's Compensation Ordinance.

           

            The result is that we allow the appeal, set aside the judgment of the District Court, and award to the appellant an amount of damages of fifteen thousand pounds as follows:

           

For loss of past wages                                     I.L.    500.-

For pain and suffering                                                I.L.   4000.-

For loss of wages in the future                       I.L. 10500.-

Total                                                                            I.L. 15000.-

 

            We also award costs against the respondent both in this court and in the District Court together with an inclusive amount of I.L. 200-. as counsel's fees in both courts.

           

Appeal allowed, and damages awarded to the appellant in the sum of I.L. 15,000.-.

Judgment given on September 24, 1954.

IN THE

SUPREME COURT OF THE STATE OF ISRAEL

SITTING AS THE

HIGH COURT OF JUSTICE

HCJ 1758/11

 

Before:           Hon. President D. Beinisch (Ret.)

                        Hon. Justice N. Hendel

                        Hon. Justice I. Amit

 

Petitioners:               1. Orit Goren,

2. The Women’s Lobby of Israel

v.

 

Respondents:             1. Home Center (Do It Yourself) Ltd.,

                                    2. The National Labor Court in Jerusalem

 

Argued:                      28 Elul 5771 (27 September 2011)

 

Decided:                     25 Iyyar 5772 (17 May 2012)

 

On behalf of Petitioner 1:               Adv. Orna Lin; Adv. Odeliah Ettinger; Adv. Barak Calev

On behalf of Petitioner 2:               Adv. Yaniv Wiseman

 

On behalf of the Respondent 1:      Adv. Dror Gal; Adv. Carmit Levi Zamir; Adv. Sima Golin

On behalf of Representatives for Equal Opportunity in the Workplace:        

Adv. Tziona Kenig-Yair; Adv. Janet Shalom

 

                        Judgment

President Dorit Beinisch (Ret.)

            Petitioner 1 (Orit Goren; henceforth, “Petitioner”) won a lawsuit against Respondent 1 (Home Center Ltd.; henceforth, “Respondent”) under the 1996 Equal Pay Act, upon the determination that the salary she received from the Respondent was lower than that of a male employee who performed the same task, and given that the Respondent could not justify the discrepancy.  The issue decided by the National Labor Court, among others, in this case was whether proof of discrimination under the Equal Pay Act automatically gives rise to a cause of action under the 1988 Equal Job Opportunities Act.  The main issue arising from this question is the fact that under the Equal Job Opportunities Act, unlike the Equal Opportunities Act, it is possible to award damages without proving actual damage.  A majority opinion in the National Labor Court determined that a successful claim under the Equal Pay Act does not automatically give rise to claim under the Equal Job Opportunities Act; hence, this petition.

 

Facts

1.         Petitioner worked as a consultant in the tool department of the Respondent’s store at the Ayalon Mall in Ramat Gan from August 25, 1997 until December 27, 1997, where she was paid NIS 17/hr.  Along with the Petitioner in the tool department worked Steven Mor, a male, who earned a salary of NIS 5000/month (which amounts to approximately NIS 26/hr.).  The two were hired after filling out a questionnaire and an interview by the department head.  When asked before their hiring how much they wanted to be paid, the Petitioner requested NIS 3500/month while Mor requested NIS 6000/month.  When the Petitioner discovered that Mor received a higher salary than her, she wrote a letter, dated November 16, 1997, to the department head asking for a raise to the effect of either NIS 5000/month or NIS 26/hr.  Her letter went unanswered. On December 14, 1997, the Petitioner wrote another letter to her department head pointing out that to the best of her knowledge other employees in her department earn more money than she does.  She requested information regarding the salaries of the other employees in her department and provided notice of her resignation effective December 27, 1997.  2.      After her resignation, Petitioner filed a lawsuit against the Respondent in the Labor Court for the District of Tel Aviv, claiming the difference in salary between her and the other employees on the basis of both the Equal Pay Act and the Equal Job Opportunities Act.  On April 1, 2004, a panel consisting of Judge M. Nachtomi and Public Representatives T. Braffman and Y. Eldar found in her favor.  The panel determined that both the Petitioner and Steven Mor worked as consultants in the tool department in the Respondent’s Ramat Gan branch, and that the Respondent did not sufficiently establish either a distinction between the job done by the Petitioner and the job done by Mor; or that Mor had any superior abilities to those of the Petitioner; or that the reason Mor received a higher salary was because he was in line for a managerial position.  However, the court determined that the Respondent sufficiently proved that, generally speaking, its male employees do not receive a higher salary than its female employees. 

Given the circumstances of the case, the court also had to decide what reference group to use in determining whether the Petitioner was discriminated against..  Should the court compare her salary to all those working in the Respondent’s tool departments across the country or should it compare it to the salaries of those working in the Ramat Gan branch?  Regarding this question the court looked to Section 2 of the Equal Pay Act which says that any discrepancy in wage should be calculated against employees employed “by the same employer” and “at the same place of employment.”  In light of the fact that the Respondent’s policy in this case is to leave all salary decisions to the discretion of the manager of each branch, the labor court determined that the Petitioner’s loss due to discrimination should be calculated against the salaries of her coworkers at the Ramat Gan branch.  Since the Respondent did not provide information regarding the wages of the other workers in the tool department of the Ramat Gan branch, and the court determined that the services provided by the Petitioner were equal to those Mor was hired to do, the court concluded that the Petitioner had sufficiently proven that the disparity in salary between herself and Mor constituted discrimination.  The court noted that the fact that the salary offered to the Petitioner was a result of negotiation between her and the department head during which she requested a lower salary than that which Mor requested does not justify the disparity in their salaries.  Therefore, the district labor court determined that the Petitioner successfully established a claim under the Equal Pay Act and awarded her NIS 6,944, which is the difference in salary earned between the Petitioner and Mor. 

Additionally, the district labor court determined that once it has been found that the Respondent violated the Equal Pay Act, the Petitioner has a legitimate claim under the Equal Job Opportunities Act.  The court held that since the Petitioner’s salary was set as a result of her salary request and not at the behest of the Respondent, the Petitioner could not be awarded the full amount under the Equal Job Opportunities Act.  Therefore, the court set the amount of compensation owed to the Petitioner under the Equal Job Opportunities Act at NIS 6,944, equal to the compensation awarded to her under the Equal Pay Act.

3.         The Respondent appealed the decision to the National Labor Court, and the Petitioner filed a counter-appeal.  The Respondent claimed that the Petitioner should not be entitled to compensation under either law, while the Petitioner claimed that she should be entitled to higher damages than those awarded to her under the Equal Job Opportunities Act.  In a November 20, 2007 decision, the National Labor Court decided to affirm the lower court’s ruling awarding the Petitioner compensation under the Equal Pay Act, but, in a split decision, held for the Respondent with regards to the Equal Job Opportunities Act and reversed the lower court’s decision to award damages under the Equal Job Opportunities Act. 

 

The Decision of the National Labor Court

4.         Judge V. Wirth-Livnah delivered the decision of the National Labor Court.  In the decision, Judge Wirth-Livnah interpreted the relevant provisions of both the Equal Job Opportunities Act and the Equal Pay Act and compared the claims available under both statutes.  Regarding the Equal Pay Act, Judge Wirth-Livnah agreed with the ruling of the district court according to which the Petitioner’s loss should be calculated against the salaries of those working in the tool department at the branch at which she worked in Ramat Gan, because every branch of the Respondent acts independently, as the manager of each branch determines each employee's salary. Judge Wirth-Livnah added that in this case the information provided by the Petitioner regarding the disparity in salary between her and Mor and the fact that they performed the same task sufficiently fulfilled the Petitioner’s burden of proof in establishing her case.  With regards to the exceptions to the Equal Pay Act listed in Section 6 of the statute, Judge Wirth-Livnah determined that it is the responsibility of the Respondent to prove that the case falls into one of the exceptions, and in this case, the Respondent did not meet its burden. Judge Wirth-Livnah pointed out that there may be exceptions to the right to equal pay not listed in the Act, and noted that the right to equal pay is not absolute.  Therefore, the right to equal pay must be balanced with the right of employers to privately contract and negotiate a salary with its employees.  Thus, Judge Wirth-Livnah determined that if an employer can prove that any discrepancy (so long as it is not extreme) between the salaries of its male and female employees who perform the same task is due solely to the individual salary negotiation the employer has conducted with each individual employee, the right to contract will outweigh the right to equal pay.  The employer, however, is required to ensure that the differences in his employees’ salary are reasonable.  Additionally, Judge Wirth-Livnah pointed out that if the court were to take away an employer’s right to contract, there could be a negative effect on women, as it could cause employers to avoid hiring women altogether as a means of avoiding the problem of wage gaps.

In this case, Judge Wirth-Livnah determined that because the difference between the Petitioner’s salary and that of Mor stood at 35% and because the Respondent failed to provide information regarding the salaries of other employees working at the branch, this is not a situation in which the right to contract trumps the right to equal pay under the Equal Pay Act.  Therefore, Judge Wirth-Livnah concluded that the Petitioner sufficiently established a claim under the Equal Pay Act, and upheld the lower court’s decision in this regard. 

While the other members of the panel joined Judge Wirth-Livnah in her decision, it is important to note that Judge S. Tzur (and employer’s Rep. D. Blumberg who joined his opinion) and President S. Adler (with whom employer’s Rep. Y. Shilon joined) did not agree with Judge Wirth-Livnah regarding the circumstances in which the right to contract trumps the right to equal pay.  President Adler held that an employer acting in good faith cannot take advantage of the weakness or unfamiliarity of female employees of the appropriate wage rates for the job she is seeking when requesting a lower salary than what a male applicant is requesting.  Finally, President Adler noted that the difference in bargaining power between the genders cannot serve as a valid justification for a difference in salary. 

5.         The main disagreement between the judges in the National Labor Court, however, surrounds the question of the relationship between a claim based on the Equal Pay Act and a claim based on the Equal Job Opportunities Act.  Judge Wirth-Livnah, together with  Judge Tzur and Employee's Rep. D. Blumberg, held that an award under the Equal Pay Act does not automatically trigger a claim for damages under the Equal Job Opportunities Act.  In her opinion, Judge Wirth-Livnah focused on the difference between the two statutes.  Under the Equal Pay Act, the plaintiff can be awarded damages for the difference in salary up to the 24 months prior to filing a complaint, whereas under the Equal Job Opportunities Act, a plaintiff can be awarded damages as the court sees fit without the need to establish any monetary loss.  Judge Wirth-Livnah noted that compensation under the Equal Job Opportunities Act are aimed at educating employers and deterring discrimination. Therefore, judges have wide latitude in determining what the compensation should be.  Furthermore, Judge Wirth-Livnah added that the two Acts are different with regards to the evidence a plaintiff must provide in order to establish a prima facie case of discrimination thus shifting the burden of proof over to the defendant.  Under the Equal Pay Act, all that is required of a plaintiff filing suit is to provide the court with information regarding a difference in salary between her and a male employee who performs the same task and in the same workplace; whereas a plaintiff filing suit under the Equal Job Opportunities Act must present actual evidence of discrimination, despite the fact that the Equal Job Opportunities Act does not require the plaintiff to prove that the discrimination was intentional.  Judge Wirth-Livnah adds that there are various pieces of legislation intended to protect equality in the workplace, among them the Equal Pay Act, the Equal Job Opportunities Act, the 1954 Women in the Workplace Act and the 1998 Law to Prevent Sexual Harassment.  The fact that there are different statutes to this effect calls upon us to look upon them as complimentary of one another as opposed to redundant in which fulfillment of the elements of one claim will automatically fulfill the elements of another.  Judge Wirth-Livnah noted that under Section 2 of the Equal Job Opportunities Act, the plaintiff-employee must prove actual discrimination.  The importance of this requirement is that any lawsuit filed on the basis of the Equal Job Opportunities Act requires the plaintiff to first and foremost establish that there was gender discrimination, because only proof of discrimination can result in punitive damages. 

Judge Wirth-Livnah added that the differences in the evidentiary requirements between the Equal Pay Act and the Equal Job Opportunities Act necessary to establish a cause of action is whether the facts of the case are branded as “discriminatory” and entail punitive damages, which is the case in a Equal Job Opportunities Act lawsuit, but not in a claim filed under the Equal Pay Act.  Therefore, Judge Wirth-Livnah concluded that successfully establishing a claim under the Equal Pay Act does not necessarily mean the plaintiff will be successful in a claim under the Equal Job Opportunities Act.  Hence, in this case, Judge Wirth-Livnah found that the fact that the lower court concluded that the Respondent’s business did not have a discriminatory policy in place meant that it was not deserving of the punitive measures consistent with a claim under the Equal Job Opportunities Act and that the compensation awarded to the plaintiff under the Equal Pay Act sufficed. 

6.         President Adler, with whom Employees Rep. Y. Shilon joins, disagreed with Judge Wirth-Livnah and held that a successful claim under the Equal Pay Act gives rise to a claim under the Equal Job Opportunities Act.  President Adler ruled that an unequal salary demonstrates discrimination in the workplace which violates Section 2 of the Equal Job Opportunities Act.  President Adler pointed out that under both statutes the plaintiff must provide evidence of a difference in salary and unequal treatment between herself and a male employee, thereby shifting the burden of proof to the employer-defendant to prove that he acted legally.  Accordingly, an employer who successfully shows that the difference in salary is justified under Section 6(a) of the Equal Pay Act has sufficiently proven that the difference in wage is not a result of the plaintiff’s gender as required by the Equal Job Opportunities Act.  Therefore, President Adler held that so long as the employer cannot show that the difference in salary is justified under Section 6(a) of the Equal Pay Act, the only conclusion is that the difference in treatment is a result of the employee’s gender.  Furthermore, President Adler added that neither Acts requires the plaintiff to prove that the discrimination was intentional and that every case is to be decided objectively.    Additionally, the situations in which a plaintiff can file a claim under the Equal Job Opportunities Act are no less than those available under the Equal Pay Act, and the defenses available to an employer under the Equal Job Opportunities Act are no more than those available under the Equal Pay Act.  Thus, concludes President Adler, the two statutes complement one another when they are interpreted in a consistent manner. 

With regards to this case, according to President Adler’s approach, the fact that the lower court agreed that the Respondent did not discriminate as a matter of policy is not a good defense against the claims stemming from the two statutes.  Paying an employee less than what others, performing the same task, are earning, even if it is against company policy, is a violation of both these laws.  Finally, according to President Adler, the question of whether a company policy results in discrimination is a factor in determining the amount of damages to award under the Equal Job Opportunities Act. 

 

The Parties’ Claims

7.         The main claims of the Petitioner and of petitioner no.2, The Women's Lobby of Israel (henceforth, “the Petitioners”) touch upon the nature of the relationship between the cause of action under the Equal Pay Act and the cause of action under the Equal Job Opportunities Act given the circumstances of this case and the evidentiary threshold necessary to prove a claim under the Equal Job Opportunities Act.  According to the Petitioners, the fact that the Petitioner’s salary was 35% less than that of Mr. Mor is reflective of the deep rooted problem of wage discrimination in the Israeli economy and is sufficient to meet the burden of proof necessary to establish a successful claim not only under the Equal Pay Act, but also under the Equal Job Opportunities Act.  The Petitioners further argue that the court cannot deny the Petitioner's compensation under Section 10 of the Equal Job Opportunities Act solely because she could not prove widespread discrimination.  According to the Petitioners, the majority ruling in the National Labor Court requiring that a claim of discrimination under the Equal Job Opportunities Act to be "because of" the employee’s gender, is, for all intents and purposes, the same as requiring proof that the employer "intended" to discriminate.  Such a burden is, according to the Petitioners, unrealistic.  The Petitioners point to the decision of the district labor court (upon which the National Labor Court relied) that there was no company-wide policy resulting in discrimination and argue that the decision of the National Labor Court essentially requires proof of widespread discrimination in the workplace as a condition for relief under the Equal Job Opportunities Act.  Additionally, the Petitioners argue that when a court determines that there is a discriminatory effect that cannot be explained by relevant considerations, such as the case at hand, it must not be required to rule on whether the source of the result is a deliberate policy of discrimination.  The Petitioners also argue that the National Labor Court’s interpretation of the Equal Job Opportunities Act does not fit with its plain language.  The statute itself contains no language suggesting that courts should deviate from the established test for determining discrimination, namely, determining whether there is disparate treatment between two entities that are otherwise equal.  The Petitioners further allege that the interpretation of the National Labor Court goes against the purpose of the Equal Job Opportunities Act, which is to serve as a deterrent to discrimination.  They argue that in Section 10 of the Equal Job Opportunities Act the legislature permitted punitive damages to be awarded without any proof of damages as a deterrent measure.  However, they claim, the National Labor Court’s decision to refrain from imposing such a penalty by setting a high burden of proof for the plaintiff effectively makes such a claim worthless and creates an incentive for the employer to act with indifference towards the Equal Job Opportunities Act.  The Petitioners add that parties may not waive the provisions of either the Equal Pay Act or the Equal Job Opportunities Act; therefore, an employee's agreement to take a lower wage should not be looked at as consent to unequal treatment on the part of the employer. 

            Finally, the Petitioners argue that under the circumstances, this Court should not reject the petition because it was filed three years after the decision in the National Labor Court.  The Petitioners claim that the public interest in eliminating discrimination against women and blocking their path up the corporate ladder and the need to permit the use of the Equal Job Opportunities Act to advance this objective outweigh the interest of the Respondent’s reliance on the decision of the National Labor Court.  The Petitioners conclude that the Petitioner never gave up her right to compensation and the reason for her delay in filing is due to her lack of financial resources. 

8.         The Respondent argues that the petition should be dismissed outright due to the long period of time it has taken the Petitioner to file, and thus, the Court cannot accept her factual or legal arguments because of the prolonged time lapse.  The Respondent also claims that this case does not justify review by this Court, sitting as the High Court of Justice, based on the rules set forth by Court precedence.    The Respondent argues that the claims of the Petitioners regarding the proper interpretation of the relationship between the Equal Pay Act and the Equal Job Opportunities Act with regards to the plaintiff’s burden of proof does not justify this Court’s intervention in a decision of the National Labor Court. Furthermore, the Respondent argues that the effect of reducing the burden of proof required under the Equal Job Opportunities Act to that of the Equal Pay Act, as the Petitioners request, is contrary to the legislative intent.  The Respondent points to the fact that the 1996 amendment to the Equal Pay Act expanding the grounds on which a plaintiff may file a claim entered into force eight years after the Equal Job Opportunities Act was enacted.  Therefore, had the legislature intended for the burden of proof required by the Equal Pay Act to be sufficient for a successful claim under the Equal Job Opportunities Act, it would have explicitly said so in the amendment, but it did not.  The Respondent adds that the two laws complement one another in that while the focus of the Equal Pay Act is the difference in salary between a male and female employee, the Equal Job Opportunities Act focuses on the cause of the difference in salary. 

Additionally, the Respondent argues that the Petitioners' argument suggesting that the majority opinion in the National Labor Court decision requires a plaintiff to prove intent to have a successful claim under the Equal Job Opportunities Act should be rejected.  The Respondent argues that the Petitioners confuse between the lack of a requirement to prove intent and the requirement to show a causal connection to prove the existence of discrimination.  The Respondent adds that the difference in salary between the Petitioner and Mor was a result of, among other things, the salary requests they made to the department head during the course of negotiating their salary.  The Respondent adds that granting a specific salary request is not one of the things forbidden to an employer under the Equal Job Opportunities Act, as opposed to the Equal Pay Act which grants am employee the right to equal pay to other employees performing the same task or a job of the same value, even if the difference in pay does not stem from the gender of the employee. 

Another point raised by the Respondent concerns the fact that the discrimination prohibited by the Equal Job Opportunities Act is discrimination based on the employee’s membership in a specific protected class (for example, religion, gender, race, etc.).  Thus, claims the Respondent, in order for an employee to prove discrimination on the basis of his/her membership in a protected class, (s)he must establish that the employer in question has a policy which results in discrimination against that particular class.  In this case, the Respondent claims that it has sufficiently proven that it does not discriminate against its female employees, and even in the same tool department in which the Petitioner and Mor both worked, there were male employees who earned less than Mor.  Under these circumstances, the Respondent argues that the earnings difference between the Petitioner and Mor is not enough for a successful claim under the Equal Job Opportunities Act, even though she was granted damages for her claim by the National Labor Court under the Equal Pay Act.        

9.         In addition to the claims of the parties in this case, we also received an amicus brief filed by the Equal Opportunities Commission of the Ministry of Industry, Trade and Labor.  In light of the commission’s interest in this case and its role in the statute involved, we decided to allow its intervention into the proceedings.  The commission claims that significant wage gaps between men and women are common in both the public and private sectors.  It argues that both the Equal Pay Act and the Equal Job Opportunities Act should be interpreted in light of the existing realities in which significant wage gaps are a commonplace in society.  It further argues that the difficulty in proving the existence of discrimination has led us to the point where the Equal Pay Act test is simply a showing of a wage gap between employees and does not require any showing of intent, and that under the Equal Job Opportunities Act, in certain circumstances, the burden of proof is shifted to the employer.  The commission claims that the majority opinion in the National Labor Court has serious implications as to the implementation of the Equal Job Opportunities Act, which go against the prevailing theory as to the ability of the plaintiff to prove discrimination under the Equal Job Opportunities Act. 

Given the circumstances, the commission argues, the Court should adopt a middle ground between the majority opinion in the National Labor Court and the dissent.  It argues that when an employee successfully establishes a difference in salary between her and another employee, despite the implementation of an equal employment policy, the burden of proof would then shift to the employer to prove that there was no discrimination on the basis of gender.  If the employer cannot withstand this burden, it would be assumed that it is a case of gender discrimination. 

 

Analysis

10.       Before discussing the main question presented by this case regarding the relationship between the Equal Pay Act and the Equal Job Opportunities Act, we will first address the issue raised by the Respondent with regards to the dismissal of the petition.  The two issues presented by the Respondent’s claim are (1) whether the amount of time that has elapsed between the date of the decision of the National Labor Court and the filing of this petition has any bearing on whether this Court may hear this case; and (2) whether this Court, in its capacity as the High Court of Justice, can review a decision by the National Labor Court. 

            Regarding the delay in filing, it seems hard to dispute the fact that filing a petition more than three years after the judgment of the National Labor Court poses a significant hurdle to the Petitioners.  Such a delay can be grounds for immediate dismissal when filed with the High Court of Justice.  When determining whether such a delay is grounds for dismissal we analyze the delay in three ways: (1) subjectively; (2) objectively; and (3) the effect upon the rule of law if such a claim is allowed to proceed.  See HCJ 170/87 Assulin v. Mayor of the City of Kiryat Gat [1988] IsrSC 42(1) 678, 694-95.  The subjective test looks to the behavior of the petitioner to determine whether, during the elapsed time, the evidence shows that the petitioner gave up his right to contest the ruling.  The objective test asks whether the delay has any impact on the rights or interests of any administrative bodies or third parties.  The final test requires the Court to determine whether the delay negatively impacts the rule of law.  This is  done by balancing the aforementioned considerations consistent with the relative weight of each circumstance.  The balance is especially cognizant of the private or public interests impacted by the objective test and the impact on the rule of law.  See AA 7142/01 Haifa Local Committee for Planning and Building v. Organization for Protecting the Environment, [2002] IsrSc 56(3) 673, 679. 

            In this case, it seems that the Petitioner’s delay in filing is evidence of her willingness to forgo her rights in the case, and that the Respondent may have legitimately relied on the decision of the National Labor Court, which is up for review now by this Court.  However, due to the importance of the question arising from this petition, which concerns the relationship between various pieces of legislation and the prohibition against gender discrimination in the workplace, we conclude that we should review this petition despite the delay in filing.  See HCJ 244/00 Organization for Democratic Discourse v. Minister of National Infrastructure IsrSc [2002] 56(6) 25, 80 - 81.  The importance of our decision concerning the parties in this case may have a considerable impact on the rights and obligations of all employers and employees.  Additionally, we should add that the Petitioner through her learned attorney, Adv. Orna Lin, has left to this court’s discretion whether it should adjudicate the case of the Petitioner or merely address the underlying legal question.

            Furthermore, it is well known that this Court, when sitting as the High Court of Justice, will only intervene in a decision of the National Labor Court when the decision contains a clear legal error, whose correction justice demands.  See HCJ 525/84 Hatib v. National Labor Court [1986] IsrSc 40(1) 673, 693; HCJ 3512/04 Shezifi v. National Labor Court [2004] IsrSc 59(4) 70, 74.  In light of the importance and implications present in the questions arising from this case, we decided to adjudicate this case.       

11.       The main question before us is whether proving the elements of a claim under the Equal Pay Act will give rise to a claim under the Equal Job Opportunities Act.  In other words, whether proving a difference in salary between a male and female employee performing the same, or substantially the same, task or one equal in value in the same workplace can serve as a basis for a claim under both statutes.  In order to answer the question we will look to the language and purpose of the two statutes and determine the relationship between them. 

First, the relevant language of Section 2 of the Equal Pay Act which stands at the center of this claim:

The Right to Equal Pay: 2. A male and female employee who perform the same task, or substantially the same task or one which is worth the same, at the same place of employment have the right to equal pay… 

Once it has been proven that the employees work at the same workplace (this element has been discussed in the decision of the National Labor Court, but is not relevant to the question before us), the burden of proof shifts to the defendant to prove that the difference in salary is justified under Section 6 of the Equal Pay Act, which states:

Difference in Salary: 6(a) The provisions of Section 2 meant to prevent discrimination in pay, does not prohibit wage differences based on the character or nature of the work under consideration, including productivity, quality of work, seniority at work, training or education, or geographic location of the work, which do not constitute gender discrimination. 

(b) In an action under this Act, the Labor Court has determined that when, in the dispute in question, the employees perform the same or essentially the same task or a task of equal value, the burden of proof shifts to the employer to prove that the difference in salary is justified under subsection (a)

 

            The Equal Job Opportunities Act prohibits gender discrimination in the workplace.  The basic point of the law is in Section 2(a) of the Equal Job Opportunities Act which states:

The Prohibition of Discrimination: 2(a) An employer may not discriminate between employees or between job seekers on the basis of their gender, sexual orientation, marital status, pregnancy, infertility treatment, in vitro fertilization treatments, parenthood, age, race, religion, nationality, country of origin, worldview, their political party, reserve duty, their potential to be called to reserve duty or duration of reserve service… regarding any of the following work decisions:

(1) hiring;

(2) work conditions;

(3) promotions;

(4) professional development;

(5) dismissal or severance pay; and

(6) retirement benefits.

 

            Subsection 2(a) is qualified by subsection 2(c) of the Equal Job Opportunities Act which states, “There is no discrimination under this Act, when it is required by the nature or character of the task or the position.”  Regarding the burden of proof in claims filed under the Equal Job Opportunities Act, Section 9 states:

Burden of Proof: 9(a) In an action filed by a prospective employee or an employee filing a claim under Section 2, the employer must prove that he acted in accordance with Section 2 when:

[(1)]Regarding  hiring, promotion, working conditions, professional development, severance pay - if the employer established conditions or qualifications, and the employee proves that he or she fulfills the said requirements;

[(2)]Regarding dismissal - if the employee proves that his conduct did not amount to grounds for dismissal.

 

12.       In this case, the Petitioner has proven, as the National Labor Court determined, that her salary was 35% lower than that of Mor – a male employee who performed the same task as the Petitioner.  Given the circumstances and the fact that the Respondent did not justify the disparity under Section 6 of the Equal Pay Act, the Petitioner successfully proved her claim under the Equal Pay Act.  The question in this case is now whether the disparity automatically gives rise to the conclusion that the Petitioner was discriminated against unlawfully by the Respondent (regarding her salary) because of her gender under Section 2(a) of the Equal Job Opportunities Act.  To decide this, we must look to the purpose of each law to determine the relationship between them. 

13.       Both the Equal Pay Act and the Equal Job Opportunities Act were enacted for the purpose of advancing equality in the workplace by prohibiting an employer from discriminating on the basis of irrelevant or illegitimate considerations.  The principle of equality and the prohibition against discrimination is an essential principle in our legal system and is a prerequisite for any democracy based on fairness and justice.  As Justice M. Landau noted with regards to the principle of equality, “This notion, which is unwritten, is the essence of our entire constitutional system of law.”  HCJ 98/69 Bergman v. Minister of Finance and State Comptroller [1969] IsrSc 23(1) 693, 698.  This Court has upheld this principle on more than one occasion, and has even determined that this principle enjoys constitutional protection.  See HCJ 6427/02 The Movement for Quality Government in Israel v. The Israeli Knesset [2006] IsrSc 61(1) 619, 688 - 89 (2006).  Regarding the essence of this principle and the prohibition of discrimination in our system of law, then-Deputy President A. Barak stated:

[P]eople are different from one another. ‘...No person is completely identical to another’…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....  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.

HCJ 721/94 El Al Israel Airlines Ltd. v. Danielowitz [1994] IsrSc 48(5) 749, 760 - 61.

           

The principle of equality and the prohibition of discrimination have been applied in different ways in the labor market, and have been explicitly mentioned in labor legislation.  This is because of the presumption that labor relations is one of the main areas of society in which members of certain groups in society are prone to unjust discrimination affecting their economic and social status on the basis of unjustified stereotypes or prejudices.  Preventing discrimination in the labor market will therefore prevent unjust prejudice based on assumptions which are irrelevant to the position in question.  Furthermore, it stands to reason that in the long run, a ban on discrimination in the labor market, as has been implemented, will undermine stereotypes and prejudices that largely form the basis for illegal discrimination in society.  As then-Justice E. Matza appropriately states,

[D]iscrimination against women in the employment and economic sectors has a cumulative effect on their negative image, as a class which is supposedly inferior, in other spheres as well. Thus, for instance, the lack of proper representation of women in various fields and various workplaces contributes to fostering a negative image of their ability to manage their lives independently. It follows that discrimination against women in economic spheres in its own way nurtures the long-term entrenchment of distorted social outlooks.

 

See HCJ 453/94 The Women’s Lobby v. The Minister of Transportation [1994] IsrSc 48(5) 501, 524 (henceforth, “In Re The Women’s Lobby”).  In order to achieve these objectives and prevent illegal discrimination, the two statutes at issue here restrain an employer’s general right to contract and limit his discretion in managing his business. 

14.       The Equal Pay Act was enacted to decisively combat one of society’s greatest expressions of illegal discrimination, namely, compensating men and women differently for the same, or substantially the same, task or for a job of equal value.  The statute was first enacted in 1964 and then reenacted in 1996.  Section 1 of the Equal Pay Act explains the law’s purpose,

Purpose: 1. The goal of this law is to advance the principle of equality and prevent gender discrimination with regards to wage or any other aspect of the workplace.

 

            The right to equal pay arises when the employees perform the same, or substantially the same, task or one of equal value.  The law establishes a legal presumption of gender discrimination when there is a difference in salary between a male employee and a female employee.  It is important to note that despite the amount of time that has passed since the law was enacted, gender discrimination with regards to wages is, unfortunately, still in practice.  A 2010 Knesset survey, released by that National Center for Statistics on September 7, 2011 stated that women earn on average 66% of what men earn a month and 84% of what men earn per hour.  See http://www.cbs.gov.il/reader/newhodaot/hodaa_template.html?hodaa=201115219.

            Furthermore, it is important to note that lower wages is only one method of discrimination against women in the labor market. Others include not hiring women, sexual harassment, the inadequate representation of women in senior positions and the mistreatment of pregnant women and mothers.  Throughout the years, the Knesset has attempted to deal with these various expressions of gender discrimination whether through the two laws at issue in this case or by other pieces of legislation (see, e.g., The 1951 Equal Rights for Women Act, the 1954 Women in the Workplace Act, and the 1998 Law Against Sexual Harassment in the Workplace).  This Court has also acted to protect the rights of women and to prevent discrimination against them (see, e.g., HCJ 153/87 Shakdiel v. The Minister of Religious Affairs [1988] IsrSc 42(2) 221; In Re The Women’s Lobby; HCJ 2671/98 The Women’s Lobby in Israel v. The Minister of Labor and Welfare [1988] IsrSc 52(3) 630).  Regarding the laws in place to advance equality between men and women we quote the words of then-Justice M. Cheshin in HCJ 2671/98 at 657 - 58:

We reviewed statutes and established rules based on our interpretation of the law.  The common denominator of these rules was and is the pressing social need to recognize the equal status of women and to strengthen this notion of equality.  These laws are progressive and the rules are no different.  When seen from afar, these laws and rules may seem strange and indirect, but I assume that a day will come when these laws will seem like child’s play, laws which are praised by the great ones of today.  Here we have a woman's right to "equal pay for the same job" as per Section 2 of the Equal Pay Act, does this law not state the obvious?  Does it matter whether 500 boxes are packed by a man or a woman?  Was this legislation not obvious and self evident even before its enactment?  Had this law not been passed would we have not established it as a rule stemming from the (constitutional) principle of equality? The same can be said about the Equal Job Opportunities Act.  There is no law which states that which we already know, namely that it is wrong to discriminate against women for no reason other than her gender.  This can be said for these two laws and any other law enacted with the same purpose.  These statutes have been enacted solely to explain illegal discrimination which has taken root in society, and the instructions therein are only to spell out to the masses what norms should prevail.  The legislator explicitly warns us of the need to eliminate illegal acts that have taken hold and place women in the place they should have been in to begin with.  The legislator has not declared new norms that are not self evident, rather, it has taken its time to spell out what exactly our legal and societal norms should be.  After having done that, the legislator correctly sanctions anyone who violates the law.  These laws are like rays of light, and the light in this case is equality, or, more specifically, gender equality in all matters.  If we go from one ray of light to another, the doctrine of equality will reveal itself in all its glory.   

            Unfortunately, even today, the second decade of the 21st century, we still need legislation to protect women from gender discrimination.  I would have hoped that today we would be in the era in which these laws would be, as Justice Cheshin described, “child’s play;” however, this era is still far, perhaps even very far, away from us.

15.       The Equal Job Opportunities Act is broader than the Equal Pay Act and was enacted to deal not only with gender discrimination, but with other forms of discrimination as well (such as age, sexual orientation, race and religion).  Likewise, the purpose of the Equal Job Opportunities Act is to prevent discrimination not only in pay, but in other aspects of the workplace as well (like hiring, work conditions and promotions). These two statutes have different definitions for what constitutes illegal discrimination.  The Equal Pay Act looks to the end result by requiring only a showing of difference in pay between a male employee and a female employee in order to have a successful claim.  Under Sections 2 and 6 of the Equal Pay Act, the labor court adjudicating such a claim must see if there is a difference in salary between the female plaintiff and a male employee to whom she is comparing her salary and who performs the same, or substantially the same, task or a one of equal value.  Once this is successfully established, the burden of proof shifts over to the employer to prove that the difference in salary is justified under Section 6(a) of the Equal Pay Act.  As President Adler pointed out in his decision, the list provided in Section 6(a) is not exhaustive.  However, any considerations not listed in Section 6(a) of the Equal Pay Act must be of the same kind as those listed and must be ones that demonstrate a difference in the “nature or the character” of the job in question.  If the employer cannot meet his burden of proof, the court must conclude that the plaintiff has a valid claim under the Equal Pay Act. 

I must note that I cannot accept the opinion of Judge Wirth-Livnah - who on this point was a lone opinion – arguing that the employer’s freedom to contract is a consideration which may, under certain circumstances, justify a difference in salary between a male employee and a female employee, even when it is not in the framework of one of the considerations listed in Section 6(a).  Through the considerations outlined in Section 6(a), the legislature determined what the balance should be between the freedom to contract and the protection of equality by listing relevant considerations which can justify a difference in salary between a male and female employee performing the same task.  Due to the importance of the principle of equality in our legal system and the need to prevent unjust gender discrimination, I believe that the freedom to contract cannot, on its own, be a legitimate consideration justifying a difference in wage between a male and female employee.  Recognizing the freedom to contract by itself as a legitimate defense to a claim of gender discrimination may lead to its utilization as a fig leaf to cover up real discrimination, completely undermining the purpose of the Equal Pay Act.  Allowing this as a defense ignores the fact that there are actual gaps between the genders in the labor market with regards to salary demands and salary negotiation.  See Sharon Rabin-Margaliot, The Market Explanation to Wage Differences: In Light of the Home Center (Do It Yourself) Ltd. v. Orit Goren, 50 HaPraklit 501, 512 – 20 (5770) (henceforth, “Market Explanations”). 

In order to deal with the difficulty women have in the labor market, the legislature decided to limit the employer’s freedom to contract in order to advance the principle of equality.  In the absence of any other considerations affecting the worker in question (as outlined in Section 6 of the Equal Pay Act), the employer may not differently compensate a male and female employee who are performing the same task.  Therefore, the legislature made a value judgment to limit the contractual freedom of an employer in order to reduce gender discrimination in the labor market.  To further this goal, taking into account the imbalance of power inherent between employees (especially females) and employers, the legislature lightened the burden imposed on the employee-plaintiff by shifting the burden of proof onto the employer under Section 6 of the Equal Pay Act.  Accepting the idea that the freedom to contract may justify a wage gap is contrary to the fundamental purpose of the Equal Pay Act, which is reducing the impact of gender discrimination on market forces in determining the salaries of women. 

Additionally, I reject the argument of Judge Wirth-Livnah according to which allowing the right to equal pay to supersede the freedom to contract will cause employers to avoid hiring women.  By instituting such a policy, an employer will violate the Equal Job Opportunities Act, which prohibits an employer from considering gender in making personnel decisions.  Such an employer would be liable to both civil and criminal penalties.  Therefore, the method by which we can prevent gender discrimination in the labor market is by enforcing the laws in place to that effect and not by avoiding these laws by taking into account market conditions. 

16.       Unlike the Equal Pay Act, a claim under the Equal Job Opportunities Act requires the plaintiff to establish causation.  Illegal discrimination under the Equal Job Opportunities Act is discrimination committed “because of” the plaintiff’s identity as a member of a protected class.  In order to prove a claim of discrimination under the Equal Job Opportunities Act, a plaintiff must prove that the employer acted discriminatorily when making one of the employment decisions listed in Section 2(a) of the Equal Job Opportunities Act.  We must point out that the Equal Job Opportunities Act does not require the plaintiff to prove the defendant acted intentionally to be successful in her claim. 

Regarding a policy requiring different retirement ages for men and women, Justice G. Bach stated:

I am prepared to assume that Petitioner's employer did not intend to discriminate against [the petitioner] and the other female employees when it signed the Labor Constitution. However, the Respondent's intentions are not conclusive as to the question that we are called upon to determine, because the test for assessing the existence or nonexistence of discrimination is objective and not subjective. The motive for creating a distinction between men and women is not determinative in the matter addressed, and for the purposes of determining the existence of discrimination, it is necessary to examine the final outcome as it appears in social reality.

 

HCJ 104/87 Nevo v. National Labor Court, IsrSc [1990] 44(4) 749, 759.

 

            Therefore, an employer taking into account one of the considerations listed in Section 2(a) of the Equal Job Opportunities Act when making an employment decision can trigger liability.  Even without any intent to discriminate, taking into account an employee’s gender, age, religion or any of the other protected classes listed in Section 2(a) of the Equal Job Opportunities Act is prohibited, unless the nature or character position in question reasonably requires such discernment as provided by Section 2(a) of the law.  Furthermore, in light of the difficulty in proving that the employer took into account the employee’s membership in a protected class in making a personnel decision, Section 9 of the Equal Job Opportunities Act allows the employee to merely prove that he or she meets the qualifications of the position in question in order to shift the burden of proof onto the employer to rebut the claim of discrimination and prove that his decision was not based on any illegal consideration.  See HCJ Rehearing 4191/97 Recanat v. National Labor Court [2000] IsrSc 54(5) 330, 351 – 52; Sharon Rabin-Margaliot, The Elusive Case of Employment Discrimination – How to Prove its Existence, 44 HaPraklit 529, 539 – 43 (5758 - 5760).

            In short, in a claim filed under the Equal Pay Act, one needs to establish that there is a difference in salary between herself and a male employee performing the same (or substantially the same) task (or a task of equal value), and if the employer cannot prove that the difference in salary is justified, the plaintiff will be successful.  However, to file a claim under the Equal Job Opportunities Act, the plaintiff must prove that the employer took into consideration the plaintiff’s membership in a protected class when making the employment decision in question.  In other words, the Equal Pay Act creates a legal presumption of discrimination if the plaintiff can prove that there is a difference in salary between her and a male employee and the employer cannot legally justify the difference.  Such a legal presumption does not exist under the Equal Job Opportunities Act, and therefore, the burden upon a plaintiff in such a claim is much heavier.  However, the Equal Job Opportunities Act does not require proof that the employer intended to discriminate, only proof that there is causation between the employer’s consideration of the plaintiff’s membership in a protected class under Section 2(a) and the employment decision in question. 

17.       Another important distinction between the Equal Pay Act and the Equal Job Opportunities Act is the remedy prescribed by the legislature for the violation of the laws.  Under the Equal Pay Act, punitive damages may not be awarded, and Section 8(a) of the law limits the time in which an affected employee can file a claim for back pay to 24 months.  By contrast, under Section 2 of the Equal Job Opportunities Act, a labor court may, pursuant to Section 10(a)(1) of the law, award damages as it sees fit given the circumstances, even in the absence of any proof of loss. These damages serve as a deterrence and are not available under the Equal Pay Act.  Under Section 10(a)(2) of the Equal Job Opportunities Act, a labor court may even, under certain circumstances, issue an injunction or a direct order if it determines that a monetary award is not sufficient.  Additionally, under Section 15(a) of the Equal Job Opportunities Act, a person in violation of the statute may be fined up to double the fine established by Section 61(a)(3) of the 1977 Penal Code.    

18.       The purpose of the Equal Pay Act is to deal with one of the more common expressions of gender discrimination in the workplace; therefore, the plaintiff has a considerably lighter burden of proof.  However, the law limits the damages that can be awarded in such a case.  The purpose of the Equal Job Opportunities Act is to deal with different types of discrimination that affects different classes of people and requires proof of causation between the illegal consideration taken into account and the employment decision in question.  Additionally, the Equal Job Opportunities Act permits an award of damages even without any proof of economic damages on the part of the plaintiff and allows for punitive measures to be taken against the discriminating employer.

19.       In this case, the Petitioner’s claim under the Equal Pay Act is not in question considering the salary difference between her and Mr. Mor who performed the same task as the Petitioner.  The issue we must decide is whether this claim is enough for the Petitioner to also have a claim under the Equal Job Opportunities Act.  The majority opinion in the National Labor Court decided this question in the negative, when determining that it is not one of the circumstances in which a plaintiff can shift the burden of proof over to the employer in accordance with Section 9 of the Equal Job Opportunities Act.  The National Labor Court determined that in order to shift the burden, the plaintiff must bring evidence that the employer discriminated against or treated his employees unequally.  Furthermore, Judge Wirth-Livnah determined that the employee must provide evidence adequately demonstrating discrimination on the part of the employer.  The mere fact that the plaintiff has a successful claim under the Equal Pay Act does not fulfill this requirement. 

By contrast, the dissenting opinion of President Adler held that a successful claim under the Equal Pay Act suffices to create a prima facie case of discrimination under the Equal Job Opportunities Act.  Because the employer could not successfully rebut the claim of the employee under Section 6(a) of the Equal Pay Act, it stands to reason that the cause for the pay difference is the employee’s gender.  We will now determine whether this is so. 

20.       In light of the differences between the two laws, a successful claim under the Equal Pay Act will not automatically trigger a claim under the Equal Job Opportunities Act.  Each statute is meant to safeguard against different forms of discrimination in the workplace; each have different ways of testing whether discrimination has occurred; and each provide for different penalties for their respective offenders.  It seems, therefore, that allowing for the laws to overlap would be inconsistent with the respective purposes of the statutes and the problems they are designed to address.  The Equal Pay Act deals with one common example of gender discrimination in the workplace and the cause of action created by the law fits this type of discrimination.  This cause of action is not the same as that of the Equal Job Opportunities Act, which sets a higher bar for establishing a successful claim against an employer and relates to various types of employment decisions.  However, the Equal Job Opportunities Act recognizes, so to speak, the difficulty an affected employee may have in demonstrating the considerations taken into account by the employer, and allows, under certain circumstances, for the burden of proof to be shifted over to the employer to prove that he did not act out of wrongful discrimination.  The question is, what is the evidentiary minimum necessary to shift the burden of proof over to the employer under the Equal Job Opportunities Act, and whether a successful claim under the Equal Pay Act fulfills this requirement. 

21.       Section 9 of the Equal Job Opportunities Act deals with the circumstances by which a plaintiff may shift the burden of proof over to the defendant.  Under Section 9(a), the burden may be shifted if the plaintiff can prove that he fulfills the conditions and requirements set by the employer to be considered for the employment decision in question.  The burden placed upon the plaintiff is relatively light.  A close reading of Sections 2 and 9 of the Equal Job Opportunities Act leads to the conclusion that a plaintiff claiming discrimination on the basis of his membership in one of the protected classes listed in Section 2 must prove that he fulfills the conditions and requirements set forth by the employer for the employment decision in question in order to shift the burden onto the employer to prove that his decision was not influenced by any wrongful considerations.

22.       The circumstances established by Section 9 of the Equal Job Opportunities Act are only one example of where the burden of proof may be shifted, and I accept the argument made by the Equal Opportunities Commission that there may be other circumstances in which the burden of proof may be shifted as well.  Because the question of whether or not the employer discriminated against the plaintiff is not necessarily related to whether or not the employee was fit for the position in question, Section 9 of the Equal Job Opportunities Act is not a complete list of methods by which a plaintiff can shift the burden of proof.  Therefore, in light of the difficulty in proving the considerations of the employer in making his decision, it stands to reason that the burden should be shifted in a case where the employee can prove that the employer had discriminated against him in the past.  Furthermore, because of the power imbalance inherent in an employer/employee relationship, the burden upon the plaintiff should not be particularly high.  Hence, the establishment of a prima facie case of discrimination will depend on the independent circumstances of each case.

            Therefore, I do not believe that the opinion of the National Labor Court requiring the plaintiff to prove discrimination on the part of the employer, as is the opinion of the National Labor Court, is correct.  As will be explained below, it is sufficient for the plaintiff to prove that there is a significant wage gap between her and a fellow male employee in order to shift the burden of proof to the employer under the Equal Job Opportunities Act. 

Additionally, the plaintiff can also shift the burden by demonstrating a policy of discrimination on the part of the employer based on the criteria outlined by Section 2 of the Equal Job Opportunities Act.  The evidence provided may have the same effect if it can prove that the result of any decision or policy undertaken by the employer has a discriminatory effect, even if it is not based on one of the prohibited considerations.  The evidence the plaintiff must provide in order to meet the requirements of this evidentiary test must relate to the relationship between the employer and the plaintiff employee in comparison to the employer’s relationship with the other employees who are not members of the same protected class as the plaintiff.  The evidence should also compare the employer’s behavior towards employees who are members of the plaintiff’s protected class to his treatment of employees who are not members of the class in question.  Once the plaintiff has successfully demonstrated disparate treatment, the burden of proof will shift onto the employer to prove either that the disparity in treatment stems from the nature of the position under Section 2(c) of the Equal Job Opportunities Act, or that it stems from a reason unrelated to any of the illegal considerations listed in Section 2(a) of the Equal Job Opportunities Act.  It is important to note that the Equal Job Opportunities Act explicitly lists the considerations which an employee may not take into account when making certain employment decisions.  If he can prove that the discriminatory result was not based on any wrongful considerations, he will successfully establish that he did not discriminate “because of” any wrongful considerations.  As President Barak stated regarding age discrimination in the Recanat Further Hearing:

As a general rule, the burden of proof is imposed upon the employee-plaintiff claiming discrimination.  This burden is met when the plaintiff proves that the employer mandates retirement when employees reach a certain age (this is direct discrimination).  The burden may also be met by establishing that a regular practice of the employer results in age discrimination (this is indirect discrimination).  In the first case, it is enough to prove that company policy dictates different retirement ages for different workers.  Proving the existence of such a rule, irrespective of the position of the employee, will prove the existence of discrimination “because of” age.  In the second case, the official policy is indiscriminate and does not mandate different retirement ages for different employees.  However, the requirements of the job set by the employer effectively results in different retirement ages for different employees.  By establishing this practice, the employee meets his burden of proof demonstrating the existence of discrimination “because of” age.  Needless to say, such a case is only indirect, but enough proof to show that the employer discriminates “because of” age (Section 2(a)).  At this point, a court must determine whether the difference in retirement ages is a result of the nature of the position in question (Section 2(c)).  The burden of proof will shift to the defendant (usually the employer, see Section 9(a) of the Equal Job Opportunities Act) to prove this is the case.  Note that with regards to the substantive law, whether discrimination exists is linked to the nature of the job in question.  In terms of the procedural law, a distinction is made regarding the burden of proof. 

 

FH 4191/97 Recanat, IsrSc 54(5) at 351 - 52.

23.       Regarding the issue at hand, I have come to the conclusion that a successful claim under the Equal Pay Act suffices to fulfill the evidentiary threshold necessary to shift the burden of proof over to the employer in a claim filed under the Equal Job Opportunities Act.  Once the plaintiff has proven that a male coworker receives a higher salary while performing the same, or substantially the same, task or one of equal value in the same workplace, and the employer cannot justify the difference in salary based on the nature of the task performed (under Section 6 of the Equal Pay Act), the plaintiff will have established a prima facie case of gender discrimination.  Note that there is no dispute with regards to the understanding that Section 2(a) of the Equal Job Opportunities Act forbids an employer from taking into account the gender of an employee when determining her salary.  When an employee successfully establishes a claim under the Equal Pay Act, the implication is that she was discriminated against by her employer on the basis of her gender, which is demonstrated by the wage gap between her and a male employee, which could not be adequately justified by the employer under Section 6(a) of the Equal Pay Act.  These circumstances will shift the burden of proof onto the employer to prove that the wage gap is a result of the nature of the position in question under Section 2(c) of the Equal Job Opportunities Act or that the reason for the difference in salary is unrelated to any of the considerations prohibited by the Equal Job Opportunities Act.  In other words, the employer must prove that there is no causal relationship between the wage gap and the gender of the employee, and thus, the difference in salary is not “because of” the plaintiff’s gender.  If the employer can successfully prove that the plaintiff’s gender was not taken into account when determining her salary, the plaintiff will not have a successful claim under the Equal Job Opportunities Act.  By contrast, if the employer cannot meet his burden of proof, the court will have no choice but to determine that the employee-plaintiff has a valid claim under both the Equal Pay Act and the Equal Job Opportunities Act. 

24.       In the case before us, it is undisputed that the Petitioner has a successful claim under the Equal Pay Act.  Given the circumstances, the burden of proof now shifts over to the Respondent to prove that there is no causal connection between the gender of the Petitioner and the 35% difference in salary between her and Mor, meaning that her gender was not taken into consideration when determining her salary.  The factual background outlined by the district labor court indicates that the Respondent successfully proved that there is no general company policy regarding pay which results in discrimination against women; however, it did not provide the salaries of the other workers working in the tool department of the Ramat Gan branch, which is where the Petitioner worked.  This information is important in light of the fact that at the time, individual salaries were not determined by the Respondent’s corporate administration, but rather by the managers of each individual branch.  Therefore, the only claim of the Respondent is that the reason for the Petitioner’s lower salary is because of the fact that she asked for a lower wage when negotiating her salary (the Petitioner asked for NIS 3,500/month, while Mor requested NIS 6,000/month; the Petitioner was given a salary of NIS 17/hr – which equals NIS 3,264/month – and Mor received a salary of NIS 5,000/month).

            An employer proving that the salaries of his workers is a result of negotiations between the parties and that he treats both male and female employees the same with regards to their salary will meet his burden of proof under the Equal Job Opportunities Act, so long as he can demonstrate a company policy regarding wages that is uninfluenced by gender or any of the other classes protected by Section 2(a).  When wages are negotiated by the parties, we cannot necessarily say that the employee’s gender was taken into consideration or that the employee was discriminated against “because of” her gender, though whether the inherent inferiority of the employee was taken into consideration by the employer is a factor, among others, that must be taken into account by the court.  Moreover, it is important to note that in this case there may be a difference between a claim filed under the Equal Pay Act which merely tests whether there is a difference in salary between male and female employees, and whose purpose is to deal with, among other things, the weaker bargaining power of women in the job market and a claim filed under the Equal Job Opportunities Act, which tests the legality of the considerations taken into account by the employer when making employment decisions (including salary decisions).  Compare The 1954 Women in the Workplace Act, and The Equal Job Opportunities Act; HCJ 554/05 Ashkenazi v. Police Superintendent [2005] IsrSc 60(2) 299, 306.  To quote the words of S. Rabin – Margalit:

The Equal Job Opportunities Act is based on causation.  A successful plaintiff will need to prove that the employer took a wrongful consideration – the fact she is a woman – into account when determining her salary.  The causation element must be proven, in other words, she must prove that the reason her salary is lower is because she is a woman.  As has been mentioned, the Equal Pay Act is not based on causation.  Therefore, there may be instances in which liability exists under the Equal Pay Act, but not the Equal Job Opportunities Act.  In those instances in which a difference in salary between male and female employees is established, but it cannot be proven that the employees’ gender was the cause, or one of the causes, influencing the difference in pay, there will be liability pursuant to the Equal Pay Act, but not necessarily under the Equal Job Opportunities Act.  This would explain why the Equal Pay Act was enacted in 1996, despite the fact that the Equal Job Opportunities Act, which also prohibits discrimination with regards to wages, had already been in effect for almost a decade (1988). 

Rabin-Margaliot, “Market Explanations” at 504 - 05. 

            Furthermore, the more significant the difference in pay between a male and a female employee, the more significant the burden of proof upon the employer to show that the employee’s gender was not a consideration in determining what to pay her, and that the only reason for her lower salary is because she asked for a lower one during salary negotiations.  In other words, employee differences in bargaining power may explain differences in salary; however, the more significant the difference, the more difficult it will be for the employer to prove that the difference is wholly based on the employees’ bargaining power and not even partially based on a consideration prohibited by Section 2(a) of the Equal Job Opportunities Act.  Additionally, because the Petitioner did not provide evidence to its effect in the district labor court, I should note that I am not answering the question of whether the practice of salary negotiation is one that (indirectly) discriminates against women. 

25.       In this case, due to the significant difference in salary between the Petitioner and Mor, the claim that the Petitioner asked for a much lower salary is not good enough of a claim on the part of the Respondent to meet his burden establishing that the Petitioner’s gender was not taken into account when deciding how much to pay her.  When there is a 35% difference in salary between a male and female employee performing the same task and the Respondent cannot provide a relevant consideration justifying the pay difference, the claim that there was a difference in their respective salary requests is not strong enough to absolve the employer under the Equal Job Opportunities Act.  Proving this claim without any other evidence on the part of the employer is not enough to rebut the presumption that the Petitioner’s gender was taken into account when deciding her salary. 

Additionally, as the district labor court held, the fact that the Respondent does not have a policy which results in discrimination is a consideration that can be taken into account when determining the amount of damages to be awarded under the Equal Job Opportunities Act.  However, this has no bearing on the proof of the claim itself, once we have determined that the plaintiff’s salary is to be measured against the employees working at her branch and not the general pool of employees working for the Respondent. 

26.       Therefore, we rule in favor of the Petitioner, and overturn the decision of the National Labor Court.  The Petitioner has a valid claim under the Equal Job Opportunities Act in light of the gender discrimination and the Respondent’s failure to meet his burden of proof.  Additionally, any obligation the Petitioner may have to return the compensation she received from the Respondent under the Equal Pay Act is void. However, I would not award any damages to the Petitioner under the Equal Job Opportunities Act, due to her delay in filing her petition and her attorney's request that the determination of damages that the Petitioner may be entitled to be  left to the discretion of this Court.  Also, I see no reason to take a position regarding the damages she was awarded by the district labor court.  This means that the Petitioner’s reliance on the decision of the National Labor Court means that the Respondent need not compensate her under the Equal Job Opportunities Act.  Thus, any obligation the Respondent may have towards the Petitioner under the Equal Job Opportunities Act is void. 

Finally, because of the delay in filing her petition, we will not award any costs or attorney’s fees to the Petitioner. 

The President (Ret.)

 

Justice I. Amit

I concur and would like to add the following:

1.         The decision of the National Labor Court is not appealable and can only be reviewed by this Court as a petition to the High Court of Justice, similar to a petition regarding the decision of a Rabbinical Court.  Since this case involves a petition and not an appeal, the Respondent cannot claim that the plaintiff’s delay in filing makes the decision of the National Labor Court absolute barring the High Court of Justice from hearing the case.  However, because filing a petition is the only remedy available, someone requesting that the decision of the National Labor Court be reviewed should do so soon after the decision is handed down.  The extensive case law behind the issue of dismissal for claims not immediately filed, some of which were quoted by President Beinisch in paragraph 10 of her opinion, deal with administrative decisions, while this case involves a judicial decision.  (As a side point, the distinction between different types of decisions is covered in Section 15(d) of the Basic Law: The Judiciary.  Section 15(d)(2) authorizes the High Court of Justice to issue orders to authorities and public officials, Section 15(d)(3) authorizes the Court to issue orders to other courts, tribunals and other bodies and individuals who act out of judicial or quasi-judicial authority.  Section 15(d)(4) authorizes the Court to issue orders to religious courts.)  As a general rule, I believe that this Court should show restraint when so much time has passed from the time of the original decision in another court.  This Court should exercise its power of review only in rare situations such as where it is discovered, after the fact, that the decision of the National Labor Court has broad ramifications unforeseen at the time of the decision, or where there is a strong public interest justifying a hearing despite the time lapse.  See HCJ 3514/07 Mivatchim Mossad LiBituach Sociali Shel Ovdim Ltd. v. Feurst [May 13, 2012] at Para. 28 (unpublished).  I should add that this case should not be viewed as precedentially groundbreaking.

2.         Regarding the main issue of this case, I agree with my colleague that a successful claim under the Equal Pay Act will not necessarily be successful under the Equal Job Opportunities Act.  This can also be inferred from the language of Section 6(a) of the Equal Pay Act:

Section 2 does not prohibit a difference in salary or other compensation stemming from the nature of the work involved, including quality of work, seniority, training or education, or geographical location of the workplace, so long as there is no discrimination on the basis of gender (emphasis added – I. A.).  

            It is not enough for the employer to provide a relevant justification for the difference in salary; we must examine the justification provided to ensure that the justification is not a cover for gender discrimination. Similarly, if the employer cannot justify the difference in pay, it does not necessarily mean that the difference is due to gender discrimination.  The issue of discrimination is to be examined within the framework of the Equal Job Opportunities Act and not the Equal Pay Act. 

            In short – the plain language of the laws themselves, the difference in how the claims are defined by the respective laws, the different purposes of the laws, the need for establishing causation under the Equal Job Opportunities Act, the different remedies provided, and the need for the Equal Pay Act to be enacted after the Equal Job Opportunities Act was already in effect, despite the fact that not compensating two employees equally can lead to claim of illegal discrimination in “work conditions” –  all point to the conclusion reached by my colleague. 

3.         As mentioned in Section 6(a), an employer can justify a pay difference based on the nature of the task being performed; however, pre-employment salary negotiations are not included in this exception.  See Rabin-Margaliot, “Market Explanations” at 503.<<this is the format for imbedded citations in English>>  Women ask for lower salaries for different reasons, some of which perpetuate the reality in the workplace and stereotyping for which the Equal Pay Act was put in place in order to fix.  Expanding the list of justifications listed in Section 6(a) by recognizing the negotiating patterns of the employer and his freedom to contract as additional justifications for pay differences between men and women is not evident in the plain language of the law and can lead to an incorrect interpretation of the law.  In other words, in Section 6(a) the legislature formulates a balance in the form of a limited list of justifications involving the nature of the job in question.  Expanding this list may cause a law meant to protect equally to widen the gap between men and women or lend legal legitimacy to discriminatory practices. Cf. Guy Mundlek, Are Anti-Discrimination Laws Doing Their Job? in Is The Law Important? A Series of Books in Memory of Haim Y. Zadok, 223, 228 (2010)). 

4.         This case illustrates the lack of overlap between the two laws and why a successful claim under the Equal Pay Act does not necessarily mean there is an automatic claim under the Equal Job Opportunities Act.  While the different wage demands of the Petitioner and Steven Mor do not constitute a justification under Section 6(a) of the Equal Pay Act, it does not fall into the realm of wrongful discrimination under Section 2(a) of the Equal Job Opportunities Act, because the pay difference does not stem from the gender of the two workers, but from the different wage demands.  I should also note that the Equal Job Opportunities Act requirement to prove causation makes it harder on the plaintiff, which is the advantage of the Equal Pay Act in this case.    

Justice Amit

 

Justice N. Hendel

I agree with the impressive ruling and overall reasoning of my colleague, President D. Beinisch.  I would like to strengthen the conclusion that the disparity in bargaining power among employees cannot justify the difference in pay, especially where the disparity is so significant. The radical feminist approach provides further support for our conclusion. This approach determines the status of women in the workplace based on their relative strength  in a gender biased society.  This approach does not focus solely on women who have made it to the top of the social ladder; it  emphasizes the difficulty of all women, especially those far down from the top of the social or economic pyramid –..  According to this approach, the number of female CEOs and Knesset members may blind us, although not deliberately, from the more subtle forms of gender discrimination.  As my colleague the President noted, due to the 35% difference in pay, the fact that the Petitioner was willing to work for a lower salary does not prove that she did not experience inequality.  However, this fact reflects the relative bargaining positions of the Petitioner and the employer, and mainly the Petitioner’s bargaining position vis a vis other male employees.  According to the radical feminist approach, the reason she requested a relatively low salary is a result of the social debasement of women with regards to their professional aspirations and stature in the labor market.  Catherine MacKinnon, “Reflections on Sex Equality under Law,” 100 Yale L.J. 1281, 1298 (1991);  see also Heidi Hartmann, Capitalism, Patriarchy, and Job Segregation by Sex, 1 Signs 137, 167 – 68 (1976)).  As Prof. Catharine MacKinnon, one of the prominent advocates identified with the radical feminist movement, states:

In money economies, income means survival; its treasure and resources also contribute to freedom, human flourishing, enjoyment of life's possibilities. From a social standpoint, income also provides an index of relative social worth…

Without pay equity, sex equality means little in capitalist societies in an increasingly capitalist world. Catherine MacKinnon, Sex Equality 178 (2007).

            In other words, income in market economies is equal to survival, freedom, personal prosperity and the ability to enjoy the range of possibilities that life offers.  Without equal pay, gender equality loses its meaning in an increasing capitalistic world.  For many of us, income is a measure of social status.  Even those who disagree with this assertion will agree that job security and level of income are connected to and certainly affect human dignity. 

           

Additionally, relative bargaining power not only highlights the differences between men and women, but also that of other protected classes in society.

           

In this case, it was proven that an employee, performing the same task as the Petitioner for the same employer, received a higher salary with no relevant justification.  It seems that my colleague, the President, has adopted a balanced solution based on existing legislation.    The Petitioner must prove that she was discriminated against “because of” her gender.  Shifting the burden of proof onto the Respondent to establish that he did not take into account any wrongful considerations – in this case, gender – when deciding how much to compensate her, provides the employer with an “equal opportunity” to disprove the allegation.  It is within the ability of the employer, in terms of his position and power, to show that he did not take into account any wrongful considerations when determining wages.  In this case, the Respondent did not produce evidence proving its justification that it is the store’s policy to determine salaries based on the salary expectations of the employees.  The Respondent, therefore, did not meet his burden of proof.  In this sense, the law creates an overlap between the evidentiary standard and the substantive law under the Equal Job Opportunities Act.  The burden shifting requirement pursuant to Section 9(a) of the Equal Job Opportunities Act fits well within the imbalance of power between the employee-claimant and the employer who must prove the absence of discrimination. 

Justice Neal Hendel

 

Decided as per the opinion of President D. Beinisch (Ret.)

25 Iyyar 5772 (17 May 2012)          

 

 

H.C. 104/87

Dr. Naomi Nevo

v.

1. National Labour Court

2. Jewish Agency for Israel

3. Jewish Agency National Staff Committee

4. Union of Office Workers - Central Committee

 

 

In the Supreme Court sitting as High Court of Justice

[October 22, 1990 ]

Before: Bach J., Netanyahu J. and Ariel J.

 

Editor's Summary

 

                Petitioner, Dr. Naomi Nevo, was employed for many years by the Jewish Agency for Israel as a sociologist. On reaching the age of 60, she received a notice from her employers that she was to retire on pension, in accordance with the provision in the Pension Rules relating to Jewish Agency employees. This stated that the retirement age for men was 65 and for women 60.

               

                Petitioner brought an action in the Regional Labour Court asking for a declaration that the above provision was void as being discriminatory. Her action was dismissed and so was her appeal to the National labour Court. Hence, her petition to the High Court of Justice against the National Labour Court and against her employers, the staff committee and the union of office workers.

               

                In allowing the petition and making absolute the order nisi against the respondents, the Court held as follows:

               

1.       In accordance with a well-established criterion, as laid down in case law, discrimination is present wherever the principle of equality is infringed, i.e., where persons are treated differently even where there is no relevant difference between them. Accordingly, the distinction between men and women in respect of retirement age in the provision in question must be examined to determine whether it is "relevant", i.e., whether it serves any legitimate purpose.

 

          The submission of counsel for the Jewish Agency that the provision for early retirement of women conferred benefits on them, enabling them to receive pension monies earlier and taking into account the extra burden that they had to undergo over the years as wives and mothers, was not acceptable. Nor was it relevant that, as submitted, many women were satisfied with the arrangement for early retirement.

 

On the contrary, the differentiation in ages of retirement for men and women amounted to discrimination, for the following reasons:

 

a)      the age differential was irrelevant in the context of alleviation from the burden of work, there being no difference between men and women in this respect;

b)      earlier retirement for women has a number of negative social, personal and economic implications. Inter alia, early retirement may curtail a promising career and entail a lower pension payment then if the woman were allowed to continue to work for a further 5 years;

c)       there is no justification in compelling a woman who reaches 60 years of age to retire, since at that age she is relieved of much of the domestic responsibilities which made her working life more difficult in earlier years. On the other hand, allowing a woman the option to retire at 60 is acceptable;

d)      in 1987, the statute known as the Male and Female Workers (Equal Retirement Age) Law was enacted by the Knesset. This statute came into force subsequent to the judgment of the National Labour Court in the present case and after the instant petition had been submitted to the High Court. Nevertheless, from the wording of the statute and the explanatory notes to the bill that preceded it, it is clear that the legislator regarded earlier compulsory retirement for women as being discriminatory;

e)       an examination of the jurisprudence of the Court of the European Community, as well as of English case law, shows that those jurisdictions also regard differentiation in retirement age as constituting discrimination.   Moreover, it is stressed in the English cases that intention or motive to discriminate does not have to be proved - suffice it for discrimination to exist in fact.

 

Nor is there any basis in the contention that early retirement for women assists in renewing the labour force and alleviating unemployment. There is no reason why women should suffer more than men for these reasons.

 

2.       With regard to the statutory position prior to the 1987 statute, a number of provision did include a differentiation between men and women as to retirement age - as for example several sections in the National Insurance Law, the securing of Income Law, 1980 and the Severance Pay Law, 1963. On the other hand, labour legislation prior to 1987 which required equality between the sexes contained no reference to retirement age. Nevertheless, in interpreting the relevant provision in this case, the basic presumption in favour of equality and against discrimination must be applied, in accordance with the provision of section 1 of the Women's Equal Rights Law, 1951 which prohibits discrimination against women in respect of any legal act.

 

3.       The 1987 statute does not operate retroactively. However, it should not be inferred from this that therefore in the period prior to its enactment differentiation in retirement age between men and women was permissible. At any rate, contrary to the respondents' contention, the statute certainly does not deprive the petitioner of her right to postpone her retirement until the age of retirement for men.

 

4.       The High Court of Justice can justifiably intervene in the decision of the Labour Court in this case, in view of the substantial legal error in that decision and because justice requires such intervention.

 

5.       This is one of the exceptional cases where a court is justified in intervening in the content of a labour agreement for reasons of public policy, in view of the discriminatory provision which affects the rights of women.

 

6.       In view of the above, the Court must act to annul the affect of the discrimination by declaring that the offending provision in the Jewish Agency Pension Rules is totally void.

 

 

Israel Supreme Court Cases Cited:

 

[l]         F.H. 10/69 Boronowski v. Chief Rabbis of Israel, 25(1) P.D. 7.

[2]        Cr. A. 112/50 Yosifoff v. Attorney General, 5 P.D. 481.

[3]        Cr. A. 5/51 Steinberg v. Attorney General, 5 P.D. 1061.

[4]   H.C. 30/55, Committee for Preservation of Requisitioned land in Nazareth v. Minister of Finance, 9 P.D. 1261.

[5]        H.C. 953/87, 1/88, Poraz v. Mayor of Tel Aviv-Yafo, 42(2) P.D. 309.

[6]   H.C. 85/89 Beit Herut Workers Cooperative for Agricultural Settlement Ltd. v. GIazmann, 41(3) P.D. 526.

[7]        H.C. 98/69, Bergmann v. Minister of Finance 23(1) P.D. 693.

[8]        H.C. 153/87 Shakdiel v. Minister for Religious Affairs, 42(2) P.D. 221.

[9]        C.A. 337 337/61 Lubinski v. Assessment Officer, Tel Aviv, 16 P.D. 403.

[10] M.A. 166/84 (H.C. 780/83) Central Yeshiva 'Tomchei Tmimim' v.State of Israel, 38(2) P.D. 273.

[11]      H.C. 363/87 Yehuda v. Rosh Ha'ayin Local Council, 41(3) P.D. 755.

[12]      H.C. 525/84 Hatib v. National Labour Court, 40(1) P.D. 673.

[13]      H.C. 410/76 Herut v. National Labour Court, 31(3) P.D. 124.

[14] H.C. 105/87 Hebrew University of Jerusalem v. National Labour Court, 42(3) P.D. 557.

 

Israel Labour Courts Cases Cited:

 

[15]      N.L.C.H. 45/13-117 Air Services Ltd. v. Sela, 17 P.D.A. 284.

[16]      N.L.C.H. 47/2-11 'Paz'Oil Company Ltd. v. Yom-Tov, 19 P.D.A. 164.

[17]      N.L.C.H. 33/3-25 Air Stewards Staff Committee v. Hazin, 4 P.D.A. 365.

[18] N.L.C.H. 35/4-8 Israel Ports Authority v. Executive Committee of the Histadrut, 7 P.D.A. 143.

 

English Cases Cited:

 

[19]      Reg. v. Birmingham C.C. Equal Opportunities Commissions,[1989] A.C. 155 (H.L.).

[20]      James v. Eastleigh B.C. [1990] 2 All E.R. 607 (H.L.).

 

International Cases Cited:

 

[21]      Marshall v. Southampton AHA [1986] 2 All E.R. 584 (C.J.E.C.)

[22]      Defrenne v. Belgium [1974] C.M.L.R. 494.

 

 

A. Feldman, F. Raday - for the Petitioner;

H. Bar-Sadeh - for Respondent Number 2.

 

 

JUDGMENT

 

BACH J,: 1. Dr. Naomi Nevo (hereinafter: the Petitioner) was employed by the Jewish Agency for Israel, which is Respondent Number 2 (hereinafter: the Respondent), as a senior sociologist as from July 1, 1962, and as Director of Sociology in the Settlement Department as from August 1, 1983. The terms of employment of Respondent's employees, including the Petitioner, are set forth in the Jewish Agency Employees' Terms of Employment of February 1966 (hereinafter: Terms of Employment), which is derived from an agreement between the executive of the Respondent in the one hand and the Central Committee of the Union of office Worker's in Israel together with the Jewish Agency for Israel Staff Committee on the other hand. The Terms of Employment covers the Jewish Agency    Staff Pension Rules of August 1, 1953 as well, which set forth the retirement arrangements for Respondent's employees.

 

            In paragraph 6 of the Pension Rules (hereinafter: Paragraph 6) it is stated:

           

"The age for retirement on pension is 65 for a man and 60 for a woman".

           

            In accordance with this paragraph, the Petitioner was notified that she must retire from work on February 1, 1985, the date on which she would reach 60 years of age.

           

            The Petitioner viewed the aforementioned Paragraph 6 as a discriminatory provision. She applied to the Regional Labour Court in Tel Aviv requesting that it declare that the Paragraph discriminates in an invalid and prohibited manner, and that it order the Respondent to continue to employ Petitioner until age 65, or alternatively, compensate her for the losses suffered as a result of her retirement at age 60.

           

            Petitioner's employment by Respondent continued beyond age 60, following Respondent's agreement to delay Petitioner's retire­ment until the Regional Labour Court rendered its decision; however, on November 27, 1985, when the Regional Labour Court gave its decision dismissing Petitioner's complaint, her employment was terminated. The Petitioner appealed the Regional Labour Court's judgment to the National Labour Court. That Court, sitting in a seven-judge panel, dismissed the appeal by a majority and held that setting a different retirement age for men and women does not constitute invalid discrimination. Two members of the court expressed the contrary opinion in a dissenting opinion. The petition before us is to annul the majority's decision.

           

            2. The following are the focal points of the dispute in this petition:

           

            a. Does setting different retirement ages for men and women constitute discrimination?

           

            b. How should legislative intent regarding retirement age be interpreted when various social welfare enactments concerning retirement rights distinguish between men and women?

           

            c. What is the impact of the enactment of the Male and Female Workers (Equal Retirement Age) Law, 5747-1987, on this petition?

           

            d. Is it proper for a judicial forum to intervene in the labour agreement which is the subject of this petition?

           

            e. Should the High Court of Justice interfere with the Labour Court's decision in this case?

           

            f. What is the appropriate relief?

           

            We will deal with these issues respectively.

           

            A. Does Setting Different Retirement Ages For Men And Women Constitute Discrimination?

           

            3. When we are called upon to address a claim of invalid discrimination, it is appropriate that we be guided by the words of President Agranat, in F. H. 10/69[1], at page 35, when he addressed the question of when a distinction is discriminatory:

           

"One must always distinguish... between invalid discrimi­nation (hereinafter: discrimination) and a permitted distinction. The principle of equality, which is simply the other side of the coin from discrimination, and which the law of every democratic country strives, for reasons of justice and fairness, to realize, means that, as to the object concerned in hand, it is necessary to treat equally people between whom there are no substantial differences which are relevant to their object. If they are not treated equally, then we are confronted with discrimination. In contrast, if the difference or differences between various  people are relevant to the object in hand, then treating them differently as required by such object will be a permitted distinction, so long as the differences justify this".

 

            Similar statements have been made in numerous cases, including: [2] Cr.A. 112/50, at page 490; [3] Cr.A. 5/51, at page 1068; and [3] H.C. 30/55, at page 1265.

           

            Accordingly, in order to ascertain whether Paragraph 6 is discriminatory, we must examine it in light of the following question: in the instant case, is there a legitimate purpose, as to the realization of which the distinction between the genders is relevant?

           

            There are two purposes in setting a mandatory retirement age for older employees, neither of which can, at prima facie, be invalidated:

           

            A. To enable the employee to rest, in his old age, from his daily toil;

           

            B. To allow the employer to revitalize the ranks of his employees and hire new, younger manpower, to replace those who retire.

           

            Is the distinction between the genders as to retirement age relevant to the realization of these two goals?

           

            4. Learned counsel for Respondent argues that Paragraph 6 constitutes a privilege, in that in practice it confers a benefit upon women. In his opinion, the paragraph also advances the cause of equality between the genders in that it makes things easier for women, since earlier retirement age reduces the extra burden on women, engendered by the fact that the working woman is also a mother and wife. According to his argument, alongside the obligation of retiring at age 60 the privilege of receiving pension payments must be reckoned with. He adds that in his opinion (which he bases on an affidavit submitted by a female employee), many women are content with this arrangement, and many even ask to advance their retirement date immediately upon becoming eligible for full pension benefits.

 

            5. I am not persuaded by these reasons, nor by their cumulative weight, and I have reached the conclusion that the aforesaid distinction does indeed constitute discrimination.

           

            The reasoning underlying my conclusion follows, and is based in part on the arguments of learned counsel for Petitioner:

           

            A. The distinction is completely irrelevant to the alleviation of burdens. There is no support whatsoever for the proposition that as a rule women, more than men, require alleviation of burdens upon reaching the age of 60. It appears that it is precisely when male and female employees reach this age that the need for the distinction is totally eliminated. The fact that life expectancy for women is higher than that for men perhaps even points to the opposite conclusion.

           

            B. Earlier retirement does not constitute a positive advantage, but on the contrary has many negative consequences:

           

            (l) Retirement from work has many negative personal, mental and social consequences. Frequently, a person who retires from his employment because of his advancing age feels that he is no longer a participant in the productive sector of society. He feels that he has been deprived of the satisfaction of working and receiving compen­sation for his labour. This feeling is also strengthened by society's attitude, which in many cases treats him as an "old man" who no longer serves any useful purpose. The situation is more acute in our day, where average life expectancy has increased and people remain healthy even at an advanced age. For this reason, the number of years have increased in which an older person, of sound body and mind, is forced, despite his capabilities, to leave his activities in the labour market and gaze, frequently in frustration, on the progression the accordingly of life's activities in which he can no longer take part.

           

            (2) Imposing an earlier retirement age on women also has negative economic consequences:

 

            (a) A woman who has not worked sufficient years to be eligible for full pension benefits loses 5 years in amassing these benefits. This is the Petitioner's situation, where at the age of 60 she had accrued a pension rate of 55.3% of the salary determinative for pension purposes; whereas were she allowed to retire at age 65, the aforementioned rate would increase to approximately 69.3%.

           

            (b) Women lose five years of salary. A full salary with benefits is much higher than a pension payment.

           

            (c) Frequently, it is precisely at the end of a person's working years that he reaches the height of his career, and also his highest salary. Loss from early retirement arises both from loss of the higher salary itself, and from the fact that the pension allowance - calculated as a percentage of salary at the time of retirement - is lower.

           

            (3) In Positions requiring lengthy academic training, such as that of the Petitioner, entry into the labour market generally occurs at a relatively late age. For the employee to utilize his full potential for advancement, he needs to take advantage of working years later in life.

           

            The problems of extracting the full potential for advancement is particularly acute in the case of women. Many women cannot devote the bulk of their energies to work during the period when they are bearing and raising their children. As a result they lose many years necessary for career advancement. The early retirement requirement is therefore likely to harm women in particular.

           

            (4) Earlier retirement age is also likely to have consequences on career progress in the period preceding retirement. This is because of the employer's tendency to prefer advancement of an employee with a later retirement date.

           

            Let us illustrate this with a practical example: a position of department head becomes vacant in a particular office, and two of his deputies are competing for the same position. Let us assume that both of them have equal experience and similar qualifications, and they are both 58 years old. However, one of the candidates is a woman and the other a man. Undoubtedly, the man in this case will have a conspicuous advantage given that the members of the selection committee know that if he is chosen he will be able to fulfil his position over the course of 7 years, until retirement age, whereas the woman will have to retire after two years, namely, shortly after "learning the ropes" in the new position.

 

            C. It is difficult to appreciate the conceptual reason for this discrimination, particularly when it operates at the age of 60. It is possible to understand and justify a certain difference in approach to employment conditions of men and women at earlier stages of life. During the years when a woman is fulfilling her role as a mother to small children, she is entitled to consideration, primarily regarding hours of employment and vacations, and not requiring has to carry out tasks involving particular physical exertion. However, when a woman reaches the age of 60, and her children in most cases have already left their parents home and established independent lives of their own, it is precisely at this moment that the woman, if she is interested, is able to make more available devote more time to work. To force her, because she is a woman, to retire from her work at this stage of her life and abandon the realization of her hopes in this area is indeed discrimination, which under modern conditions of life seems unjustified, unreasonable, and unacceptable.

           

            I do not find fault with giving women the option to retire; this is likely to be to the advantage of all concerned. But there is no justification for the arrangement whereby the woman is obligated to retire, while a man employed in the same job and at an identical age, is entitled to continue working.

 

            D. The fact that creating a gap between the mandatory retirement age for women and the corresponding age for men constitutes unjustified discrimination has in fact also now been recognized by the legislature also with the enactment of the Male and Female Workers (Equal Retirement Age) Law on March 17, 1987 (hereinafter: Retirement Age Law).

           

            The term "retirement age" is defined as follows in section I of this Law:

           

'"Retirement age' means the age on attaining which a male or female worker must retire from employment in accordance with the provisions of a collective agree­ment applying to him or her".

           

            Following this is section 2 of the Law, which states:

 

"When a collective agreement prescribes for a female worker a retirement age lower than that prescribed therein for a male worker, then, notwithstanding anything provided in that collective agreement, the female worker shall have the right to retire from employment at any age between her retirement age and the retirement age prescribed for a male worker".

 

            In the explanatory notes accompanying the Male and Female Workers (Equal Retirement Age) Bill, 5747-1987, it is made clear that the purpose of the law is to eradicate the unjust discrimination between the sexes in this area. And it is stated therein, at page 106:

           

"The retirement age currently provided in collective agreements creates discrimination between men and women in that a female employee is forced to retire in most cases five years before the retirement age for male employees.

 

The requirement that she retire earlier directly harms her potential for advancement at work, the salary she receives, and her ability to accumulate pension rights. The aim of the bill is to eliminate the existing discrimina­tion in this matter and prescribe the same retirement age for male and female employees".

 

            Arguably, the legislature in this Law allows for a certain disparity between the sexes and in this mistural creates a certain discrimination to the man's detriment, in that women are granted the option of earlier retirement, which is not granted to men. But this argument is only superficially logical. The primary purpose of this law is indeed to eliminate discrimination in the mandatory retirement age gap, but this fact is not contradicted by the legislature's desire not to deprive women of the right to earlier retirement, to which they are entitled under a collective agreement.

           

            The matter is explained thus at the end of the aforementioned explanatory notes to the bill, where it is stated:

           

"Nevertheless, it is proposed to allow the female employee, to the extent she so desires, to preserve her             right to retire from employment before the uniform retirement age, if she has such a right under the collective agreement applicable to her".

 

            The aforementioned Law was passed by the Knesset after the National Labour Court had handed down its decision in this case and after the instant petition was filed. Since it is not stated that the Law has retroactive effect, it does not apply to Petitioner's case. However, it is certainly possible to learn from that Law, and from the reasoning in the explanatory notes to the bill, that the above-mentioned distinction between men and women in a collective agreement constitutes invalid discrimination.

           

            E. The principle that a gap between the mandatory retirement age for men and women constitutes invalid discrimination has been recognized in international case law as well. An instructive and leading example of this can be found in the decision of the Court of Justice of the European Communities in the matter of Marshall v. Southampton AHA (1986)[21].

           

            This decision dealt with the appeal of an English woman who had served as senior officer in a public institution and whose employment was terminated the age of 62, against her will, for the sole reason that she was a woman and the retirement age for women was 60, as opposed to the corresponding age of 65 for men. The woman appealed to the court of the European community and argued that terminating her employment constituted gender discrimination, and that it was, inter alia, a breach of EC Council Directive 76/ 207.

           

            These provisions include at the outset general guidance, which states:

 

"Equal treatment for male and female workers consti­tutes one of the objectives of the Community, in so far as the harmonization of living and working conditions while maintaining their improvement are inter alia furthered" (ibid. [21], at 588).

 

            Within the framework of this general guidance, and with a view to its realization, Article 5 of the Directive states:

           

"1. Application of the principle of equal treatment with regard to working conditions, including the conditions governing dismissal, means that men and women shall be guaranteed the same conditions without discrimi­nation on grounds of sex.

 

2. To this end, member states shall take the measures necessary to ensure that ... (b) any provisions contrary to the principle of equal treatment which are included in collective agreements, individual contracts of employ­ment, internal rules of undertakings or in rules governing the independent occupations and professions shall be, or may be declared, null and void or may be amended..."(ibid. [21] at 589).

 

            And after an exacting analysis of all the relevant arguments, the court reaches at the following conclusion:

           

"...for an employer to dismiss a woman employee after she has passed her sixtieth birthday pursuant to a policy of retiring men at the age of 65 and women at the age of 60 and on the grounds only that she is a woman who has passed the said age of 60 is an act of discrimination prohibited by art 5(1) of Directive 76/207" (ibid., at 591).

 

            6. No doubt it is highly likely that many women are satisfied with the existing situation, and they view the possibility of early retirement on pension as constituting a right. However, as noted above, this right is secured by the option to retire on pension at age 60, and the desire to grant this right does not require or justify forcing the woman to retire at that age even against her will.

           

            7. Respondent's arguments and the Labour Courts' holdings emphasized that the motivation for including Paragraph 6 in the Pension Rules and including a similar paragraph in other collective agreements was not to discriminate against women, but, to the contrary, to alleviate their position.

           

            I am prepared to assume that Petitioner's employer did not intend to discriminate against her and the other female employees when it signed the Labor Constitution. However, the Respondent's intentions are not conclusive as to the question that we are called upon to determine, because the test for assessing the existence or nonexistence of discrimination is objective and not subjective. The motive for creating a distinction between men and women is not determinative in the matter addressed, and for the purposes of determining the existence of discrimination, it is necessary to examine the final outcome as it appears in social reality.

           

            English case law concerning gender discrimination has been decided in a similar spirit. In the House of Lords decision in the appeal of Reg. v. Birmingham C.C. Ex p. Equal Opportunities Commission (1989) [19], the question of whether arrangements, which resulted in the situation that girls needed better marks than boys to be accepted for certain schools, constituted invalid discrimination.

           

            Lord Goff held in this case, at page 1194, as follows:

           

"There is discrimination under the statute if there is less favourable treatment on the ground of sex, in other words if the relevant girl or girls would have received the same treatment as the boys but for their sex. The intention or motive of the defendant to discriminate, though it may be relevant so far as remedies are concerned ... is not a necessary condition of liability; it is perfectly possible to envisage cases where the defendant had no such motive, and yet did in fact discriminate on the ground of sex".

 

            An even more far-reaching decision, only recently handed down by the House of Lords in England - James v. Eastleigh B. C. (1990) [20] - addressed the complaint of a 61 year old man against the local council. The man complained about the fact that he was charged an entrance fee to a public swimming pool, while at the same time, his wife, who was the same age, entered the pool without charge. The difference arose from the fact that the wife was on pension, while the plaintiff would be entitled to free entrance as a retiree on pension only at the age of 65. The House of Lords found that this distinction constituted discrimination against the man on the basis of his sex. I see no need to comment on the result reached by the House of Lords in this case. However, I wish to rely upon the following principle, set forth in the decision at page 612, as follows:

 

"The council in this case had the best of motives for discriminating as they did. They wished to benefit 'those whose resources were likely to have been reduced by retirement' and 'to aid the need [sic], whether male or female'. The criterion of pensionable age was a convenient one to apply because it was readily verified by possession of pension book or a bus pass. But the purity of the discriminator's subjective motive, intention or reason for discriminating cannot save the criterion applied from the objective taint of discrimination on the ground of sex".

 

            8. As to the second purpose in setting a compulsory retirement age, i.e., in order to replenish the ranks of the employees, I do not see that it is in any way relevant to distinguishing between the sexes. The Manufacturers' Association of Israel, which was requested by the National Labour Court to express its opinion in the appeal, claimed that acceptance of the appeal is contrary to the best interests of the national economy because of the unemployment problem. It is difficult to understand why it is necessary to sacrifice particularly the female public in order to achieve this important purpose. In my opinion, it is best that we ignore this rationale.

           

            Consequently, from this perspective as well there is no reason to compel women to retire on pension at an earlier age, so that here again it is obvious that the discrimination is invalid.

 

            9. Discrimination is a menace which engenders a feeling of deprivation and frustration. It impairs both the sense of belonging and positive motivation to participate in the life of society and contribute to it. A society in which discrimination is practiced is an unhealthy one, and a state in which discrimination is practiced cannot be regarded as properly governed. It is worth noting in this regard the words of my colleague Justice Barak, in H.C. 953/87, 1/88 [5], at page 332:

 

"...there is no more destructive force in society than the sense among its members that they are subject to different Standards. The sense of inequality is one of the most oppressive feelings. It harms the forces which unite society. It harms man's self-image".

 

            It appears that there is not always sufficient vigilance regarding discrimination when it works against women. As to this matter, see for example the facts which formed the background for C.A. 89/85 [6], at page 531.

 

            Let us assume, hypothetically, that the early retirement age were to apply to the members of a particular community, for the reason that that community prefers to remain within the family circle and regard participation in the labour market as secondary, and that compulsory retirement constitutes special protection for them because of the great burden they bore during their early years. I have no doubt whatsoever that a generalization of this type, and the resultant determination, would be immediately portrayed as blatant discrimination. Certainly I would in no way need to enumerate the general negative consequences of this distinction to support the determination that we have here is invalid discrimination.

           

            When a court encounters a distinction between groups, it must scrutinize closely whether this distinction is based on stereotyped general perceptions, which are based on nothing but prejudice.

           

            Upholding the discriminatory retirement age distinction between men and women may reinforce the view that women cannot be equal in the labor market, and in practice this may impair equality of opportunity for women.

           

            I find the above sufficient to determine that Paragraph 6 is a discriminatory paragraph, and accordingly reverse the decision of the majority in the National Labour Court.

           

            However, the labour Court's main line of reasoning in determining that the paragraph is not discriminatory was based on legislation which in its opinion amounted to constitutional approval, direct or indirect, of the distinction between women and men in all matters related to compulsory retirement age.

           

            We will now address this reasoning.

           

            B. How should the legislative intent regarding retirement age be interpreted, in light of the legal situation existing at the time the decisions were given in the Labour Courts?

           

            10. First we shall review the legal situation regarding retirement age, as it was when the Petitioner's matter was addressed by the labour courts, i.e., prior to the enactment of the Retirement Age Law.

           

            In legislation expressly providing for retirement age for employees, no distinction whatsoever was made between the sexes. Thus, in paragraph 18(a) of the State Service (Benefits) Law [Consolidated Version], 5730-1970, a uniform retirement age of 65 was set for all employees in the civil service; in paragraph 18(a)(l) of the Courts Law [Consolidated Version], 5744-1984, the retirement age for judges was set at 70 with no distinction between the sexes; and in paragraph 13 of the Israel Defence Forces (Permanent Service) (Benefits) Law [Consolidated Version], 5745-1985, the uniform retirement age was set at 40.

           

            On the other hand, in the social welfare legislation a distinction is made between the sexes as to the age at which entitlements to various benefits begins or ends: the age of 65 for men and 60 for women. In the National Insurance Law [Consolidated Version], 5728-1968, this distinction is repeated several times: Section 12 (a) regarding qualification for old-age pension, section 127C(a) regarding entitlement to unemployment allowance, section 127U regarding entitlement to general invalidity insurance, section 127Y(c) regarding non-cessation of invalids' entitlement to special services, section 127AP regarding entitlement to vocational rehabilitation and section 127AU(a)(1) regarding entitlement to vocational training. In section 2(a)(4) of the Assurance of Income Law 5741-1980, the distinction exists regarding entitlement to assurance of income, and in section 7A of the Invalids (Pensions and Rehabilitation) Law [Consolidated Version], 5719-1959, regarding entitlement to pension supplements. This is also the case in section 33A of the Fallen Soldiers' Families (Pensions and Rehabilitation) Law, 5710-1950, regarding the obligation of an employer to continue to employ a worker beyond retirement age, and in section 11(e) of the Severance Pay Law, 5723-1963, regarding dismissals beyond the age of 60 in the case of a woman, and 65 in the case of a man.

 

            There is another reference to the age distinction of 60 for a woman and 65 for a man, not in the area of social welfare legislation, in section 3(a) of the Emergency Labour Service Law, 5727-1967, regarding retirees who are liable to Labour service during emergency situations.

           

            In the legislation which addressed the requirement of equality between the sexes up until the enactment of the Retirement Age Law, retirement age was not cited among the areas in which equality is required. The Male and Female Workers (Equal Pay) Law, 5724-1964, only dealt with pay; section 42(a) of the Employment Service Law, 5719-1959, provides that the Employ­ment Service shall not discriminate between the sexes in referrals to places of employment; the Employment (Equal Opportunities) Law, 5741-1981, dealt solely with equality in acceptance has emplagment and in creational training, and its replacement (which was enacted after the beginning of the litigation in the Petitioner's matter) - the Employment (Equal Opportunities) Law, 5748-1988, provides that an employer shall not discriminate against women in hiring, work conditions, job advancement, training or continuing education and in dismissals or severance pay. Retire­ment age, accordingly, did not fall within the areas in which the legislator expressly required equality.

           

            In those sectors where the legislature did not prescribe a retirement age, the matter was determined in Labour agreements between employees and employers. Regarding Histadrut employees it was provided in 1983 that the retirement age between the sexes would gradually be equalized. Nonetheless, it may be said that as a rule the distinction between the sexes regarding retirement age existed in most of the labour agreements at the time that Petitioner's matter was considered by the labour courts.

 

            11. On the basis of the above, the two labour courts, the regional and the national, held that the distinction between the sexes regarding retirement does not fall within the realm of discrimination.

           

            Their conclusions were three-fold:

 

            a. The legislature regulated the provision of benefits linked to retirement on pension in accordance with the non-uniform retirement age set forth in the relevant labour agreements. Thus the legislature made it clear that it agreed with the distinction provided for in those agreements.

 

            b. The fact that in the laws in which the legislature regulated retirement age, it established a uniform retirement age, indicates that its failure to deal with the retirement age as to other sectors was intentional.

 

            c. In the statutes relating to equality between the sexes (until the Retirement Age Law) there was no reference to retirement age. Hence, the legislature did not view the distinction between the sexes in this matter as amounting to discrimination.

 

            I quote from the opinion of the National Labour Court*:

 

"It is a basic assumption that a distinction in a statute is 'reasonable', and does not contradict public policy or create invalid discrimination, so why should an iden­tical provision in a collective agreement or collective arrangement be viewed as creating invalid discrimination?"

 

            12. Respectfully, I do not accept these conclusions.

 

            I accept the statement of the Labour Court that it is a basic assumption that the legislature does not discriminate. Accordingly, where there is a doubt as to the right interpretation uncertainty, the enactment must be understood in light of that basic assump­tion. That is, that interpretation must be applied which accords with the basic principle of equality and lack of discrimination and with the Women's Equal Rights Law, 5711-1951, which gives legislative force to this basic right, specifically, as to women.

 

            In other words: when a question of interpretation comes before this Court, it is entitled, and even obligated, to uphold the basic freedoms and to interpret the legal issues that come before it in their light. In the words of Justice Landau, in H.C. 98/69 [7], at page 698: "It is... only right - precisely in the borderline cases where a statutory provision can be construed in two ways - that we prefer the construction that upholds the equality of all persons before the law over one that sets it at naught". And as Justice Barak stated in H.C. 153/87 [8], at page 274: "Between two possible interpretations, we must choose that which guarantees equality in the optimal sense, and reject the interpretation that contradicts equality".

           

            Furthermore, the Women's Equal Rights Law states in section 1:

 

"A man and a woman shall have equal status with regard to any legal proceeding; any provision of law which discriminates, with regard to any legal pro­ceeding, against women as women, shall be of no effect".

 

            Retirement from work constitutes a legal proceeding. As a consequence of this act, the status of a person is changing, and his rights and duties are altered (and see Justice Witkon's broad interpretation of the term "legal act" in section 1 of the Women's Equal Rights Law in C.A. 337/61 [9], at page 406). Accordingly, we should not prima facie draw inferences as to the matter before us from statutory provisions which refer to the distinction between men and women in other matters unrelated to retirement age. I would also not assign great weight to the argument that the Women's Equal Rights Law cannot be given special status, and that therefore subsequent enactments may contradict it:

 

"The basic conception is, that in enacting a new statute, it is the legislature itself that must repeal or narrow down the old Statute. If the legislature has not done so, the assumption is that it wanted to give effect to both statutes, simultaneously the other, each according to the scope required by its terms".

 

            So held Justice Barak in H.C. 953/87, 1/88 [5], supra, at page 334, in addressing the meaning of the Jewish. Religious Services Law [Consolidated Version], 5731-1971, as against the Women's Equal Rights Law which preceded it.

           

            This statement is true whenever we consider two statutes which may contradict each other. But in our case we must give even more weight to the Women's Equal Rights Law. This statute reflects an important and fundamental value, a principle which shapes life in our state as a well-ordered state. The Women's Equal Rights Law proclaims a value which should encompass our entire legal system. Accordingly, where a matter which contradicts that statute is not expressly stated, the interpretation of the statute compatible with the principle of equality between the sexes must be preferred.

           

            This statement is all the more true in the case before us, where it is merely sought to draw an inference from other statutes which contradicts the Women's Equal Rights Law.

           

            We will now address the labour courts' reasoning anew, against the background of the principles we outlined above.

           

            It should not be inferred from the legislature's silence regarding labour agreements which create a distinction in retirement age that it intended to approve this discrimination. This also applies to silence on the part of the legislature regarding retirement in statutes relating to women's rights. The fact that the legislature set a uniform age whenever it dealt expressly with retirement age can perhaps be interpreted in two ways, but I think the preferable conclusion is that this fact also points more in the direction of negating sex discrimination in this area.

 

            This is particularly so in light of the enactment of the Retirement Age Law, which clearly takes exception to that discrimination.

           

            Section 12 of the National Insurance Law [Consolidated Version], which sets forth the age of entitlement to old-age pension, is the enactment closest to our issue. This paragraph does obligate a woman to retire at age 60, but rather permits receipt of the pension from this age onwards. The distinction protects women in practice from the creation of a double injustice. For in the existing situation, if the entitlement to old-age pension were determined in an equal manner (that is, starting at age 65), the woman who retires in accordance with labour agreements would suffer a shortfall for 5 years. This paragraph, accordingly, permits the woman to retire safely at age 60, but it does not require this.

           

            It is to be noted and emphasized that the same argument was considered at length in the decision in Marshall [21], supra. There too the authorities relied upon welfare legislation, according to which a woman was eligible for pension at age 60, while a corresponding age of 65 was established for men. It was argued that it should be deduced therefrom that the existence of a gap regarding mandatory retirement age between men and women does not constitute invalid discrimination.

           

            The court rejected this claim, holding, inter alia, at page 599:

           

"... a general policy concerning dismissal involving the dismissal of a woman solely because she has attained the qualifying age for a state pension, which age is different under national legislation for men and for women, constitutes discrimination on grounds of sex. . . ".

 

            Accordingly, it was held that a woman's obligation to retire at age 60 should not be inferred from such legislation.

           

            A similar claim was also raised before the House of Lords in the James [20] decision, supra, and there too it was held that the notion that discrimination is permitted should not be inferred from the existence of various statutes establishing benefits for women from age 60 and for men only from age 65, and in the absence of an express statutory provision permitting as much, discrimination of this nature is forbidden. The decision held at page 613, as follows:

           

"Statutory pensionable age is still used in some other statutory contexts ... as the basis of entitlement to enjoy certain other benefits or concessions... But it is impossible to infer from these or any other specific statutory provisions requiring or authorising discrimi­nation in defined circumstances the existence of a general exception to the prohibition of sex discrimi­nation in the provision of goods, facilities and services imposed by s. 29 of the Sex Discrimination Act 1975 such that discrimination in favour of women and against men between the age of 60 and 65 is always permitted. In the absence of express statutory authority derived from some other enactment, such discrimination is prohibited".

 

            In sum:

 

            It is true that the statutory provisions which indicate on their face the legislature's recognition of differences between men and women for specific purposes, including the age at which they are entitled to pension, cannot be ignored. However, it should not be deduced, by way of interpretation, that the legislature has thereby granted permission for establishing a gap between man and woman regarding compulsory retirement age. For this, explicit legislation would be required. No such legislation exists, but on the contrary, wherever the compulsory retirement age is referred to in connection with a specific category of employees, a uniform age is provided, and it is now explicitly prescribed in the Retirement Age Law that this type of gap is invalid and should not be put into practice.

           

            C. Significance of the Retirement Age Law

           

            13. Thus we arrive at the question: how does the Retirement Age Law directly impact upon our issue?

           

            We already noted above that the Retirement Age Law was enacted on March 17, 1987 (namely, after the National Labour Court handed down the decision in this case, and after the petition was filed), and as the text of the Law does not indicate a date on which it comes into force, it is in effect from the date of its publication (March 26, 1987), and onwards.

           

            Learned counsel for the respondent (who submitted his brief after the Law was enacted) argues that this Law answers the question presented in this petition, and that accordingly considera­tion of the petition is unnecessary because it is solely theoretical. He bases his statement on two decisions of this Court: M.A. 166/84 (H.C. 780/83) [10] and H.C. 363/87 [l l].

           

            Respectfully, I do not accept this argument. In the two decisions noted, statutes were considered which retroactively settled the problem on which this petition was based. In those cases, since the legislature had dealt with the matter, there was no further room for the involvement of this Court. In the case before us, the legislative arrangement does not apply retroactively to the Petitioner, so that her problem remains as it was. Accordingly, this proceeding is not superfluous.

           

            As stated, the legislature did not make any statement as to how to act during the period preceding the effective date of the Retirement Age Law. On the one hand, it could be inferred from the fact that the legislature established an effective date from that point onwards, that in so doing the legislature answered the question in the negative. According to this interpretation, a woman's right to choose when to retire between the ages of 60 and 65 should not be applied retroactively. This possibility is certainly reasonable, since retroactive application is likely to bring with it uncertainty and disorder in the economy. Likewise, since this law is a result of a social process, it is only reasonable to fix a point in time when the social change, on account of which the law was enacted, "crystallized", so to speak.

           

            On the other hand, it could be argued that this statute is merely the unavoidable result of a social and legal situation. For, as shown above, the same result would have been reached even if it had not been enacted (I will not enter here into the question of whether the Retirement Age Law really institutes the desired equality. For purposes of this issue, it is sufficient that women were given the opportunity to retire at an age equal to the retirement age for men). Moreover, it is unsatisfactory that the statute which eliminated discrimination against women on retirement is that which will deny relief to the Petitioner; while if the statute had not been enacted, the Petitioner would have been entitled to it.

           

            In practice, a problem of interpretation arises here, the method of clarifying which we have already considered in the previous section: when several possible reasonable interpretations arise, we prefer that which upholds basic rights over the option which limits them. Accordingly, I find that the enactment of the Retirement Age Law does not negate the Petitioner's right to retire at an age equal to the retirement age for men.

 

            It could be queried whether we are not thus undermining the purpose of the law. For there is no doubt that along with the goal of achieving equality in retirement, the legislature apparently sought to achieve another goal: application of the change in an organized fashion, with the aim of preventing uncertainty, legal claims, excessive monetary expenses, and so on.

           

            I therefore wish to make it clear that my holding herein is merely that the Retirement Age Law does not preclude the Petitioner, who claimed her right to retirement on the basis of equality before she left her job, and before the Retirement Age Law was enacted, from being entitled to that right.

           

            I do not see the need, within the context of this petition, to express an opinion regarding the potential influence of this decision on the situation of other women in positions similar to that of the Petitioner, in that they too were forced to retire on pension at age 60. The same applies to the question of whether women, who reconciled themselves to the situation and retired without resorting to litigation, will now be able to request cancella­tion of the arrangement which has entered into affect for them.

           

            I will note only the existence of a precedent for limiting the application of a fundamental decision regarding women's equal rights in the case law of the Court of the European Community:

           

            Judgment was given in favour of the plaintiff in the case of Defrenne v. Belgium (1974) [22], which also concerned discrimina­tion between men and women, being an equal pay for equal work claim. However, the Court placed a time limit on the effect of the rule which it laid down in this decision, holding that the Court would not entertain claims submitted for the balance of salary for periods preceding the date of the decision (see regarding this matter E.C. Landau, The Rights of Working Women in the European Community (Luxembourg, 1985) 23-26).

           

            However, as noted above, I do not intend to decide this issue, which does not concern the Petitioner.

           

 

            D. Will The High Court of Justice intervene in the Labour Court's decision in this case?

           

            14. In H.C. 525/84 [12], President Shamgar dealt at length with the topic of the High Court of Justice's intervention in the decisions of the Labour Court, reviewing the development of the case law on the topic. In summing up his remarks, the President reaches the conclusion that the test is two-fold (see page 695 of the judgment):

           

            (l) Whether substantial legal error has been disclosed in the Labour Court's judgment;

           

            (2) That justice requires intervention in the Labour Court's decision.

           

            I have no doubt that the present case justifies our intervention. The determination that the said distinction does not fall within the definition of discrimination is a substantial legal error. Justice requires the intervention of this Court, since Petitioner was denied the basic rights of equality and freedom of occupation.

           

            E. Is it appropriate that a judicial forum intervene in the labour agreement which is the subject of this petition?

           

            15. Collective labour agreements and collective labour arrange­ments are the outcome of negotiations between employee representa­tives and employers. As a contract, they reflect the will of the parties, and accordingly, in light of the principle of freedom of contract, the court should abstain from intervening in its content as far as possible. There is considerable intricacy in a collective agreement or arrangement, and the various terms constitute a part of a whole in which every detail is part of a system of balances and compromises at which the parties arrived in their deliberations. Moreover, since agreements of this nature affect a broad community, the fact that many parties rely upon its content must be considered.

           

            In the National Labour Court's judgment it is stated that the specific provision we are dealing with here "is the result of collective negotiations between two of the central organizations in labour relations in Israel - the General Federation of Labour (Histadrut) and the Manufacturers' Association, and the Terms of Employment obligating the Jewish Agency and its employees is also the result of a bilateral arrangement, to which the largest employee organization in the State is a party". These remarks show clearly the extent of the effect of the agreement with which we are dealing. I will accordingly repeat the Labour Courts ruling (N.L.C.H. 45/117-13 [15], at page 289; N.L.C.H. 47/11-2 [16], that the Court will intervene as little as possible contents of collective agreements or arrangements.

           

            I think that this case is among the few in which the Court will intervene in the contents of a labour agreement, despite the principles noted above.

           

            In N.L.C.H. 33/25-3 [17] the National Labour Court held that courts are authorized to intervene in the contents of a collective agreement for "public policy reasons" pursuant to section 64 of the Ottoman Civil Procedure Law. In our case, the relevant section is section 30 of the Contracts (General Part) Law 5733-1973 (here­inafter: the Contracts Law), which states: "A contract the making, contents or object of which is ... contrary to public policy is void". Section 31 of the Contracts Law provides that section 19 of that Law should apply to section 30. Section 19 states that "Where a contract is severable, and the ground for rescission relates only to one part thereof, such part alone shall be capable of rescission.

 

            It is appropriate to quote the following statement from N.L.C.H. 33/25-3 [17], supra, at page 378:

           

"...If in a regular contract the court will invalidate a provision which contains 'discrimination' which is contrary to 'public policy'- all the more so in the case of a collective agreement. Just as in the administrative law area the Supreme Court did not hesitate to invalidate 'discrimination', there is likewise no room for such hesitation where a collective agreement is concerned. In its contractual part, the collective agreement is nothing but a contract between the parties; in its normative part - it is closer to legislation, by imposing norms on the individual through an external source, a source which represents the individual's interests, but not the individual qua individual. If in a regular contract a provision which the individual explicitly agreed to would be invalidated because of 'public policy', it is that much more appropriate to invalidate for the same reason this type of provision when it applies to the individual because of his being a member of a larger group...".

 

            In H.C. 410/76 [13], at page 130 et seq., Deputy President Landau (as he then was) adopted this rule (although the case ruled otherwise on the merits).

           

            I consider it right to apply this ruling to the matter before as also. Paragraph 6 creates a discriminatory arrangement which impairs the rights of women to participate equally in the domain of labour. Accordingly I believe that this paragraph is contrary to public policy, and therefore it is right for this Court to intervene and nullify it.

           

            It should be further noted, that if the aforementioned applies as to collective labour agreements, which were duly signed and registered, then this statement is certainly correct regarding other labor agreements, such as the "Terms of Employment" which is the subject of our present discussion.

           

            Respondents' counsel argues that work and retirement conditions are areas which the employees and employers must shape in the course of their negotiations, and if indeed a social change has occurred which justifies a change in the retirement age of women, the Petitioner should have waited until the signing of a new labour agreement, which would reflect the change.

           

            This argument cannot justify acquiescence in a discriminatory distinction for so long as it is contained in an existing agreement. The judge who wrote the minority opinion in the National Labour Court commented on this topic as follows*:

           

"Notwithstanding the importance of the parties' positions in labor relations, I reject reliance on this agreement as a basis for justifying distinctions in retirement age. If the courts in the United States would have taken this approach when they came to determine the justification for discrimination between whites and blacks, it is doubtful whether this discrimination would have been invalidated even to this day".

 

            16. To conclude the elucidation of this point I see the need to mention in this context once more the provisions of section 1 of the Women's Equal Rights Law, which, as noted, states:

           

"A man and a woman shall have equal status with regard to any legal proceeding; any provision of law which discriminates, with regard to any legal proceeding, against women as women, shall be of no effect".

 

            If this is the legislature's guidance regarding the interpretation and application of a statute, it is all the more necessary to act in this manner regarding the application of a labour agreement and the determination of its validity.

           

            F. What is the appropriate relief?

           

            17. The National Labour Court held in its judgment that, even had it reached the conclusion that Paragraph 6 is discriminatory, it would have been precluded from granting the Petitioner relief. The court based its decision, inter alia, on the fact that a condition for declaratory relief is that "the situation as to which a declaration is sought is clear and unambiguous" (N.L.C.H. 35/98-4 [18], at page 158), a condition which in the court's opinion does not exist herein.

           

            The court raised the question of which is the optimal state of equality - making the retirement age of men equal to the retirement age of women (that is, 60) or the opposite? The ambiguity raised by this question was one of the reasons for the National Labour Court's decision that declaratory relief should not be granted. At first sight, we are also confronted with this dilemma. For who can assure that it is more correct to make the retirement age of women equal at 65 than to make the retirement age of men equal at 60; or should it be held, as it is now set forth in the Retirement Age Law, that the retirement age of 60 is optional for women?

           

            True, we described the negative consequences of early retire­ment at the outset of the judgment, but at the same time we have not ignored the fact that there are those who view early retirement (women as well as men) as an arrangement which benefits the worker.

           

            But it seems to me, after additional consideration, that this problem may be overcome without particular difficulty.

           

            The accepted age for retirement on pension today is 65. This is the age fixed in the agreement in question as the retirement age for men, and the Petitioner seeks to eliminate the discrimination which acts against her in Paragraph 6 and make her situation equivalent to that of men in all matters related to the compulsory retirement of employees.

 

            As we have found that there is indeed invalid discrimination as to this point, and that this discrimination is not based in a statutory provision, we must act to eliminate it and grant the Petitioner the requested relief.

           

            18. In light of everything stated herein, I would recommend to my esteemed colleagues that we make the order nisi absolute, in the sense that it is declared that that part of Paragraph 6 which sets forth a different compulsory retirement age for women is null and void .

           

            The parties are required to engage in negotiations on the practical effects of this judgment regarding Petitioner's rights. If an agreed-upon solution in this matter is not found within a reasonable time, the Petitioner may once again apply to the Regional Labour Court regarding this matter.

           

            Respondent shall pay costs to the Petitioner in the sum of 6,000 NIS, as of today.

           

            NETANYAHU J.: It saddens me that in the Israel of our day it was not clear and self-evident that forcing the retirement of a woman from her work at an earlier age than a man constitutes discrimination.

           

            Ever since the generation of the founders and pioneers, women have taken, and continue to take in our day, an equal part with men in endeavour in all areas of life, and do not lag behind men in doing so, despite the additional burdens women bear as wives and mothers.

           

            In my view, the discrimination is reflected not only in the financial loss she suffers from her retirement at a younger age, but also, and in my opinion, primarily, in that she is precluded, at precisely the age where she is more free to do so, from achieving, fulfilling, and flourishing in the realization of her various talents and skills.

           

            I associate myself with the opinion of my colleague Justice Bach that Paragraph 6 of the collective agreement is invalid as being discriminatory.

           

            ARIEL J.: I agree. In H.C. 953/87, 1/88 [5], cited by my colleague the Hon. Justice Bach, I was given the opportunity and privilege to make, inter alia, the following statement, at page 342:

           

"The equal status of women within the context of the principle of the equality of the sexes is not merely formal, and it should and must extend in a practical and real manner across all fields of our lives".

           

            Hence, it is clear that I am in agreement with the conclusions reached by my esteemed colleague, in consideration of the reasons presented by him.

           

            As to our intervention in the ruling of the National Labor Court, I am persuaded that in this case intervention in the National Labour Court's decision is also justified by the position I expressed in H.C. 105/ 87 [14], at page 567-568, regarding the need to confine this Court's intervention in judgments of labour courts solely to cases in which intervention is necessary to do justice, since we are involved here with a ruling with impact upon the law in general.

           

Judgment given on October 22, 1990. Decided as stated in the judgment of  Bach, J.

 

 

 

 

 

Petition granted.

1 Nissan 5766.

30 March 2006.

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

 

 

HCJ 5666/03

Kav LaOved

and others

v.

1.     National Labour Court, Jerusalem

2.     Givat Zeev Local Council

3.     Attorney-General

4.     New General Federation of Labour

5.     Abir Textile Industries Ltd

6.     Y. Zarfati Vehicle Services Ltd

7.     Nituv Management and Development Company Ltd

8.     Aqua Print Technological Toning Ltd

 

 

The Supreme Court sitting as the High Court of Justice

[19 September 2007]

Before President D. Beinisch, Vice-President E. Rivlin
and Justices A. Procaccia, E.E. Levy, A. Grunis,
M. Naor, E. Arbel, S. Joubran, E. Hayut

 

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

 

Facts: Palestinian workers filed claims in the Labour Courts against their Israeli employers with regard to their employment in the Israeli enclaves in Judaea and Samaria. These claims gave rise to the question whether these employment relationships were governed by Israeli law or by the local law of Judaea and Samaria, which is Jordanian law, the significance of this question being that Israeli law grants workers more rights and protection than Jordanian law.

The National Labour Court held on appeal that in the absence of any stipulation on this issue in the employment contracts, these employment relationships were governed by Jordanian law as the local law in force in Judaea and Samaria, since Israeli law has never been applied to the occupied territories as a whole, but only to Israelis living in Judaea and Samaria.

The petitioners, who are human rights organizations, petitioned the Supreme Court on behalf of the Palestinian workers to set aside the judgment of the National Labour Court and to rule that Israeli law governs their employment relationship. They argued that this intention could be clearly seen from the employment contracts. They further argued that this conclusion was also required on several other grounds: the second respondent is an Israeli government authority, and is therefore bound by Israeli law; the custom in employment law is that the employment contract should be governed by the law most favourable to the worker; in the absence of any agreement between the parties, the contract should be governed by the law that has the strongest ties to the contract, which in this case is Israeli law; the judgment of the National Labour Court is contrary to public policy; the judgment of the National Labour Court is discriminatory in that Palestinian workers and Israeli workers who do the same work receive different wages and employment benefits.

 

Held: The contracts in this case do not contain any express statement of the parties’ intentions as to the law that should govern their employment relationships. Therefore, the law governing the contracts should be decided in accordance with the ‘strongest ties’ test. In applying this test, the territorial criterion has less weight in the Israeli enclaves in the occupied territories, where more than one set of laws operate. Consequently, the weight of the other ties and of the principles of the legal system becomes greater when choosing the applicable law.

The circumstances of the case lead to the conclusion that the employment relationships are more closely connected with Israeli law than with Jordanian law.

This conclusion is also supported by the principles of substantive employment law, for which the choice of law is required. The principle of equality, which is a fundamental principle of employment law, demands that the same law govern both Israeli and Palestinian workers who work in the same place. Applying different sets of laws for Israeli workers and Palestinian workers necessarily results in discrimination. The conflict of law rules were not intended to legitimize such an outcome.

There is no decisive significance to the question of what law will benefit workers the most.

 

Petition granted.

 

Legislation cited:

Administration of Local Authorities (Judaea and Samaria) Order (no. 892), 5741-1981.

Basic Law: Freedom of Occupation.

Basic Law: Human Dignity and Liberty.

Contracts (General Part) Law, 5733-1973, s. 26.

Equal Employment Opportunities Law, 5748-1988.

Equal Remuneration for Female and Male Employees Law, 5756-1996.

Proclamation Concerning Law and Administration  (Territory of the West Bank) (No. 2), 5727-1967, s. 2.

Law and Administration Arrangements Order (No. 1), 5727-1967.

Hours of Work and Rest Law, 5711-1951.

Protection of Wages Law, 5718-1958.

Women’s Employment Law, 5714-1954.

 

Israeli Supreme Court cases cited:

[1]        HCJ 393/82 Jamait Askan Almalmoun Altaounia Almahdouda Almasaoulia Cooperative Society v. IDF Commander in Judaea and Samaria [1983] IsrSC 37(4) 785.

[2]        HCJ 1661/05 Gaza Coast Local Council v. Knesset [2005] IsrSC 59(2) 481.

[3]        HCJ 7957/04 Marabeh v. Prime Minister of Israel [2005] (2) IsrLR 106.

[4]        HCJ 2612/94 Shaar v. IDF Commander in Judaea and Samaria [1994] IsrSC 48(3) 675.

[5]        HCJ 61/80 Haetzni v. State of Israel (Minister of Defence) [1980] IsrSC 34(3) 595.

[6]        HCJ 785/87 Afu v. IDF Commander in Gaza Strip [1988] IsrSC 42(2) 4.

[7]        CA 1432/03 Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [2005] IsrSC 59(1) 345.

[8]        HCJ 205/82 Abu Salah v. Minister of Interior [1983] IsrSC 37(2) 718.

[9]        CA 419/71 Menorah Liability and Secondary Insurance Co. Ltd v. Numikos [1972] IsrSC 26(2) 527.

[10]     CA 352/87 Griffin Corp. v. Koor Sahar Ltd [1990] IsrSC 44(3) 45.

[11]     CA 165/60 Union Insurance Co. Ltd v. Moshe [1963] IsrSC 17 646.

[12]     CA 750/79 Klausner v. Berkovitz [1983] IsrSC 37(4) 449.

[13]     CA 300/84 Abu Atiya v. Arbatisi [1985] IsrSC 39(1) 365.

[14]     CA 5118/92 Altripi Laltahoudat Ala’ama Ltd v. Salaima [1996] IsrSC 50(5) 407.

[15]     HCJ 3512/04 Shezifi v. Interclub Ltd (unreported decision of 29 December 2004).

[16]     HCJFH 922/05 Shezifi v. Interclub Ltd (unreported decision of 20 March 2005).

[17]     CA 6601/96 AES Systems Inc. v. Saar [2000] IsrSC 54(3) 850.

[18]     HCJFH 4191/97 Recanat v. National Labour Court [2000] IsrSC 54(5) 330.

[19]     CA 294/91 Jerusalem Community Burial Society v. Kestenbaum [1992] IsrSC 46(2) 464.

[20]     CA 239/92 Egged Israel Transport Cooperation Society v. Mashiah [1994] IsrSC 48(2) 66.

[21]     HCJ 11163/03 Supreme Monitoring Committee for Arab Affairs in Israel v. Prime Minister [2006] (1) IsrLR 105.

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

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

[24]     HCJ 6698/95 Kadan v. Israel Land Administration [2000] IsrSC 54(1) 258.

[25]     HCJ 4112/99 Adalah Legal Centre for Arab Minority Rights in Israel v. Tel-Aviv Municipality [2002] IsrSC 56(5) 393.

[26]     HCJ 525/84 Hativ v. National Labour Court [1986] IsrSC 40(1) 673.

[27]     HCJ 8111/96 New Federation of Workers v. Israel Aerospace Industries Ltd [2004] IsrSC 58(6) 481.

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

[29]     HCJ 608/88 Finkelstein v. National Labour Court [1989] IsrSC 43(2) 395.

[30]     HCJ 932/91 Central Pension Fund of Federation Employees Ltd v. National Labour Court [1992] IsrSC 46(2) 430.

[31]     HCJ 1199/92 Lusky v. National Labour Court [1993] IsrSC 47(5) 734.

[32]     HCJFH 4601/95 Serrousi v. National Labour Court [1998] IsrSC 52(4) 817.

[33]     HCJ 10026/01 Adalah Legal Centre for Arab Minority Rights in Israel v. Prime Minister [2003] IsrSC 57(3) 31.

[34]     HCJ 240/98 Adalah Legal Centre for Arab Minority Rights in Israel v. Minister of Religious Affairs [1998] IsrSC 52(5) 167.

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

[36]     HCJ 1703/92 C.A.L. Freight Airlines Ltd v. Prime Minister [1998] IsrSC 52(4) 193.

[37]     HCJ 6924/98 Association for Civil Rights in Israel v. Government of Israel [2001] IsrSC 55(5) 15.

[38]     HCJ 663/78 Kiryat Arba Administration v. National Labour Court [1979] IsrSC 33(2) 398.

 

Israel National Labour Court cases cited:

[39]     NLC 42/2-13 Nordan Oil Services Ltd v. Mori [1982] IsrLC 13 368.

[40]     LabA 1372/01 Shezifi v. Interclub Ltd (unreported decision of 11 February 2004).

[41]     NLC 42/2-33 State of Israel v. Azoulay [1983] IsrLC 15 105.

[42]     NLC 37/3-71 Elite Israeli Chocolate Industry Co. Ltd v. Lederman [1978] IsrLC 9 255.

 

For the petitioners — A. Spinrad, N. Pinchuk-Alexander.

For the second respondent — B. Ablin, R. Plitt.

For the third respondent — Y. Amsalem.

For the fourth respondent — E. Shilony.

For the fifth respondent — R. Hadar-Barabash.

For the sixth respondent — E. Bentovim.

For the seventh respondent — Y. Peri.

For the eighth respondent — A. Rivlin.

JUDGMENT

 

 

Vice-President E. Rivlin

1.    Several inhabitants of Judaea and Samaria, who are not citizens of Israel (hereafter: the Palestinian workers) filed claims in the Regional Labour Courts against their Israeli employers, who conduct business in the occupied territories. During the hearings, a question arose as to whether the claims should be governed by Israeli law or the local law. The Labour Courts held that Israeli law applied. The National Labour Court (the honourable President S. Adler, the honourable Judges N. Arad and S. Tsur, Workers’ Representative S. Guberman and Employers’ Representative H. Dudai) heard the employers’ appeals jointly, and held that the law applicable to the employment contracts between the parties was the law that governs the occupied territories. The National Labour Court also held that the hearing of each case would be returned to the Regional Labour Courts for them to examine the provisions of the law applicable in the occupied territories and to clarify the need for subjecting the employment contracts to special provisions of Israeli law by virtue of the principle of public policy. The first petitioner, Kav LaOved Workers’ Hotline, is challenging these findings of the Labour Court on behalf of all the Palestinian workers.

The proceedings in the Regional Labour Courts

2.    Claims were filed in the Regional Labour Courts by the Palestinian workers, who were employed in the occupied territories by various employers: the Givat Zeev Local Council, Abir Textile Industries Ltd, Y. Zarfati Vehicle Services Ltd, Nituv Management and Development Company Ltd and Aqua Print Technological Toning Ltd (hereafter: the employers). The plaintiffs claimed that they were entitled to be paid the minimum wage, severance pay and various employment benefits, all of which in accordance with Israeli employment law. As stated above, the main question before the courts concerned the question of which law should apply to the employment relationships between Palestinian workers who are inhabitants of the occupied territories, and Israeli employers, when the place of work is in the ‘Israeli enclaves’ in the territories. In view of the intentions and expectations of the parties, an analysis of which law is most applicable to the contract, and the special characteristics of employment law that are regarded as part of the contract by virtue of public policy, the Regional Labour Courts reached the conclusion that in the aforesaid cases the plaintiffs should be subject to Israeli law, rather than the law in the territories.

The employers challenged this finding in the National Labour Court.

The judgment of the National Labour Court

3.    When it considered which law should apply to the employment contracts under discussion, the National Labour Court addressed the question of what law is applicable in the territories and the conflict of law rules with regard to contracts where the parties are subject to different legal systems. The National Labour Court held that, as a rule, in the absence of strong ties linking the contract to the law of another place, the employment agreement should be governed by the law that is applicable in the place where the work is done. The National Labour Court took as its starting point s. 2 of the Proclamation Concerning Law and Administration Arrangements (Territory of the West Bank) Declaration (no. 2), 5727-1967, which provides:

‘Validity of existing law

2.  The law that was in force in the territory on 28 Sivan 5767 (7 June 1967) shall remain in force, in so far as it does not conflict with this declaration or any declaration or order that will be made by me, subject to changes that derive from the establishment of the rule of the Israel Defence Forces in the territory.’

The court explained that, according to this section, the law that applies in the territory of Judaea and Samaria consists of the Jordanian law that governed this territory until 1967 and orders that have been made by the military commander of the territory from then until today. This law has been supplemented by provisions of Israeli internal statutes that have been applied individually to Israeli citizens that live in the territory of Judaea and Samaria, but not to the whole territory or to all of its inhabitants. From this the National Labour Court concluded that in the absence of a provision of statute that expressly applies Israeli employment law to the territory, the law in force is Jordanian employment law, as amended by the orders of the military commander. The National Labour Court therefore went on to examine the question of whether there were any legal rules that might justify imposing provisions of Israeli law to Palestinian workers that are employed by Israeli employers.

4.    Since there was no express provision in the employment contract itself with regard to the law governing it and since it was not possible to find any indication of the intentions of the parties in this matter by interpreting the agreement, the National Labour Court turned to consider all of the ties that link the parties to the occupied territories, on the one hand, or the State of Israel, on the other. The National Labour Court found that the ‘Israeli’ ties, such as the fact that the employer was Israeli, the payment of wages in Israeli currency, the fact that various documents concerning the employment were in Hebrew, the determination of rest days and holidays in accordance with accepted practice in Israel, and the payment of tax to the Israeli tax authorities (in one of the cases under consideration) were insufficient to tip the balance in favour of the contract being governed by Israeli law. On the contrary, the National Labour Court was of the opinion that the fact that the occupied territories were the place where the contract was made and where the main work was carried out, and the fact that all of the parties were inhabitants of the territories tipped the scales in favour of the contracts being governed by the local law in force in the territories. Since there was no express arrangement that applied parts of Israeli employment law to these workers, and since there were insufficient ties to link the contracts to Israel law, the National Labour Court reached the conclusion that there was no justification for applying Israeli employment law to the Palestinian workers. The National Labour Court therefore decided that each of the employment contracts under consideration was governed by the local law of the occupied territories.

5.    Notwithstanding, the National Labour Court held that when an Israeli court acquired jurisdiction to hear the case, it was entitled, and even obliged, to examine every provision of a contract that is governed by a foreign law from the perspective of the principle of public policy, and to refrain from enforcing a contractual provision if it is contrary to public policy. It held that applying the rules of public policy to a specific case is a matter that requires a careful consideration of facts and ethics for each norm that is being considered. This was not done in the Regional Labour Courts, and therefore the National Labour Court decided to return all of the cases to the Regional Labour Courts. With regard to the employers’ prima facie breach of their duty to treat all of their workers fairly and equally, the National Labour Court stated that the question should be considered separately. In so far as private employers are concerned, this question can be considered within the framework of the examination of the rules of public policy and the principle of good faith. Finally, the National Labour Court held that in the absence of an express provision, a collective agreement to which the Israeli employer is a party does not apply to workers who are inhabitants of the occupied territories.

The arguments of the parties

6.    The judgment of the National Labour Court lies at the heart of this petition. The petitioner claims that the employment contracts clearly show that the parties intended them to be governed by Israeli law. To the extent that the Givat Zeev Local Authority is concerned, the petitioner argues that where a government authority enters into a contract with another party, it is clear that Israeli law should apply. The petitioner further claims that in so far as a government authority is concerned, where the work was done in an Israeli ‘enclave’ in the territory of Judaea and Samaria, it is clear that the employer’s intention is that Israeli law should apply, and it is also clear that this is the workers’ expectation. The petition also claims that even if the applicable law is not expressly stated in the contract, the contract should be regarded as incorporating custom, by virtue of the provisions of s. 26 of the Contracts (General Part) Law, 5733-1973. The petitioner goes on to argue that the custom that prevails in the field of employment law is that the employment contract should be governed by the provision of law that is most favourable to the worker, and this custom should also be applied in the present case. The petitioner further claims that in the absence of any express or implied agreement between the parties, the contract should be governed by the law that has the strongest ties to the contract in the circumstances of the case, and in this case the ‘strongest ties’ test clearly indicates that this law is Israeli law, since the place where the negotiations between the parties took place is an Israeli enclave in the territory of Judaea and Samaria, the workers are far more closely associated with the Israeli government with regard to their work than they are associated with the Palestinian Authority, and the place where the agreement was made, the work was done and the breach was committed, as well as the currency used for payment, indicate the close ties to Israeli law.

The petitioner is also of the opinion that the findings of the National Labour Court conflict with the principle of public policy, according to which the workers should be subject to Israeli law, which benefits them, and its findings are contrary to the principles of justice that bind the courts. The petitioner also complains of the discrimination that results, in its opinion, from the decision of the National Labour Court. It claims that the discrimination is reflected in the fact that Palestinian workers and Israeli workers who do the same work receive different wages and employment benefits — all because of the different laws that are applied to them.

7.    The petitioner’s positions were supported, after the filing of the petition, by the New General Federation of Labour (hereafter: the General Federation of Labour). It emphasized in its closing arguments the importance of determining a single rule for the employment of Palestinian workers by Israeli employers in the Israeli towns in the occupied territories, and the advantages inherent in having a uniform bargaining standard. From a collective perspective, the General Federation of Labour insists that there is no moral or legal reason why non-Israeli workers should be excluded from the application of the collective agreements that bind the Israeli employer in an ‘Israeli enclave’ and his Israeli workers. According to the General Federation of Labour, no departure should be allowed from the principle of treating all the workers of one employer at a given plant uniformly, other than on the basis of legitimate class distinctions, and for this purpose a distinction on the basis of nationality of country of origin between citizens, residents and ‘foreign workers’ cannot be justified.

8.    The second respondent, which is the Givat Zeev Local Council, claims that the petitioner’s objections were considered extensively by the National Labour Court, even if the petitioner was not the party that raised then in that forum, and there is no adequate justification for the intervention of the High Court of Justice, as a third instance, in the decision of the National Labour Court. On the merits, the Givat Zeev Local Council relies on the judgment of the National Labour Court and argues that there is no real concern of harm to the Palestinian workers, since the judgment guarantees an individual examination of each of their claims in accordance with the principle of public policy. The second respondent also claims that Israeli employment law was not applied by the legislature to the territory of Judaea and Samaria, and that we are not dealing with a situation of a conflict of laws at all. In any case, it claims that the ‘strongest ties’ test does not lead to the contract being governed by Israeli employment law.

9.    The attorney-general agrees with the position of the Givat Zeev Local Council; he too is of the opinion that there is no justification for any intervention in the findings of the National Labour Court. On the merits of the matter, the attorney-general claims that where there is no contrary stipulation, the employment of a Palestinian who is a resident of the occupied territories is governed by the local law, and as a rule the Israeli ties of the employer does not result, under the ‘strongest ties’ test, in the applicability of Israeli employment law, unless this is justified by virtue of the principle of public policy. The attorney-general also seeks to emphasize that ‘what the Israeli legislature or the military commander in the territories have not done should not be done by resorting to the rules of private international law, so that a kind of “back door” is used to apply Israeli private law to the Israeli towns in Judaea and Samaria.’ This interpretation is unfounded, as we shall explain later.

10. The fifth respondent, Abir Textile Industries Ltd, relies on its arguments in the National Labour Court, and it supports the claim of the other employers that there is no basis for any intervention in the judgment. The seventh respondent, Nituv Management and Development Company Ltd, also argues that there is no reason for any intervention in the findings of the National Labour Court, and it emphasizes in its pleadings the distinction between a public employer and a private employer. In doing so it argues that private employers who have set up or moved their businesses to the occupied territories relied on the cheaper cost of labour because of the applicability of Jordanian employment law. The eighth respondent, Aqua Print Ltd, which was a party to a settlement in the previous proceeding, was joined as a respondent but chose not to present any further argument. The sixth respondent, Y. Zarfati Vehicle Services Ltd, gave notice that it had no interest in participating in the proceeding.

The local normative framework — the law of the enclaves

11. This court has held in a host of judgments that the territories of Judaea and Samaria are subject to a belligerent occupation of the State of Israel, with all that this implies from the viewpoint of the applicable law:

‘Judaea and Samaria are subject to a military or a belligerent occupation by Israel. Military rule has been established in the territory, for which a military commander is responsible. The powers and authorities of the military commander derive from the rules of public international law relating to a military occupation. According to the provisions of these rules, all the executive and administrative powers are held by the military commander… Some of these powers derive from the law that prevailed in the territory before the military occupation, and some derive from new legislation, which was enacted by the military commander… In both cases the exercise of authority should comply with the rules of public international law relating to a military occupation, and the principles of Israeli administrative law relating to the exercise of executive authority by a civil servant’ (HCJ 393/82 Jamait Askan Almalmoun Altaounia Almahdouda Almasaoulia Cooperative Society v. IDF Commander in Judaea and Samaria [1], at p. 792; see also HCJ 1661/05 Gaza Coast Local Council v. Knesset [2], at pp. 558-559; HCJ 7957/04 Marabeh v. Prime Minister of Israel [3], at para. 14 of the opinion of President A. Barak).

Thus it has been held that the judicial and administrative jurisdiction of the State of Israel has no application in the territory of Judaea and Samaria (see for example HCJ 2612/94 Shaar v. IDF Commander in Judaea and Samaria [4], at p. 681). Indeed, for years the State of Israel has consciously refrained from applying Israeli law to the territories of Judaea, Samaria and the Gaza Strip (see, by contrast, the Law and Administration Arrangements Order (No. 1), 5727-1967, which applies the ‘law, jurisdiction and administration of the state’ to East Jerusalem). Indeed, from the arrangement provided in s. 2 of the Proclamation Concerning Law and Administration Arrangements (no. 2), 5727-1967, it can be seen that there are two main elements of the legislation applicable to the Palestinian inhabitants of the territories: one element is the law that was in force in the occupied territories until 1967, and in the case of Judaea and Samaria this is Jordanian law; the other element is the orders made by the area commander, which serve as primary and subordinate legislation in the territories. This normative position is also consistent with the outlook of customary international law with regard to the law applicable in a territory that is held under a belligerent occupation, as laid down in article 43 of the regulations appended to the Fourth Hague Convention Respecting the Laws and Customs of War on Land, 1907 (without considering the question of the status of the Hashemite Kingdom of Jordan in the West Bank prior to the occupation of the territory by the Israel Defence Forces and the question whether Jordanian law satisfies the tests of constitutionality accepted in public international law — see HCJ 61/80 Haetzni v. State of Israel (Minister of Defence) [5], at pp. 597-598; see also E. Zamir and E. Benvenisti, Jewish Land in Judaea, Samaria, the Gaza Strip and East Jerusalem (1993)).

The law is different for Israeli inhabitants of the occupied territories. They are subject to a different legislative element, which is known as ‘the enclave law’ and includes Israeli internal legislation that was applied on a personal basis solely to persons living in the territories that are Israeli citizens or entitled to become Israeli citizens. This was discussed by the learned A. Rubinstein and B. Medina:

‘Over the years a clear distinction has been made between the law applicable to Israeli settlers and the law applicable to the local inhabitants. Beyond the personal application of various provisions of law to the inhabitants of the settlements in Knesset legislation, there have also been acts of legislation of the military administration that apply solely to Jewish settlements’ (A. Rubinstein and B. Medina, The Constitutional Law of the State of Israel (vol. 2, fifth edition, 1996), at p. 1181, and see also the new version of the book (vol. 2, sixth edition, 2005), at pp. 927-928).

Elsewhere Rubinstein has clarified that —

‘A resident of Maaleh Adumim, for example, is prima facie subject to the military administration and local Jordanian law, but in practice he lives subject to Israeli law both from the viewpoint of his personal law and from the viewpoint of the local authority in which he resides. The military administration is merely a remote control, through which the Israel law and government operate’ (A. Rubinstein, ‘The Changing Status of the Occupied Territories,’ 11 Tel-Aviv University Law Review (Iyyunei Mishpat) 439 (1986)).

Indeed, the legal system that applies to the inhabitants of the territories — Israelis alongside Palestinians — is unique and complex. Within this framework, and for the purpose of the decision in the case before us, it is important to distinguish between the systems of public international law and private international law that apply to the area in general and to the employment contracts under consideration in particular.

Conflict of laws in the occupied territories between public and private international law

12. There is no dispute that with regard to the occupied territories the courts in Israel are subject to the provisions of the Proclamation Concerning Law and Administration Arrangements (Territory of the West Bank) (no. 2), 5727-1967, and the rules of customary public international law (HCJ 785/87 Afu v. IDF Commander in Gaza Strip [6], at pp. 35, 76). Notwithstanding, we have held in the past that ‘this alone cannot prevent the court from applying Israeli law to events that occur in the occupied territories, where such an application is required in view of the rules of private international law’ (CA 1432/03 Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], at p. 356). In other words, whereas public international law determines the local law — i.e., which law will apply, as a rule, in the geographic area of ‘the territory of Judaea and Samaria’ — private international law determines which law will apply in a given case of a dispute in the field of private law. In our case, public international law and the provisions of the Proclamation Concerning Law and Administration Arrangements (Territory of the West Bank) Declaration (no. 2), 5727-1967, provide, as a starting point, that as a rule the law applicable in the territory of Judaea and Samaria, including the ‘Israeli enclaves’ in that territory, is the law of the Hashemite Kingdom of Jordan that was in force on the date when the territory was occupied by the Israel Defence Forces. But this alone does not necessarily mean that the rules of private international law provide that the employment contracts in this case are indeed governed by Jordanian law. In order to determine the issue before us, there is no real significance to the fact that the vast majority of Israeli employment law has not been applied to the occupied territories or to the ‘Israeli enclaves.’ The decision regarding the law of contracts in this case will be made in accordance with the conflict of law rules accepted in private international law, as interpreted by the court. In this regard we should emphasize that although the conflict of laws process takes place at a kind of ‘international junction of law,’ every sovereign state is entitled to formulate the conflict of law rules that it will apply. In practice, most Western legal systems have formulated the conflict of law rules in accordance with several general theories (see M. Karayanni, The Influence of the Conflict of Law Process on International Jurisdiction (2000), at pp. 45-48).

For the sake of completeness, we should clarify that a decision within the context of the conflict of law rules that a given contract that was made in the occupied territories or to which one of the parties is an inhabitant of the occupied territories is governed by Israeli law does not, in itself, affect the sovereign status of those territories. We have said in the past ‘that the mere application of a certain Israeli norm to a place outside the State of Israel does not necessarily make that place a part of Israel’ (HCJ 205/82 Abu Salah v. Minister of Interior [8], at p. 720).

We should now turn to examine the law applicable to the employment relationship in the cases before us. We should first explain that Israeli law has not yet expressly adopted any conflict of law principles with regard to employment relations (but see NLC 42/2-13 Nordan Oil Services Ltd v. Mori [39]). Therefore, we shall first review the conflict of law rules in the contractual sphere in general, and subsequently we shall examine the specific applicability of these rules to employment relations.

Conflict of laws in the contractual sphere

13. In Israel there is no general legislation that regulates the subject of the conflict of laws in private law. Although there are several specific statutory provisions that regulate the conflict of laws in various areas, the sphere of the law of contracts has not been expressly regulated by the legislature (but see A. Levontin, Conflict of Laws — Proposed Legislation with Introduction and Brief Explanatory Notes (1987), which proposed a model whereby the conflict of laws in the contractual sphere should be based on the consent of the parties to the contract, and in the absence of such consent, an examination should be made with regard to the proximity of the contract to a certain set of realities and circumstances and an objective test should be applied to determine which law should apply (for details, see p. 32)). In such circumstances, as in most countries around the world, it is the court that is required to formulate the conflict of law rules that will apply, which it does by taking into account the conflict of law policy and the basic principles of the substantive law of that legal system (for a comprehensive discussion, see L. Brilmayer, ‘The Role of Substantive and Choice of Law Policies in the Formation and Application of Choice of Law Rules,’ 252 Collected Courses (1995)).

14. The basic principle in the law of contracts — a respect for the individual will of the parties in order that they may realize their ‘legitimate expectations’ — also lies at the heart of the conflict of law rules concerning contracts. Therefore, as a rule, the law of the contract is the law that the parties agreed should govern their conduct. But if the parties have not revealed their intentions, a need arises to determine ‘the law to which the transaction has the strongest and most tangible ties’ (CA 419/71 Menorah Liability and Secondary Insurance Co. Ltd v. Numikos [9], at p. 531). For this purpose, focusing on a certain factual connection, such as the place where the contract was made or the place where it was performed, and applying the law of that place, may result in a simple and clear solution, but in Israel, as in most Western legal systems, a broader and more flexible test is now accepted for identifying the law that governs the contract. This test —

‘… is made in accordance with several factors, of which the most important is the express intention of the parties. The absence of an express intention makes it necessary to discover the intention of the parties by means of objective criteria. In other words, the goal is to discover which legal system served as the basis for making the contract; it is the system to which the transaction has the closest ties’ (CA 352/87 Griffin Corp. v. Koor Sahar Ltd [10], at p. 62).

To this end, each contract should be examined according to its circumstances, on the basis of objective criteria, such as the place where the contract was made, the place where it was performed, the identity of the parties to the contract, the language of the contract, the currency of the contract, etc. (see Griffin Corp. v. Koor Sahar Ltd [10], at pp. 62-63, 70-71; see also CA 165/60 Union Insurance Co. Ltd v. Moshe [11], at pp. 652-659). In addition to specific criteria found in the actual contract, it is possible in appropriate cases to resort, as suggested by the learned A. Levontin, to an examination of objective criteria:

‘The law of the contract is the law that the parties adopted jointly, whether in an express choice or by implication, as the law that applies to the contract between them.

If the parties did not adopt a law for the contract as aforesaid, they may be presumed to have conducted business in accordance with the reality and circumstances with which a contract of the kind that they made is most closely associated; and what is accepted and customary in that reality and in those circumstances will serve, in so far as it is applicable, as the law of the contract’ (Levontin, Conflict of Laws — Proposed Legislation with Introduction and Brief Explanatory Notes, supra, at p. 1 (para. 2)).

15. Many Western countries have followed a similar course. Thus the status of the territorial approach, which had a central role in forming the conflict of law rules in common law and in Continental law until the middle of the twentieth century, has become somewhat eroded, because of the inflexibility of this approach and because sometimes the connection between the contract and a certain territory, such as the place where the contract was made, is not of great significance (see also Karayanni, The Influence of the Conflict of Law Process on International Jurisdiction, supra, at pp. 51-52). Main examples of the flexible modern approach can be found in articles 3 and 4 of the EC Convention on the Law Applicable to Contractual Obligations, 1980 (hereafter: the Rome Convention), which proposes a conflict of law arrangement for contracts within the European Union, and in sections 6 and 186-188 of Restatement of the Law (2d), Conflict of Laws, which regulates the conflict of law rules for contracts in the United States (see also L. Collins (ed.), Dicey & Morris on the Conflict of Laws (thirteenth edition, 2000), at pp. 1195-1250).

A study of these rules shows a clear legal trend that in the absence of any consent between the parties with regard to the law that will govern the contract, every specific issue or provision in the contract will be governed by the law of the state that has the strongest ties to that issue. Admittedly, in the Rome Convention and the Restatement the territorial connection is given real significance, but the general trend that can also be seen from these documents is that the ‘centre of gravity’ of the legal relations will be determined on the basis of a combination of all of the contract’s ties, and the country with the strongest ties to a given dispute will be regarded as the country whose law applies. This trend allows a degree of flexibility to be introduced into the conflict of law process; it gives the court a margin of discretion in determining the applicable law, while at the same time it prevents a mechanical selection process.

16. It should be pointed out in this respect that the advantages of the ‘strongest ties’ approach, as a principle that allows flexibility and justice in choosing the law that will apply in each case, have also been discussed in Israeli case law with regard to the conflict of laws in other contexts, and especially with regard to torts (see Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], and the remarks of Justices M. Ben-Porat and M. Bejski in CA 750/79 Klausner v. Berkovitz [12], the remarks of Justice T. Strasberg-Cohen in CA 300/84 Abu Atiya v. Arbatisi [13], and the remarks of Justice T. Or in CA 5118/92 Altripi Laltahoudat Ala’ama Ltd v. Salaima [14]). In Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], we preferred a territorial conflict of law rule (the place where the tort was committed), but we held that there would be an exception that would allow the choice of law to be made in accordance with other ties where this was required by considerations of justice. The differences between the law of torts and the law of contracts tip the scales in favour of greater flexibility in the contractual sphere, in the sense that the territorial connection should not be held to be the rule, but in each case the court should examine all of the ties according to their nature and their relative weight in the circumstances of the case.

As a matter of policy, it would appear that there are various reasons why the territorial connection should not be regarded as an independent conflict of law rule or as an exclusive and decisive element of the conflict of laws in the contractual sphere. In this context, we should examine the connection between the obligation and a particular territory against the background of the distinction between a voluntary obligation and an involuntary obligation. Thus it would appear that an involuntary obligation that arises from the commission of a tort is usually more closely connected with the place where the tort was committed, since by its very nature it is not the result of any planning or a joint intention or expectation of the parties, and its circumstances are usually random. We have therefore held, as stated above, that in the tortious sphere we should adopt the law of the place where the tort was committed as the ideal conflict of law rule, subject to an exception ‘that will allow the law of the place where the tort was committed not to be applied where considerations of justice so demand’ (Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], at p. 374). It was held in that case that the rule — the principle of territoriality — was justified because it provides a solution to the need to maintain public order in the territory of the countries that are involved, and it is also usually consistent with the expectations of the parties and creates certainty. Notwithstanding, it was also held that in cases where it is found that the connection of a given country to the tort is significantly stronger than the connection of the country where the tort occurred (and consequently the place where the tort was committed becomes incidental), the aforesaid exception is likely to apply.

17. By contrast, a voluntary obligation in a contract is not necessarily tied to the place where it was made or where the contract is performed, and therefore to the law of those places, but by virtue of other ties it may involve another law, and in any case it is subject to the apparent intentions of the parties. This gives rise to the approach that when considering the law that will apply to a contract, all of the relevant ties should be considered. All of this is naturally subject to the policy considerations underlying the legal system and the relevant legal subject-matter. The burden of proving the existence of a certain connection rests with the party claiming that it exists, and the proof of the connection is made on a qualitative basis rather than a quantitative one (see also P. Kaye, The New Private International Law of Contract of the European Community (1993), at pp. 236-237).

This approach to the conflict of law process in contracts is dictated by modern realities, which are characterized by extensive social and commercial mobility, which allows the existence of global activity and of transnational relations that result in the making of contracts that have a connection with more than one legal system, in which the territorial element is not of decisive significance. In addition to the fact that the connection to the place where contracts in general, and transnational contracts in particular, are made is not necessarily the strongest connection, contracts also frequently involve public (national and international) interests and various private interests, which should be taken into account when deciding which law will apply (see also A. Shapira, ‘Comments on the Nature and Purpose of the Conflict of Law Rules in Private International Law,’ 10 Tel-Aviv University Law Review (Iyyunei Mishpat) 275 (1984), at p. 276). Already at this point we should emphasize that the weight of the public and private interests increases when we are speaking not merely of any contractual arrangement, but of employment relations, which are naturally based not only on the contractual consents of the parties but also on employment law (which the parties cannot contract out of). This is also of significance for the purpose of the conflict of law process, as will be explained below.

Indeed, the development of commerce requires the formulation of conflict of law rules that are consistent with this new reality. Thus, for example, the difficulty in relying on the territorial connection alone for the purpose of choosing the law is exemplified by the spread of the phenomenon of entering into contracts via the Internet, where the place of the negotiations, the place where the contract is made, the place where the parties reside, and the place where the obligation is performed may be incidental and possibly even ‘virtual.’ It is therefore unsurprising that in such a framework these connections will, in certain cases, lose their weight and practical significance (see also in this regard Y. Bar-Sadeh, The Internet and Online Commercial Law (1998), at pp. 48-51). As we said above, a survey of American and European law also shows a general approach that the territorial connection, such as with the place of making or performing the contract, is not the entirety of the matter, and it should be considered against the contract’s other ties — ties that can lead to the application of the law of another country to the employment contract.

18. Moreover, the purposive doctrine that characterizes the modern conflict of law process necessitates a consideration of additional factors beyond the contract’s direct ties — factors that are capable of guaranteeing a proper and desirable outcome with regard to the choice of the applicable law (see, for example, s. 6(2) of the Restatement, the remarks of Karayanni, The Influence of the Conflict of Law Process on International Jurisdiction, supra, at pp. 52 and 234-237, and F.K. Juenger, Choice of Law and Multistate Justice (1993), at p. 191). In this context, modern private international law indicates an inclination to attach considerable weight, within the framework of the conflict of law process, to general policy considerations and principles that lie at the heart of the substantive law whose application is being considered. This was discussed by the learned M. Karayanni:

‘According to the methodology that currently characterizes the conflict of law rules, the aspiration is to formulate purposive rules that aim to reach just results. One of the declared purposes of this approach is the replacement of the traditional conflict of law rules, which sought to rely on mechanical formulae and in many cases led to unjust outcomes. The purpose of the modern methodology of the conflict of law rules is to be aware of and take into account every factor that can be relevant to the choice of law process, including the normative interest of the forum, in order to guarantee that just decisions are made’ (Karayanni, The Influence of the Conflict of Law Process on International Jurisdiction, supra, at p. 233; see also Brilmayer, ‘The Role of Substantive and Choice of Law Policies in the Formation and Application of Choice of Law Rules,’ supra, at pp. 60-97).

The essence of the matter is that the accepted conflict of law test for the law of contracts is the consent of the parties, or in the absence thereof, the ‘strongest ties’ test, where the result of the test may be affected by wider policy considerations that serve general normative interests. When applying the test, the nature and weight of the ties that are examined may naturally vary in accordance with the specific laws whose application is being considered and in accordance with the special circumstances of a given contract. As a rule — and we are not intending to set out a comprehensive list — it would appear that the contract’s ties to a given law should be examined with a view to the place where the contract was made, the place where the negotiations took place before the contract was made, the (only, main or usual) place where the contract is performed, the identity of the parties to the contract (including their place of residence, citizenship, incorporation and business activity), the language of the contract, the payment currency, the place where taxes are paid and the intention of the parties with regard to the conflict of laws in other aspects of their relationship. In identifying these ties and determining their weight, there is no reason why the court should not take into account general policy considerations of the legal system and the fundamental principles of the contractual sphere for which the choice of law is required. In the absence of concrete ties, the court may resort to objective ties of the contract, namely the law that is applied to similar contracts, between similar parties and in similar circumstances.

The conflict of laws and employment relations

19. As a rule, the ‘strongest ties’ test that we have discussed is also a proper test for choosing the law relating to employment relations. Thus, for example, in the American Restatement rules the employment contract is not excluded from the application of the rules listed in ss. 6 and 186-188, which concern contracts in general. Notwithstanding, we cannot ignore the fact that the employment contract is not an ‘ordinary’ contract, and employment law is a separate discipline from the law of contracts. Indeed, in most countries around the world these is a greater or lesser degree of regulation in employment relations, and this also has a real and important effect on the conflict of law rules regarding employment contracts. Article 6(2) of the Rome Convention, for instance, provides special conflict of law rules for the personal employment contract (the article does not apply to collective agreements), according to which, as a premise, a territorial conflict of law rule will apply to employment relations (the place where the work is carried out or the employer’s place of residence), unless most of the objective and subjective ties of the contract connect it with the law of another country with which the contractual relationship has a closer and more realistic connection (see also Dicey & Morris on the Conflict of Laws, supra, at pp. 1303-1322). In any case, it is clear that in view of the unique nature of employment law, the conflict of law rules that apply to employment relations should be adapted to the subject-matter of the substantive law in this field.

In Israeli law employment relations have an internal contractual element and an external element that the parties cannot contract out of, where the former is subject to the latter. The rights and liabilities of the parties to an employment relationship are not determined merely by the employment contract itself. They are also subject to external involvement in the internal contractual relationship of the parties: binding protective legislation, collective employment law, public policy and general principles of justice. Israeli law has assimilated the approach that the expectations of the parties and their consents in the employment contract are subject to an external legal framework that overrides them (even if there is no complete consensus as to the manner in which the binding rules influence the consents between the parties; see LabA 1372/01 Shezifi v. Interclub Ltd [40], and the petition to the High Court of Justice and the further hearing that were denied in HCJ 3512/04 Shezifi v. Interclub Ltd [15] and HCJFH 922/05 Shezifi v. Interclub Ltd [16]). This approach also has an effect on the conflict of law rules in the field, especially in the sense that when applying the ‘strongest ties’ test the weight of the various ties should be adapted to the fundamental concepts of employment law, and the cumulative weight of the ties should be examined in accordance with the working assumption that the consents between the employee and the employer are not the entirety of the matter. The National Labour Court addressed this when it examined the law applicable to employment contracts between an Israeli employer and employee that were supposed to be performed beyond the borders of the State of Israel:

‘… This viewpoint leads us to the main question in the field of the conflict of laws, which is unique to employment law or whose weight is particularly great in the field of employment law. The question is whether the applicable law should be determined exclusively in accordance with the rules that apply to the law of commercial contracts…

Those who refrain from speaking of a concept of an “employment contract” do so because of the ever-increasing weight of legal norms that regulate the relationship between an employee and an employer, which do not originate in the “wishes of the parties” but in the wishes of the legislator or the parties to collective relationships… The aforesaid is not relevant to every country, but it does apply to Israel. From the time of the first employment statute, the Knesset has refrained from using the term “employment contract” and has preferred the concept of “employee-employer relations.” The departure from the common expression certainly had a reason, and this remains true today’ (Nordan Oil Services Ltd v. Mori [39]).

20. Like the general trends in the field of the conflict of laws, which allow the courts in the country of the forum to consider, within the context of the conflict of law process, the policy, principles, purposes and public interests underlying the rules being examined (see also Shapira, ‘Comments on the Nature and Purpose of the Conflict of Law Rules in Private International Law,’ supra, at pp. 291-293), the determination of the conflict of law rules in the field of employment law is also not the result of mere technical criteria that take into account the different elements of the employment relationship. The principles, purposes and public interests underlying the concept of the ‘employment contract’ should also be taken into account, as well as the accepted subordination of the employment contract to the binding set of rights and liabilities. This legal policy, which involves complex social and ethical decisions with regard to what is desirable and proper in employment relations, also influences the conflict of law rules in this field. Therefore, when examining the various ties of the employment relationship within the context of the ‘strongest ties’ test, the relevance of each tie should be considered not only against the background of the facts of the specific case, but also with reference to the policy underlying the legal rule whose application in the circumstances of the case is under consideration.

21. Within this framework, and in view of the binding provisions of legislation in the field of employment law, there is no doubt that the ties based on the consent of the parties are likely to have less weight where the consent is inconsistent with the principles of employment law. In exceptional cases, it is possible that certain ties will not be taken into account at all. The weight of the ties arising from the language of the employment contract, in so far as it is drafted by the employer, should be reviewed in light of the outlook that there is a disparity of forces between the employee and the employer, subject to the circumstances of the concrete case. Where there is a lack of clarity or a lacuna in the contract with regard to the express or apparent intentions of the parties, the ‘strongest ties’ test should be influenced by the principle of equality — equal wages and employment conditions for the same or effectively the same work, whether the employees are men or women, parents or not parents, Jews or Moslems, Israelis or Palestinians. This influence may be realized by means of the principle of public policy (see, for example, CA 6601/96 AES Systems Inc. v. Saar [17], and the remarks of President Barak in HCJFH 4191/97 Recanat v. National Labour Court [18], at p. 370, and in the appropriate circumstances, also with regard to private employers; see also the remarks of Justice A. Barak in CA 294/91 Jerusalem Community Burial Society v. Kestenbaum [19], at pp. 530-532; CA 239/92 Egged Israel Transport Cooperation Society v. Mashiah [20], at pp. 71-73; A. Barak, ‘Protected Human Rights and Private Law,’ The Klinghoffer Book of Public Law (Y. Zamir, ed., 1993) 163; N. Cohen, ‘Equality vs. Freedom of Contracts,’ 1 HaMishpat 131; R. Ben-Israel, Equal Opportunities and the Prohibition of Work Discrimination (vol. 1, 1998), at pp. 255-259); it may also be realized by virtue of a basic principle of the substantive law whose application is being considered (see, inter alia, the Equal Employment Opportunities Law, 5748-1988; the Equal Remuneration for Female and Male Employees Law, 5756-1996; NLC 42/2-33 State of Israel v. Azoulay [41], at p. 113; NLC 37/3-71 Elite Israeli Chocolate Industry Co. Ltd v. Lederman [42]; Ben-Israel, Equal Opportunities and the Prohibition of Work Discrimination, supra; and it may also be realized as a part of a basic principle of the forum law (see, for example, HCJ 11163/03 Supreme Monitoring Committee for Arab Affairs in Israel v. Prime Minister [21], at para. 13 of the opinion of President A. Barak; see also HCJ 98/69 Bergman v. Minister of Finance [22]; HCJ 114/78 Burkan v. Minister of Finance [23], at p. 806; HCJ 6698/95 Kadan v. Israel Land Administration [24]; HCJ 4112/99 Adalah Legal Centre for Arab Minority Rights in Israel v. Tel-Aviv Municipality [25], at p. 415). A violation of equality in the field of employment law can also constitute a violation of rights protected by the Basic Law: Human Dignity and Liberty and rights protected by the Basic Law: Freedom of Occupation.

22. The influence of the substantive law whose application is being considered and of the policy and fundamental principles that lie at the heart of the legal system on the conflict of law rules is also accepted in comparative law. Thus, article 6(2) of the Rome Convention has been interpreted as seeking to protect the (at least ostensibly) weaker party to a contract against attempts to prevent the application of the most appropriate protective law in the circumstances of the case, and there are those who have gone so far as to interpret the rule as a principle that was intended to allow the worker to rely on the provisions of law that will give him the broadest protection, even if this protection is based on more than one legal system (see Kaye, The New Private International Law of Contract of the European Community, supra, at p. 221, and Dicey & Morris on the Conflict of Laws, supra, at p. 1304). The Restatement also allows the court, when deciding which law should apply in the absence of a conclusive provision of statute, to take into account general policy considerations, and, as can be seen from s. 6(e), considerations relating to the field of substantive law with regard to which the choice of law needs to be made:

‘a) the needs of the interstate and international systems,

b) the relevant policies of the forum,

c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issues,

d) the protection of justified expectations,

e) the basic policies underlying the particular field of law,

f) certainty, predictability and uniformity of result, and

g) ease in the determination and application of the law to be applied.’

23. In summary, the conflict of law rule that applies to employment relations is influenced by the two foundations on which this field stands — the contractual foundation and the binding legislative foundation. The application of the ‘strongest ties’ test is influenced by the basic principles of employment law and the fundamental principles of the legal system, both internally, by identifying the relevant ties and giving proper weight to the ties being considered, and externally, by virtue of the principle of public policy and a constitutional scrutiny of the rights of the parties. Therefore, in an employment relationship where the parties have made no express agreement with regard to the law that will apply in their case, the court will apply the ‘strongest ties’ test in order to identify the law that will apply, in view of the aforesaid principles. It may be possible — but we do not need to discuss this at the present time — that in the field of employment relations there may be exceptional cases in which a certain consent of the parties will not in itself determine the question of the conflict of laws.

From general principles to the specific case

24. In our case, the contracts that were made do not contain any express statement of the parties’ intentions with regard to the identity of the law that governs the relationship between them. In the many documents that the parties filed, neither the Labour Court nor we were referred to any stipulation in a contract that expressly provides that one law or another governs the employment relationship between the parties. As a rule, in the absence of any expression of the parties’ intentions, the territorial connection would lead to the conclusion that the law that governs the Palestinian workers is Jordanian law, since the place where the Palestinian workers are employed is situated in the occupied territories. But, as stated above, the territorial test does not stand on its own, and the general position of the respondents, who sought to rely on the territorial connection to the place where the work is carried out as the sole and decisive tie, should certainly not be accepted. The place where the work was carried out, which is the immediate territorial connection of the employment relationship, should be considered together with the various ties that are examined within the framework of the ‘strongest ties’ test in this regard. In view of the principles of employment law that we have already discussed and in view of the special legal status of the ‘Israeli enclaves,’ which we shall address below, the ‘strongest ties’ test leads to the conclusion that the employment relationship under consideration should be governed by Israeli employment law.

25. No one disputes that the Givat Zeev Local Council, as well as the local authorities where the other employers (Israeli companies whose production plants are situated in the territories) operate, are Israeli enclaves in Judaea and Samaria. These authorities are listed in the schedule to the Administration of Local Authorities (Judaea and Samaria) Order (no. 892), 5741-1981 (Amendment of 20 July 1989 Order) (except for one employer whose production plant is situated in the ‘Barkan’ Industrial Zone, which lies within the jurisdiction of the Samaria Regional Council), and they are Israeli local authorities according to law. The negotiations between the Palestinian workers and the employers with regard to their terms of employment took place in these ‘Israeli enclaves,’ and the contract was performed there. These territorial ties require a comprehensive study of the legal position that prevails in the ‘Israeli enclaves,’ and the effect that this position has on choosing the law that will apply.

In other words, in the circumstances of the case before us, because of the identity of the parties and because of the geographic location in which the dispute took place, we should consider the unique nature of the legal position in the occupied territories and the ‘Israeli enclaves.’ Within the framework of the examination of the territorial connection, the conflict of law process should also take into account the special legal position that prevails in the place where the employment contract is made or performed, i.e., the ‘Israeli enclaves.’ From a theoretical viewpoint, basing the choice of law on a territorial factor relies on the assumption that a given territory has only one law, so that the individual develops a clear expectation with regard to which law will govern his transactions there. But in the case of the ‘Israeli enclaves’ in the occupied territories, there is a complex reality and a multi-faceted legal position. The Israeli inhabitants living in those territories are subject to extensive parts of Israeli law, in addition to special legislation of the military commander that also applies solely to the Israeli inhabitants. The Palestinian inhabitants who live in the very same territories are subject to Jordanian law and to the legislation of the military governor that applies to them (see Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], at pp. 378-379). Thus we see that in the case before us the law of the place where the work was performed is not uniform and does not depend merely on a territorial factor, but also on a personal factor. This outcome creates a situation in which different sets of laws operate in one territory and the ordinary expectations of the parties with regard to the law that will govern their actions has less weight. It may be, however — and we shall return to this later — that we can identify an expectation that certain workers will not be discriminated against, with regard to their rights, in comparison to their colleagues who are carrying out the same work, simply because the former are governed by different laws than the latter. Moreover, the legal character of the Israeli settlement as an ‘enclave,’ which is not de facto subject to the general law that governs that territory, weakens to a certain extent the connection between the place where the work is being carried out and the law that applies to the work contract. We discussed this in Yinon Food Products Manufacture and Marketing Ltd v. Kara’an [7], and what we said is also pertinent to this case:

‘In view of the unique legal reality that exists with regard to the Israeli settlements situated in the occupied territories, the reasons underlying our choice of the rule that the law that governs a tort is the law of the place where it was committed do not apply. The rule was not intended to operate in such a reality, which is in no way similar to the framework in which the rule operates in the world of Western law.

…

The legal position in the Israeli settlements in the occupied territories is an exception to the territorial principle, and this exception is what justifies the need to apply the exception to the rule that a tort should be governed by the law of the place where it was committed (ibid. [7], at pp. 378-379).

Indeed, the question of the character of the place to which the rules apply is a critical question, and appropriate weight should be given to the various relevant factors.

26. In our case, because of the nature of the territory under consideration, the weight of the territorial connection is lessened, so much so that it is difficult to choose which law is required by the connection to the place where the contract is performed. Thus, within the framework of the ‘strongest ties’ test, the cumulative weight of the other ties and of the principles of the legal system become greater when choosing the law that will apply. Within this context, we should take into account the fact that the workers were paid in Israeli currency, various documents concerning the employment, such as letters of dismissal, salary slips and time cards were written in Hebrew, the days of rest and religious holidays were determined in accordance with the usual practice in Israel, and in one case before us the worker even paid tax in Israel. Thus, these other circumstances strengthen the conclusion that the connection of the employment relationships under discussion to Israeli law is stronger than their connection to the Kingdom of Jordan and its laws.

This conclusion is also supported by the principles underlying the substantive law for which the choice of law is required, namely employment law. These principles lead to the presumption that, as a rule, in the absence of a clear consent between the parties, the aspiration should be that the choice of law will result in an identical and equal law applying in the field of employment relations to all the workers who have no relevant difference in that they carry out the same or effectively the same work. Just as the employment of a Palestinian worker, by virtue of the proper permits, in the territory of the State of Israel by an Israeli employer is governed — in the absence of any agreement to the contrary or any other significant ties — by Israeli law, so too Israeli law should also govern the employment of a Palestinian worker who is employed, with the proper permits, by an Israeli employer in an ‘Israeli enclave.’ There should be no discrimination between the two, just as there should be no discrimination between them and an Israeli worker who is employed by the same Israeli employer in the ‘Israeli enclaves,’ if he performs the same or effectively the same work. The contractual relationship has the same form. A distinction of a kind that relies on citizenship or nationality is inappropriate. It does not point to any relevant difference and it is not required by the circumstances. This is true of the Palestinian workers inter se and also of any distinction between Palestinian workers and Israeli workers. Applying two different sets of laws to workers who work together for the same employer will necessarily result in prohibited discrimination. The conflict of law rules for employment law were not intended to sanction such an outcome. These rules, which are formulated in a normative environment that is determined by the fundamental values of Israeli society and the basic principles of the whole community of nations, are intended to prevent inequitable employment patterns based on distinctions relating solely to the national and ethnic origin of the workers.

Consequently, in the special circumstances before us, there is no alternative but to hold that the law that should govern the employment relationships under discussion — which is the law that has the ‘strongest ties’ with the employment contracts — is Israeli law.

27. We should clarify and emphasize that in the case before us — as in any other case concerning the formulation of conflict of law rules — there is no decisive significance to the question of which law will benefit the petitioners (and therefore we also do not need to adopt, in our case, a broad interpretation that the worker is entitled to benefit from the maximum protection possible under the laws whose application is being considered). Indeed, the aspiration to better the petitioners’ wages and their employment benefits lay at the heart of this litigation, but, as stated above, it is not capable to deciding the question of the choice of law that governs the contracts.

Now let us turn to the question of the relief sought.

Intervention in the ruling of the National Labour Court

28. This court may intervene in the rulings of the National Labour Court when two conditions are satisfied: one is that there is a material legal mistake in the judgment, and the other is that justice requires our intervention (HCJ 525/84 Hativ v. National Labour Court [26]). The main consideration when examining whether there has been a ‘material legal mistake’ concerns ‘the nature of the problem, namely its general public importance or its unique legal significance or its general applicability and recurrence as a phenomenon in employment relations or its general effect on social processes and other similar considerations’ (ibid. [26], at pp. 682-683; see also HCJ 8111/96 New Federation of Workers v. Israel Aerospace Industries Ltd [27]; HCJ 104/87 Nevo v. National Labour Court [28], at p. 767 {161}; HCJ 608/88 Finkelstein v. National Labour Court [29]; HCJ 932/91 Central Pension Fund of Federation Employees Ltd v. National Labour Court [30]; HCJ 1199/92 Lusky v. National Labour Court [31]; HCJFH 4601/95 Serrousi v. National Labour Court [32]).

It would appear that these two conditions are satisfied in our case. No one disputes that the question before us has wide-ranging ramifications for all of the workers that are employed in Israeli settlements in the occupied territories and that its solution affects the relationship between the Israeli employers in the territories on the one hand and both Israeli and Palestinian workers on the other. The issues in dispute give rise to legal questions that involve several branches of law, and especially the conflict of law rules and employment law. This case requires a clear statement of how the ‘strongest ties’ test should be formulated and applied in general, and in particular how it should be applied in the field of employment law in the reality that prevails in certain parts of the territories. Moreover, applying Israeli law to the Palestinian workers is necessitated by the principle of equality and by the fundamental purpose of eliminating improper discrimination in the work market. It is thereby based on the basic principles of the legal system. Justice therefore requires intervention in the conclusions of the National Labour Court.

I would therefore propose to my colleagues that we grant the petition and make an absolute order setting aside the judgment of the National Labour Court and holding that, in the circumstances of the cases before us, Israeli law governs the employment relationship between the Israeli employers and the Palestinian workers who are inhabitants of the territories.

 

 

President D. Beinisch

I agree.

 

 

Justice E.E. Levy

I agree.

 

 

Justice A. Grunis

I agree.

 

 

Justice M. Naor

I agree.

 

 

Justice E. Arbel

I agree.

 

 

Justice E. Hayut

I agree.

 

 

Justice S. Joubran

1.    I agree with the opinion of my colleague, Vice-President E. Rivlin, that the petition should be granted. As I shall clarify below, I accept the petitioners’ claim that the ruling of the National Labour Court creates discrimination between Palestinian workers and Israeli workers who are carrying out the same work but receiving different wages and employment benefits. I also agree that it is important to determine a uniform rule for the employment of Palestinian workers by Israeli employers in Israeli settlements in the occupied territories.

2.    The main question that we need to decide in this petition concerns the law that applies to a claim brought by workers, who are inhabitants of Judaea and Samaria but not Israeli citizens, against an employer that is a local authority listed in the schedule to the Administration of Local Authorities (Judaea and Samaria) Order (no. 892), 5741-1981 (hereafter: ‘the schedule’). I accept the analysis of my colleague the vice-president, from which it can be seen that in view of the special character of employment law, applying the ‘strongest ties’ test in our case leads to the conclusion that the petitioners’ employment contracts should be governed by Israeli law. Notwithstanding, because of the importance of the issue, I would like to emphasize several points that arise from the opinion of my colleague the vice-president with regard to the application of the principle of equality in this case.

3.    It is well known that this court has held on many occasions that the principle of equality is one of the most basic principles of the State of Israel. This court has held in the past that ‘the right to equality is one of the most important human rights. It is “the heart and soul of our whole constitutional regime” ’ (Bergman v. Minister of Finance [22], at p. 698 {18}). Indeed, ‘it is common knowledge that equality is one of the basic values of the state. It lies at the heart of social life. It is one of the pillars of democracy’ (see Adalah Legal Centre for Arab Minority Rights in Israel v. Tel-Aviv Municipality [25], at p. 415; HCJ 10026/01 Adalah Legal Centre for Arab Minority Rights in Israel v. Prime Minister [33], at p. 39). It is the supreme principle for the interpretation and implementation of statutes (HCJ 240/98 Adalah Legal Centre for Arab Minority Rights in Israel v. Minister of Religious Affairs [34], at p. 177).

In Supreme Monitoring Committee for Arab Affairs in Israel v. Prime Minister [21], I said inter alia that:

‘Of the essence of equality and the deleterious effect of discrimination it has been said that —

“… equality is a basic value for every democracy… it is based on considerations of justice and fairness… the need to maintain equality is essential for society and for the social consensus on which it is built. Equality protects the government from arbitrariness. Indeed, there is no force more destructive to society than the feeling of its members that they are being treated unequally. The feeling of inequality is one of the most unpleasant feelings. It undermines the forces that unite society. It destroys a person’s identity” (per my colleague Justice A. Barak in Poraz v. Mayor of Tel-Aviv-Jaffa [35], at p. 330).

In the same spirit it has been said that —

“… (True or perceived) discrimination leads to feelings of unfair treatment and frustration, and feelings of unfair treatment and frustration lead to envy. And when envy comes, good judgment is lost… We are prepared to suffer inconvenience, pain and distress if we know that others too, who are our equals, are suffering like us and with us; but we are outraged and cannot accept a situation in which others, who are our equals, receive what we do not receive” (per my colleague Justice M. Cheshin in C.A.L. Freight Airlines Ltd v. Prime Minister [36], at pp. 203-204).’

 Likewise, the Declaration Concerning the Aims and Purposes of the International Labour Organization of 10 May 1944 (the Declaration of Philadelphia) states that ‘labour is not a commodity,’ because of the international recognition of the need to respect human dignity, including equal opportunities in employment, as paramount measures of creating a proper employment environment:

‘The Conference affirms that —

(a) All human beings, irrespective of race, creed or sex, have the right to pursue both their material well-being and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity.’

This recognition constituted the basis for the later conventions of the International Labour Organization, which were adopted by the community of nations. Thus, for example, convention 111 of the International Labour Organization concerning the prohibition of discrimination in employment and occupations, which has been adopted by 141 countries, including the State of Israel on 12 January 1959, defined discrimination as follows:

‘Article 1

(1) For the purpose of this Convention the term “discrimination” includes —

(a) any distinction, exclusion or preference made on the basis of race, colour, sex, religion, political opinion, national extraction or social origin, which has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation;

…

(3) For the purpose of this Convention the terms “employment” and “occupation” include access to vocational training, access to employment and to particular occupations, and terms and conditions of employment.’

Discrimination (Employment and Occupation) Convention, 1958.

Similarly, the Universal Declaration of Human Rights enshrined the international recognition of the principle of equality between human beings and the prohibition of discrimination on the basis of national or social origin:

‘Article 1

All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.

Article 2

Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status. Furthermore, no distinction shall be made on the basis of the political, jurisdictional or international status of the country or territory to which a person belongs, whether it be independent, trust, non-self-governing or under any other limitation of sovereignty.’

Universal Declaration of Human Rights (10 December 1948).

4.    In our case, the decision of the National Labour Court gives rise to the result that the only difference between the Palestinian workers and the Israeli workers — with regard to the law that governs their employment contracts — is the fact that the Palestinian workers are Palestinians living in the Palestinian Authority, whereas the Israelis are citizens of Israel.

This distinction on the basis of national identity for the purpose of deciding the law that is applicable to the employment contracts is, in my opinion, inappropriate and amounts to prohibited discrimination. In my opinion, all of the workers of the local authority, whether they are Israeli or Palestinian, should be governed by the same law, which in this case is Israeli law. This will lead to an equitable result that makes no distinction on the basis of nationality, in the spirit of the values of the State of Israel and in accordance with the spirit of the Basic Law: Human Dignity and Liberty.

5.    It was held by this court in HCJ 6924/98 Association for Civil Rights in Israel v. Government of Israel [37], at pp. 26-27, that:

‘The court has given a broad meaning to the principle of equality in a whole host of judgments, and it has applied it to almost every type of distinction between human beings on the basis of improper criteria. Thus, for example, a distinction between persons who apply to receive a subsidy according to their place of residence or according to the date of the application may be considered a violation of the principle of equality. But the original meaning of the principle of equality, and I think that this is also the precise meaning, is narrower. In this sense, which is accepted in other countries, the principle of equality applies to a limited list of defined grounds that can be called the classic grounds of equality, or, as Justice M. Cheshin calls them, the generic grounds of equality. Examples of these are religion, race, nationality and sex: every person is entitled to equality irrespective of religion, race, nationality or sex. The principle of equality in this sense, as distinct from the broad sense, is considered in many countries, and ought to be considered, a constitutional right. It is for good reason that the Declaration of the Establishment of the State of Israel proclaims… the commitment of the state to uphold “complete social and political equality of rights for all its citizens irrespective of religion, race and sex.”

A breach of the principle of equality in the narrow sense is considered especially serious. As Justice M. Cheshin said in the second Women’s Network case… (at pp. 658-659):

“Another example of generic discrimination [in addition to discrimination against a woman because she is a woman] is discrimination against a person because of the colour of his skin or because of his race. Generic discrimination, as has already been said, is discrimination that deals a mortal blow to human dignity.”

See also Kadan v. Israel Land Administration [24] … at pp. 275-276.

The same is true of discrimination against Arabs because they are Arabs, and it makes no difference whether the discrimination is based on religion or nationality. This is a violation of the principle of equality in the narrow sense. It is therefore particularly serious.

The principle of equality in this sense is the essence of democracy. Democracy requires not only one vote per person on election day, but also equality for everyone at all times. The true test of the principle of equality can be found in attitudes towards religious, national or any other minority. If there is no equality for the minority, there is also no democracy for the majority.

The same is also true with regard to the question of equality for Arabs.’

(Emphases added).

6.    It is my opinion that even though the work was not carried out in the territory of the State of Israel, but in the territory occupied by the Israel Defence Forces, which is outside the State of Israel, this cannot work to the detriment of the Palestinian workers, and where there is no express intention in the employment contracts between the parties, Israeli law should apply. Obviously there is nothing to prevent different workers receiving different salaries that are based on the quality of their work or any other relevant difference, but this may not be done because of their ethnic origin or group.

7.    In our case, it seems to me that applying a foreign law to the Palestinian workers, while Israeli workers are governed by Israeli law, violates the basic rights of the Palestinian workers and leads to discrimination against them — in relation to the Israeli workers — because they are Palestinians, even though all of the workers work side by side. Discrimination on the basis of nationality was described by Dr M. Karayanni in The Influence of the Conflict of Law Process on International Jurisdiction (2002), at p. 271, in the following terms:

‘Therefore, if the law that is applied in the other forum conflicts with the “principles of the lifestyle of the local society,” because it violates the basic principle of equality between the sexes or the best interests of the child, or because it is discriminatory on the grounds of race, nationality or religion, it may be assumed that the original forum will refrain from compelling the parties to litigate before the other forum by accepting a claim of forum non conveniens. This is also true if the norm that will be applied in the other forum violates the “basic values of morality, justice, freedom and fairness…”.’

8.    When we are speaking of employment relations, these remarks are doubly valid, since it is well known that the Israeli legislature saw fit to protect the worker by means of binding statutes that the worker cannot contract out of, in which the legislature took into account the best interests of the worker and sought to protect him from exploitation by the employer. For these reasons it enacted statutes such as the Protection of Wages Law, 5718-1958, the Women’s Employment Law, 5714-1954, the Hours of Work and Rest Law, 5711-1951, and other similar statutes.

9.    Applying the foreign law violates the basic rights of the Palestinian workers, contrary to Israeli employment law. The National Labour Court de facto deprived the Palestinian workers that are employed by the Givat Zeev Local Council of the protection that the Israeli legislature saw fit to give Israeli workers. In my opinion, removing this protection in the circumstances of the case constitutes improper discrimination and it de facto creates a distinction that is neither objective nor ethical in the employment terms of Israeli workers as compared to Palestinian workers, so that the same employer applies different laws, one of which benefits the worker whereas the other does not.

10. In my opinion, since employment relations are determined by rights and duties that are imposed on the parties, an Israeli authority that acts under the law may not discriminate between workers of different nationalities that do the same work, even on the basis of the principle of good faith and the principles of equality and justice. Since the principles of Israeli employment law are more favourable to the worker that the provisions of Jordanian law, in the circumstances of the case they should be preferred since they reflect the principles of employment law that protect the worker (see HCJ 663/78 Kiryat Arba Administration v. National Labour Court [38]).

The Rome Convention of 1980 also adopted this outlook for this very reason, namely that the worker should be given maximum protection. The purpose of article 6 is to prevent a situation in which a worker, who comes from a country where the employment conditions are worse than in the country where he works, becomes a victim of discrimination. The assumption is that a worker will not go from a wealthy country to a poor one, unless it is worth his while, in which case he does not need the protection of the law.

Article 6 of the Rome Convention of 1980 states the following:

‘Article 6 — Individual employment contracts

1. Notwithstanding the provisions of Article 3, in a contract of employment a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable under paragraph 2 in the absence of choice.

2. Notwithstanding the provisions of Article 4, a contract of employment shall, in the absence of choice in accordance with Article 3, be governed:

(a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or

(b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated;

unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country.’

EC Convention on the Law Applicable to Contractual Obligations (19 June 1980).

11. In the case before us, it is true that we are speaking of inhabitants of the territories who are not generally subject to Israeli law and who are doing work in a place that from a geographic viewpoint lies outside the territory where Israeli law applies. But in practice the Israeli enclaves have the legal status of Israeli towns, at least for the purpose of the application of Israeli law, and especially employment law. Workers who have Israeli citizenship and who work in these enclaves are subject to Israeli employment law, with all that this implies. Therefore, in view of what we said above with regard to the principle of equality, no distinction may be made between these workers and their Palestinian colleagues, who differ from them in nothing other than their national identity.

12. In conclusion, for all of the aforesaid reasons I agree with the opinion of my colleague the vice-president that the petition should be granted and the order should be made absolute.

 

 

Justice A. Procaccia

I agree with the opinion of my colleague Vice-President Rivlin and with the remarks of my colleague Justice Joubran.

 

 

Petition granted.

27 Elul 5768.

10 October 2007.

 

HCJ 10843/04

1. Hotline for Migrant Workers

2. Kav LaOved Worker’s Hotline

v.

1.     Government of Israel

2.     Minister of Interior

3.     Minister of Industry, Trade and Employment

4.     Yilmazlar International Construction Tourism and Textile Co. Ltd

5.     Israel Military Industries Ltd (IMI)

 

 

The Supreme Court sitting as the High Court of Justice

[19 September 2007]

Before Vice-President E. Rivlin and Justices E.E. Levy, E. Hayut

 

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

 

Facts: Within the framework of an agreement between the fifth respondent and the Turkish Ministry of Defence, the State of Israel undertook that the fourth respondent would be given permits by the Israeli authorities to employ Turkish workers in Israel in the construction industry. According to the terms of these permits, the Turkish workers are only permitted to be employed in Israel by the fourth respondent. Following the decision of the court in Kav LaOved Worker’s Hotline v. Government of Israel [1], which set aside arrangements that restricted foreign workers in Israel to a specific employer as a violation of their human rights, the petitioners challenged the restrictive arrangement relating to the Turkish employees of the fourth respondent.

 

Held: (Majority opinion — Vice-President Rivlin and Justice Hayut) The arrangement in this case differs from the restrictive arrangements addressed in Kav LaOved Worker’s Hotline v. Government of Israel [1] in two major respects. First, unlike the foreign workers in Kav LaOved Worker’s Hotline v. Government of Israel [1], the Turkish workers do not pay substantial sums to manpower contractors to be allowed to come to Israel. Second, the rights of the Turkish workers are subject to the supervision of both the Turkish authorities and the Israeli authorities, which both have an interest in ensuring that the Turkish workers’ wages are paid and remitted to Turkey.

(Minority opinion — Justice Levy) The fact that the Turkish workers are not required to pay substantial sums to manpower contractors in order to come to work in Israel does not derogate from the fact that they are subject to a restrictive arrangement that prevents them from changing employers in Israel. The result of this is that they are unable to realize their market value in the work market. The restrictive arrangement thus violates the rights of the Turkish workers, and this violation is unconstitutional.

 

Petition denied, by majority opinion (Vice-President Rivlin and Justice Hayut), Justice Levy dissenting.

 

Legislation cited:

Companies Law, 5759-1999, s. 2.

Contracts (General Part) Law, 5733-1973, s. 30.

Courts (Mediation) Regulations, 5753-1993, r. 4A.

Employment Service Law, 5719-1959.

Hours of Work and Rest Law, 5711-1951.

 

Israeli Supreme Court cases cited:

[1]        HCJ 4542/02 Kav LaOved Worker’s Hotline v. Government of Israel [2006] (1) IsrLR 260.

[2]        HCJ 8155/03 A. Arenson Ltd v. Director of the Foreign Workers Department (not yet reported).

[3]        HCJ 3541/03 A. Dori Engineering Works Ltd v. Government of Israel (not yet reported).

[4]        HCJ 1963/04 Resido Fi. Bi. Ltd v. Ministry of Industry, Trade and Employment (not yet reported).

[5]        HCJ 10692/03 Plassim Development and Construction Co. Ltd v. Prime Minister (not yet reported).

[6]        CA 11152/04 Pardo v. Migdal Ltd [2006] (2) IsrLR 213.

[7]        CrimA 11196/02 Frudenthal v. State of Israel [2003] IsrSC 57(3) 40.

[8]        CrimA 7757/04 Borstein v. State of Israel [2005] IsrSC 59(5) 218.

[9]        LCA 267/06 Yilmazlar International v. Yagel (unreported decision of 9 January 2006).

[10]     HCJ 4999/03 Movement for Quality Government in Israel v. Prime Minister (not yet reported decision of 10 May 2006).

[11]     HCJ 1030/99 Oron v. Knesset Speaker [2002] IsrSC 56(3) 640.

[12]     CA 10078/03 Shatil v. State of Israel (not yet reported decision of 19 March 2007).

[13]     HCJ 6427/02 Movement for Quality Government in Israel v. Knesset (not yet reported decision of 11 May 2006).

[14]     HCJ 8111/96 New Federation of Workers v. Israel Aerospace Industries Ltd [2004] IsrSC 58(6) 481.

[15]     CA 105/92 Re’em Contracting Engineers Ltd v. Upper Nazareth Municipality [1993] IsrSC 47(5) 189.

[16]     CA 337/62 Riezenfeld v. Jacobson [1963] IsrSC 17(2) 1009; IsrSJ 5 96.

 

Israeli District Court cases cited:

[17]     LCA (TA) 2782/05 Yilmazlar International v. Yagel (unreported decision of 4 January 2006).

 

Israeli Magistrates Court cases cited:

[18]     CC 2992/05 (Ram) Yagel v. Nomdar (unreported decision of 4 September 2005).

 

Canadian cases cited:

[19]     Dunmore v. Ontario (Attorney General) [2001] 3 S.C.R. 1016.

 

For the first petitioner — N. Levenkron, Y. Berman.

For the second petitioner — Y. Livnat.

For respondents 1-3 — A. Helman.

For the fourth respondent — T. Benenson.

For the fifth respondent — R. Wolf.

 

 

JUDGMENT

 

 

Vice-President E. Rivlin

The background to the petition and the arguments of the parties

1.    In 2002, an agreement was signed between Israel Military Industries Ltd (IMI) and the Turkish Ministry of Defence to upgrade 170 Turkish Army tanks, for a sum of approximately 700 million dollars. The agreement included an undertaking on the part of the State of Israel to make reciprocal purchases in an amount of approximately 200 million dollars over a period of ten years, i.e., approximately 20 million dollars per annum. An undertaking of this kind for a reciprocal purchase, which is called an ‘offset arrangement,’ is intended as a rule to compensate local industry for sending sources of income and employment out of the country, as well as to create an economic balance so that together with the purchase from a party outside the country, foreign currency will also travel in the opposite direction, which in our case is from Israel to Turkey. There is therefore no dispute that, without the undertaking to make a reciprocal purchase, the Turkish Ministry of Defence would not have approved the transaction as a whole.

In 2003, it was agreed between IMI and the Turkish Ministry of Defence that a part of the offset undertaking to which IMI committed itself would be realized by means of granting a permit to the fourth respondent, Yilmazlar International Construction Tourism & Textile Co. Ltd (hereafter: the Yilmazlar company), a company registered in Israel with Turkish owners, to employ workers from Turkey in the construction industry. Within the framework of the agreement it was stipulated that the wages of the Yilmazlar company’s workers, less the amounts of money that the employees would keep for themselves for the purpose of their living expenses in Israel, would be sent directly to Turkey, and would be deducted from the offset debt. In order to ensure that most of the amounts that the Yilmazlar company’s workers would receive would indeed be sent to Turkey and be deducted from the offset liability, it was stipulated that at least 90 per cent of the Turkish workers who would be employed by the Yilmazlar company within the framework of the agreement would have families to support.

The aforesaid agreement was enshrined in government decision no. 2222 of 11 July 2004 (hereafter: the government decision). It was stipulated in the decision that the Yilmazlar company would receive a special permit to employ 800 foreign workers from Turkey in the construction industry during the years 2004-2007, without this leading to an increase in the overall maximum number of foreign workers in the construction industry. The petition before us was filed against this decision.

2.    The petitioners before us — the Hotline for Migrant Workers and the non-profit organization Kav LaOved Worker’s Hotline — are challenging the aforesaid decision of the government. In their petition, they explain that the workers of the Yilmazlar company are not subject to the procedures that apply to other foreign workers in the construction industry in Israel with regard to the possibility of changing employers, but they are subject to the arrangement that existed before the aforesaid procedures were formulated. According to the previous arrangement, a worker may work solely and exclusively for the employer for whom he came to work in Israel, and when the contract between the worker and that employer ends, the validity of the worker’s entry visa and his permit to live in Israel expires. As a result of this, the workers of the Yilmazlar company are ‘bound’ to their employers. In view of the aforesaid, the petitioners demand that respondents 1-3 (hereafter: the respondents) apply to the workers of the Yilmazlar company the arrangements that apply to the other foreign workers in the Israeli construction industry. In particular the petitioners demand that the ‘change of employer’ procedure and the ‘closed skies’ procedure should be applied to the workers of the Yilmazlar company. The ‘change of employer’ procedure, it should be clarified, was intended to allow a worker to submit an application to change employers before he leaves his lawful employer or immediately after leaving him, if he proves that he was unable to submit the aforesaid application before he left. The procedure stipulates conditions that allow a worker to leave the employer whose name is stated in his permit and change over to a different employer, subject to the conditions and requirements stipulated therein. The ‘closed skies’ procedure allows in certain circumstances a worker who has been arrested for illegal residence in Israel to be released from custody and to obtain work with another employer. This is intended to provide a solution for employers who have a shortage of workers, in view of the closed skies policy. The petitioners therefore argue that the government decision, which provides that the Yilmazlar company’s workers shall not be subject to the aforesaid procedures, is an unreasonable decision that violates the basic constitutional rights of the workers.

3.    The petitioners give details in their petition of several cases in which the Yilmazlar company’s workers applied, because of allegedly harsh and illegal conditions of work and wages, to change over to another employer within the framework of the ‘closed skies’ procedure. The applications of these workers were refused — so it is alleged — because the state relied on the government decision that is the subject of the petition. The petitioners argue that the Yilmazlar company’s workers suffer from harsh work conditions and meagre, illegal wages. They explain that the Yilmazlar company’s workers are recruited for the work in Turkey and are immediately required to sign a several-page agreement, without being given the possibility of reading the agreement and without being given a copy of it. It is alleged that the workers’ wages, without overtime, are less than the minimum wage required by law. The workers are required to sign a blank promissory note, which remains in the possession of the Yilmazlar company and allows it to attach the worker’s money and property unconditionally and for whatever amount that it sees fit to write in the promissory note. The petitioners further argue that when the workers come to Israel, their passports are taken from them; that in the first few months of their work, the Yilmazlar company does not pay their wages; that they work many hours each day and in rare cases they are even required to work almost a whole day without interruption; that the workers are not paid for overtime; that in some cases the workers are forbidden to leave the site after the workday ends without the approval of the work manager or they are required to return home no later than 10:00 p.m.; that at some sites the workers are forbidden to have cellular telephones; that if workers make a complaint, they are fined by the company and threatened that they will be dismissed and sent back to Turkey; and that the company has the habit of holding ‘threat meetings’ from time to time. The petitioners claim that the respondents’ policy, according to which they do not allow the Yilmazlar company’s workers to change over to another employer, gives Yilmazlar absolute power over its workers, who are compelled to suffer any condition and any stricture that is imposed upon them. They also say that the petition is filed as a public petition and that the petitioners do not include any worker of the Yilmazlar company who has been personally harmed by the company’s policy. The reason for this, according to the petitioners, is that the Yilmazlar company has succeeded in exploiting its absolute power over the workers in order to suppress any possibility of a ‘revolt’ against its conditions of work, as well as against the restriction upon changing over to another employer.

The petitioners raise a host of arguments against the government decision. Inter alia, they argue that the government decision with regard to the restrictive arrangement was made ultra vires and is contrary to the provisions of the Employment Service Law, 5719-1959, and contrary to the decision of a previous government; that it is a restrictive arrangement that violates the dignity and liberty of Yilmazlar’s workers, the freedom of occupation, the freedom of contracts and their freedom to enter into contracts; that the decision is contrary to public policy, contrary to the principle of equality and unreasonable. Finally they are of the opinion that we ought to decide that the offset transaction that was signed between the Government of Israel and the Government of Turkey is nothing more than trafficking in human beings.

4.    The state argues at the beginning of its reply that no foreigner has an inherent right to work in Israel, and a foreigner certainly does not have an inherent right to work in any place of work where he wishes to work, for any employer whom he chooses. It argues that every state may make its willingness to allow a foreign national to enter and work in it conditional upon him working only for a specific employer for whose benefit a visa was issued to the worker. On the merits, the state is of the opinion that the government decision does not violate any inherent rights of the company’s workers and that there are objective and reasonable grounds that justify not applying the ‘closed skies’ procedure and the ‘change of employer’ procedure to the Yilmazlar company’s workers. The state argues that there are significant differences between the Yilmazlar company’s workers and other foreign workers. First, the state says that the Yilmazlar company’s workers do not, when they enter into a contract with the company, pay large sums of money for their actual employment in Israel. This is different from other foreign workers, who pay huge sums to manpower companies or other agents in return for their actual employment in Israel, and they are therefore subject to the possibility of exploitation by the employer. In view of the aforesaid, the state argues that a worker who is not satisfied with the terms of his employment with the Yilmazlar company and wishes to terminate his employment with it can return to Turkey without suffering serious economic loss as a result, and there is no ground or reason that justifies allowing him to remain in Israel and to work here. Second, the state claims that the Yilmazlar company’s workers are different from other foreign workers in Israel in that they are employed in Israel within the framework of an agreement that was made with the approval of the Turkish government and they are entitled to the protection of the Turkish government with regard to their rights as workers. Third, the state further argues that the State of Israel has a clear special interest in protecting the rights of the Turkish workers to earn proper wages and to receive their wages on time. It is emphasized that the State of Israel attributes great importance to carrying out the offset undertaking within the framework of the agreement with Turkey, both because of the serious economic consequences that could result from a breach of the undertaking and because of the negative consequences that could result from a breach of the undertaking in the sphere of Israel’s foreign relations with Turkey. The respondents say in this regard that the Turkish Ministry of Defence and the Israeli government check the conditions of employment of the Yilmazlar company’s workers. Thus a delegation from the Turkish Ministry of Defence visited Israel in order to check the conditions of employment of Yilmazlar’s workers. In addition, the Director of the Foreign Workers Department at the Ministry of Industry, Trade and Employment (hereafter: the Ministry of Industry) ordered a comprehensive investigation to be made of the conditions of employment of Yilmazlar’s workers at the various sites of the company throughout Israel. It is claimed that the findings of this investigation showed that, as a rule, the company’s workers are employed on fair conditions, their wages are not less than the minimum wage provided by law and their housing conditions at the company’s sites are reasonable. The state clarifies that where problems were found, a further check was made and this showed that most of the problems had been corrected, and it declares that, in any case, the department will continue to consider whether to take action pursuant to its powers under the law to prevent additional problems in the future. Finally, the state claims that the petitioners did not succeed in establishing their claim with regard to a systematic violation of the rights of the Yilmazlar company’s workers, and that in any case, even if there is a basis to their claims, nothing prevents the workers who are dissatisfied with their terms of employment from leaving their work and returning to Turkey.

5.    The Yilmazlar company, the fourth respondent, requests in its reply that we deny the petition against it in its entirety. Yilmazlar claims that the petitioners, in their innocence, have been deceived by parties that have economic interests — employers and manpower contractors — who wish to devise  a method of bringing foreign workers into the State of Israel, who will operate without supervision and in circumvention of the ‘closed skies’ policy of the Israeli government. Yilmazlar regrets the fact that the petitioners  made no contact with it requesting  to receive the relevant details and to clarify the truth of the claims raised against it. The company claims that the documents in its possession — salary slips, confirmations of the payment of wages by bank transfer, confirmations of direct payments to workers and work agreements — show that it fully complied with the employment laws, and that investigations that have been carried out, both by Turkish government authorities and by Israeli authorities, show this to be the case. Yilmazlar requests that we do not accept the affidavits of the three foreign workers on which the petition is based. It claims that a comparison of these affidavits with other affidavits, which were filed by workers in administrative petitions relating to them, show many contradictions and that many of the facts included in them are incorrect. Inter alia, Yilmazlar says that the workers keep their Turkish passports, which they claim was proved in the investigation carried out by the Ministry of Industry; that the workers, including the deponents, come to Israel after signing work agreements with Yilmazlar that are supervised and approved by the Turkish Ministry of Labour; that the terms of the agreements with them, including increases in wages, are punctiliously observed by Yilmazlar; that the Turkish Ministry of Employment controls the travelling of Turkish workers to Israel and supervises the procedure carefully; and that the fact that many of the workers who return to Turkey, including one of the petitioners’ deponents, wish to return to Israel and to be reemployed specifically by Yilmazlar shows that the employment is fair and the wages are proper and lawful. Yilmazlar claims that the offset agreement constitutes a golden economic opportunity for the Turkish workers, and that granting the petition and setting aside the agreement will inflict a mortal blow upon hundreds of Turkish workers who are employed by the company.

6.    IMI, which was joined as a party to the petition at a later stage, is also of the opinion that it should be denied. It argues that the petition should be denied in limine because of delay in filing it, both because it was filed more than four months after the date on which the government decision was made, and because IMI was joined as a party to the proceedings another four months thereafter. IMI explains that the realization of the undertaking to make a reciprocal purchase — in an amount of tens of millions of dollars, and in accordance with predetermined timetables — involves lengthy and complex planning. It argues that setting the government decision aside will case IMI real and serious damage, since it will have difficulty, and maybe will not succeed at all, in complying with its undertakings to make a reciprocal purchase within the timetable that applies in this regard. IMI points out that Turkey is one of its important strategic targets. It argues that a failure to comply with the undertakings that IMI took upon itself is likely to result in fines in a sum of millions of dollars; damage to its chances of winning a further order for the project; the inclusion of IMI on the ‘blacklist’ of the Turkish defence establishment; exclusion from participation in additional tenders in Turkey in the military-security sphere; damage to IMI’s additional projects in Turkey; and damage to other joint projects between Israel and Turkey and the strategic relationship between the countries.

Decision no. FW/3 of the ministerial committee and Government Decision no. 4024

7.    Before we turn to consider the merits of the petition, we should discuss several developments that have occurred since the court began  hearing the petition. First, on 7 September 2005, the state filed an update statement, in which it gave notice that on 7 June 2005 the ministerial committee for the employment of foreign workers adopted a decision concerning the workers of the Yilmazlar company (hereafter: ministerial committee decision no. FW/3), which states the following:

‘1.          a.         Further to Government Decision no. 2446 of 15 August 2004 and Government Decision no. 2222 of 11 July 2004 [the decision that is the subject of this petition], it shall be determined that the permits that were given to Yilmazlar… to employ 800 foreign workers until the end of 2007 shall not be subject to the procedures concerning the employment of foreign workers through licensed corporations, and the Minister of Industry, Trade and Employment shall be directed to grant an exemption to the Yilmazlar company from paying the permit fees for employing those workers. In addition, the Ministry of the Interior shall be directed not to apply the transfer procedure and the change of employer procedure to the Yilmazlar company’s workers, subject to the decision of the Supreme Court in petition HCJ 10843/04, and at the same time the Director of the Foreign Workers Department at the Ministry of Industry, Trade and Employment shall be directed to carry out special periodic checks of the conditions according to which the company’s workers are employed, in order to ensure the payment of wages and ancillary benefits to the workers according to law.

b.            It is clarified that only the government has the power to approve, in very exceptional cases, any additional arrangement for the bringing or the employment of foreign workers as a part of reciprocal purchase transactions.’

The update statement made it clear that the Minister of Finance submitted an objection to the aforesaid ministerial committee decision no. FW/3, and on 31 July 2005 the government adopted decision no. 4024 (hereafter: decision no. 4024), in which it decided, inter alia, to approve the aforementioned paragraph 1, which lies at the heart of this petition and which concerns the arrangement whereby the foreign workers are employed by the Yilmazlar company. The state, therefore, emphasizes that both the ministerial committee and the government directly considered the matter lying at the heart of the petition, and they decided, in the circumstances of the case, that the transfer procedure and the change of employer procedure should not apply to the 800 foreign workers who are employed by Yilmazlar. It is argued that the margin of discretion given to the government, as the executive branch of the state, with regard to the policy of employing foreign workers in Israel, is very broad. In view of the aforesaid, the state argues that Government Decision no. 4024 falls within the margin of reasonableness, and that there are no legal grounds for the court's intervention.

8.    For their part, the petitioners filed a response to the update statement, in which they clarified that they stand behind everything stated in their petition and insist upon the relief sought therein. The petitioners claim that the decision of the ministerial committee and Government Decision no. 4024 do not change the position of Yilmazlar’s workers. Moreover, the petitioners emphasize that other foreign workers who work in the construction industry are no longer employed by construction companies, but through licensed corporations who supply manpower to the construction companies. As we said above, these workers are subject to the ‘closed skies’ procedure and the ‘change of employer’ procedure, which allow workers to change over from one manpower company to another once every three months. The petitioners argue that, by contrast, Yilmazlar remains the only construction company in Israel which has permits to employ non-Israeli construction workers directly, and whose workers suffer from being absolutely bound to their employer and from a continued violation of their rights.

9.    On 8 February 2006, the petitioners filed an application to attach documents, which they claim are capable of shedding light on the harsh consequences of the arrangement under discussion in the petition, and of the violation of the rights of the Yilmazlar company’s workers. The documents that the petitioners wish to attach are the decisions of three instances of the courts in an action filed by the village of Yagel against the Yilmazlar company. In the action, the Yilmazlar company was requested to vacate a building in the village in which it had housed its workers. It was alleged that the company housed approximately one hundred of its workers in a building designed as a home for one family, thereby violating their rights. The petitioners claim that the Magistrates Court, the District Court and finally this Court accepted the factual contentions of the village of Yagel in this regard.

In response, Yilmazlar argues that the housing conditions of its workers are not a part of the petition, and the facts of this matter should be examined, if at all, in other proceedings. It argues that the citations from the judgments that the petitioners wish to attach are obiter remarks that were made within the framework of the hearing for a temporary order, before the actual claim was tried. Finally, Yilmazlar argues that inspectors from the Department for Enforcing the Employment Laws at the Ministry of Labour and Social Affairs made an inspection of the housing conditions of the workers who were housed in the village of Yagel. They argue that that the report that was compiled shows that the housing conditions of the workers were satisfactory and that Yilmazlar passed the inspection after correcting minor defects. Yilmazlar therefore wishes to attach to its submissions the report of the inspection of the foreign workers’ housing by the Department for Enforcing the Employment Laws of the Ministry of Labour and Social Affairs of 8 November 2005, and the report of the inspection after correcting the defects, in order to prove that there is no basis to the petitioners’ claims.

The judgment in Kav LaOved Worker’s Hotline v. Government of Israel [1]

10. On 40 March 2006, judgment was given by this Court in HCJ 4542/02 Kav LaOved Worker’s Hotline v. Government of Israel [1]. The petition in Kav LaOved Worker’s Hotline v. Government of Israel [1] was filed inter alia by the petitioners before us. In that petition it was claimed that the arrangement that bound foreign workers in Israel to one employer seriously violated the rights of those workers. The Supreme Court granted the petition. In a comprehensive judgment (written by Justice E. Levy, with the agreement of President A. Barak and Vice-President M. Cheshin), the court first considered the realities of the employment of foreign workers in Israel. The position of the workers was described (in paragraph 27 of the judgment) as follows:

‘A consideration of the reality of employing foreign workers in Israel during these years reveals a problematic and troublesome picture. It transpires that workers from foreign countries are able to come to Israel ab initio only after paying large amounts of money — sometimes involving the mortgaging of their property and taking out loans — to manpower providers and agencies. These amounts of money are shared between the manpower company in the country of origin and the manpower providers in Israel (State Comptroller, Annual Report no. 53b for 2002, at pp. 655-656; LabC (Hf) 1565/05 Rosner v. Ministry of Industry, Trade and Employment). In this manner:

“The profit involved in actually bringing the foreign workers from abroad (which arises from payments that the foreign workers are prepared to pay in their country of origin in return for the right to work in Israel) induces various manpower providers to bring foreign workers to Israel in as large a number as possible, whether there is work for them in Israel… or not” (Recommendations of the Inter-ministerial Committee, at p. 11).

The wages paid to foreign workers are in most cases low, and frequently even lower than the minimum wage. The State Comptroller’s Annual Report for 1999 found that:

“The main economic incentive for employing foreign workers is that they cost less than the Israeli worker, and that they are prepared to work without social benefits and on terms that are unacceptable to the Israeli worker… Foreign workers are the most vulnerable sector, from the viewpoint of breaching the Minimum Wage Law. Exploitation of foreign workers by employers can also be seen from a survey conducted by the Manpower Planning Authority in 1998 with regard to foreign workers in Israel without a permit. Approximately 70% of those interviewed earned less than the minimum hourly wage…” (State Comptroller’s Annual Report for 1999, at pp. 278-279).

Even the work and subsistence conditions offered to foreign workers are poor, and many of them find themselves living in crowded accommodation and unpleasant living conditions (see State Comptroller’s Annual Report for 1995, at pp. 476, 493; CrimC (Jer) 106/03 State of Israel v. Mordechai Aviv Construction Enterprises Ltd). They do not benefit from the effective protection of protective legislation (see O. Yadlin, “Foreign Work in Israel,” Menachem Goldberg Book (A. Barak et al. eds., 2001), at p. 350 and the references cited there; LabC (BS) 1347/03 Atzova v. Sansara Health Club Management Ltd); they are exposed to abuse, exploitation and oppression (see LCrimA 10255/05 Hanana v. State of Israel; see also the Report of the Ministry of Justice, Ministry of Labour and Social Affairs and the Ministry of Foreign Affairs, Implementation of the International Covenant on Economic, Social and Cultural Rights (1997), at p. 27), and they find it difficult, inter alia because of a lack of the knowledge and the funds that are required in order to pursue a legal recourse, and because of their great dependence on their employers, in bringing their cases to the courts (see LabA 1064/00 Kinianjoi v. Olitziki Earth Works, at p. 638).’

Against the background of this harsh reality, the court reached the conclusion that the arrangement that restricts a worker to one employer violates the basic rights of the foreign workers to dignity and liberty. The court explained that in view of the large sums that the worker invests in acquiring the possibility of working in Israel, the connection between the residency permit in Israel and working for one employer seriously violates the foreign worker’s autonomy of will, which constitutes a central part of the human right to dignity. It was held that the restrictive employment arrangement means that the act of resignation, which is a legitimate act and a basic right of every worker, is accompanied by a serious sanction — the person who wishes to terminate the employment relationship loses the licence to live in Israel. This involves a violation of the worker’s right to operate in the work market as a free agent. The judgment explains that:

‘Associating the act of resignation with a serious resulting harm is equivalent to denying the individual of the possibility of choosing with whom to enter into a contract of employment, and compelling a person to work in the service of another against his will. This not only violates the right to liberty, but it creates a unique legal arrangement that is by its very nature foreign to the basic principle of employment law, the moral value of the employment contract and the basic purpose of the employment contract in guaranteeing the economic survival, dignity and liberty of the worker. It gives the employer of the foreign worker an enforcement tool that is unrecognized in our legal system, which has freed itself of the idea of enforcing employment contracts (see s. 3(2) of the Contracts (Remedies for Breach of Contract) Law, 5731-1970). It deprives the worker of the basic ability to negotiate for the remuneration that he will receive for his work potential, and for the terms of his employment and his social benefits’ (Kav LaOved Worker’s Hotline v. Government of Israel [1], at para. 32).

The court went on to hold that the arrangement that binds a worker to one employer does not satisfy the proportionality test. In view of the aforesaid, the court ordered the respondents:

‘…to formulate a new employment arrangement, which is balanced and proportionate, with regard to foreign workers in these industries. This should not be based on the restriction of the worker who comes to Israel to a single employer, and it should refrain from linking the act of resigning with any sanction, including the loss of the status in Israel.’

11. Following the judgement in Kav LaOved Worker’s Hotline v. Government of Israel [1], the parties were asked to notify the court of their position with regard to the ramifications of the aforesaid judgment on the petition before us. From the statements of the parties it can be seen that both the petitioners and the respondents have not changed their positions. According to the petitioners, the judgment in Kav LaOved Worker’s Hotline v. Government of Israel [1] strengthens their petition and what is stated therein applies a fortiori to the specific restrictive arrangement of the Yilmazlar’s company’s workers. The petitioners are of the opinion that the arrangement that is the subject of this petition should also be set aside, since it is a unique and even more drastic arrangement than the arrangement that previously governed all  of the foreign workers in Israel. For their part, the respondents are of the opinion that Kav LaOved Worker’s Hotline v. Government of Israel [1] does not have any effect upon their response. According to them, there is a material and relevant difference between the workers of the Yilmazlar company and the other foreign workers, who are required to pay large sums of money in order to come to Israel. The respondents are of the opinion that in view of the special employment arrangements of the Yilmazlar workers, the additional supervision of their employment, the fact that that this is an exceptional and special arrangement and the fact that the arrangement is supposed to continue only until the end of 2007, a distinction should be made between the specific case in this petition and the general question considered in Kav LaOved Worker’s Hotline v. Government of Israel [1].

Consideration of the arrangement that applies to the Yilmazlar workers

12. No one disputes that the offset arrangement between the Turkish government and IMI, which is the background to this petition, involves important public interests of the State of Israel. Granting the petition, by ordering the state to apply to the workers of the Yilmazlar company the arrangements that apply to all the foreign workers in the construction industry, in so far as this concerns the ability to change employers, is likely to result in serious damage to essential interests of the state, since it will lead to one of two possibilities. The first possibility is that the Yilmazlar company will be given an opportunity to employ new workers from Turkey, as replacements for workers who leave it and change over to other employers. This course of action will allow foreign workers to be brought into Israel without any limit, which is completely contrary to the ‘closed skies’ policy that the government adopted in order to limit the number of foreign workers and to encourage Israelis to re-enter the work market. The respondents explain that this policy has, in the last two years, resulted in thousands of new Israeli workers joining the construction industry. It has also been approved in several decisions of this Court, which has held that it contains no flaw and that there are no grounds for court intervention (HCJ 8155/03 A. Arenson Ltd v. Director of the Foreign Workers Department [2]; HCJ 3541/03 A. Dori Engineering Works Ltd v. Government of Israel [3]; HCJ 1963/04 Resido Fi. Bi. Ltd v. Ministry of Industry, Trade and Employment [4]; HCJ 10692/03 Plassim Development and Construction Co. Ltd v. Prime Minister [5]). The second possibility available to the state is that it will not allow Yilmazlar to bring new workers from Turkey to replace those workers who have changed over to other employers. It should be noted that the employment of a worker who changes over to any employer other than the Yilmazlar company, which as we said above has Turkish owners, will not be credited to the implementation of the reciprocal purchase undertaking, unless the Turkish Ministry of Defence approves the identity of the employer. Consequently, this course of action will lead to a breach of the offset agreement with Turkey, and the respondents assert that it is likely to result in serious damage to IMI in particular, and to Israel’s foreign relations and security in general. In this regard, the state emphasized the great importance of the strategic relationship between the State of Israel and Turkey and the fact that Turkey is one of Israel’s most important allies.

13. Indeed, the concern that important interests of the state may be harmed carries great weight. However, in the case before us, I have reached the conclusion that in and of itself  this concern need not lead to the denial of the petition because I am persuaded that the petition is unjustified on its merits and that the rights of the foreign workers, whom the petitioners wish to protect, are not being violated to a degree that justifies our intervention.

The position of the Yilmazlar company’s workers is incomparably different from the position of the foreign workers whose case was considered in Kav LaOved Worker’s Hotline v. Government of Israel [1], because of a combination of several factors that are all present in our case. First, there is no dispute that the workers of the Yilmazlar company are not required to pay large sums of money in order to come to Israel for the purpose of working for Yilmazlar. In the judgment in Kav LaOved Worker’s Hotline v. Government of Israel [1], the court emphasized that:

‘The question whether the restrictive employment arrangement violates the rights of the employee to dignity and liberty cannot be considered in a vacuum. It should be considered in view of the reality of the employment of foreign workers in Israel. It should be sensitive to the complex circumstances that led to the possibility of foreign workers coming to Israel in the first place. It should take into account the special status of the group of foreign workers in the Israeli work market — a group that is composed of weak, “temporary,” poor and unorganized workers. It should take into account the huge disparity in forces between the foreign worker and the state that is allowing them to enter its work market on its terms , and the manpower agencies and companies that operate in this work market’ (Kav LaOved Worker’s Hotline v. Government of Israel [1], at paragraph 28; emphasis supplied).

Indeed, the court went on to discuss this reality. It explained that:

‘… foreign workers that come to Israel to work here do so against a background of economic distress and their desire to provide for their families. In the process of coming here, they are charged, not infrequently, large sums of money, which in terms of what is customary in their countries of origin are sometimes enormous, in return for arranging their coming and staying in Israel. For these reasons, deporting them from Israel before the worker has the opportunity of earning an amount of money that is at least sufficient to “cover” his debt is an action that deals a mortal economic blow to the worker and his dependents’ (Kav LaOved Worker’s Hotline v. Government of Israel [1], at paragraph 28; emphasis supplied).

Later the court said:

‘…according to the restrictive employment arrangement the residence permit given to the foreign worker who comes to Israel is conditional upon him working for a specific employer whose name is stipulated in the residence permit. A termination of the work for this employer, whatever the reason for it may be, means that the permit to reside in Israel expires. In view of the money and the effort that the foreign worker invests in “acquiring” the possibility of working in Israel for a fixed period, it is clear that this connection between the validity of the residence permit and the work for a single employer seriously violates the autonomy of his will…’ (Kav LaOved Worker’s Hotline v. Government of Israel [1], at para. 31; emphasis supplied).

The conclusion of the court in the aforesaid Kav LaOved Worker’s Hotline v. Government of Israel [1] was therefore based to a large extent on the factual background. In the case before us, as we have said, the position is different: the Turkish workers are not required to pay huge amounts to middlemen or to manpower companies in order to come to Israel to work for Yilmazlar. The opposite is true: Yilmazlar pays the cost of bringing the workers to Israel, including the costs of medical checks, flights to Israel and medical insurance. In view of the aforesaid, and as the respondents justly point out in their replies, an employee of the Yilmazlar company who is not satisfied with his conditions of employment may terminate his work relationship with the company, return to his country of origin, and this too is at Yilmazlar’s expense (except in exceptional cases where the worker is dismissed because of damage and loss that he deliberately and wilfully caused to the company), without the worker being encumbered by any significant debt. Indeed, a foreign worker who enters Israel within the framework of the offset arrangement does not have any acquired right to work in Israel; he certainly does not have an acquired right to work at any place of work that he wishes and for any employer that he chooses. Notwithstanding, a worker who has returned to Turkey can, if he so wishes, take the necessary steps in order to be employed by another Israeli employer, like any foreign national who wishes to be employed in Israel.

14. Moreover, I have been persuaded that there is a significant difference between the Yilmazlar workers and other foreign workers. This difference finds expression in a host of other parameters: the procedure of making a contract with Yilmazlar’s workers is carried out under the auspices and supervision of the Turkish government; the employment agreement with the workers is drafted and prepared by the Turkish Ministry of Labour together with the Turkish Ministry of Defence; the agreement is written in Turkish, the mother-tongue of the workers, and a copy of it is kept in the file that is maintained by the central management of the Turkish employment office; the work agreement is signed in Turkey as a three-party agreement by the worker, the Yilmazlar company and also a representative of the Turkish Ministry of Labour; the agreement grants the Yilmazlar workers a right to sue Yilmazlar even in Turkey. In this respect, their situation is also different from other foreign workers, since the deportation of the latter from Israel to their country of origin is likely to make it impossible for them to pursue their rights against their Israeli employer. With regard to the work conditions of the Yilmazlar company’s workers, the employment of these workers requires compliance with very strict conditions that were determined by the Turkish authorities. The respondents declare that the workers enjoy good working conditions, which includes receiving three meals a day, housing and medical insurance that are all paid for by Yilmazlar. The activity of the Yilmazlar company, in so far as it concerns the protection of the rights of the Turkish workers employed by it in Israel, is subject to the institutional supervision and strict review of several bodies, both on the Turkish side and on the Israeli side: the Turkish Ministry of Labour recruits the workers, prepares the work agreement with them and signs it, as aforesaid, as a third party, together with the worker and the Yilmazlar company. In this way, it is possible for the Turkish authorities to monitor the conditions in which the workers are employed. It was also stated that a delegation from the Turkish Ministry of Defence actually visited Israel in order to check the employment conditions of the Yilmazlar workers; the Turkish authority that supervises the offset arrangement supervises the transfers of the money and payments to the workers. The money (at least 75% of the workers’ salaries) is transferred to a central account that is managed in a bank in Turkey and from that account the money is transferred to the private accounts of the workers. From the Israeli side, there is an equal degree of supervision: IMI sends the Turkish authorities copies of all the transfers of money to the workers’ accounts and in return it benefits from a credit for the reciprocal purchase in the total amount of those transfers; the Israeli Ministry of Industry, which is responsible for the performance of the offset agreement, conducts inspections of the Yilmazlar company. As the state explained in its reply, the Foreign Workers Department at the Ministry of Industry carries out checks at the company’s sites throughout Israel. In the most recent check that was made, it was found that all of the company’s workers are employed in decent conditions, their wages are not less than the minimum wage provided by law and their housing conditions at the company’s sites are reasonable. The state also declared that in places where problems were found, a further inspection was made, and this showed that most of the problems had been corrected. The state further declared that the Foreign Workers Department will continue to check that measures are taken in accordance with its powers under the law in order to prevent additional problems in the future. It will be remembered that in decision no. FW/3 of the ministerial committee, which was approved in Government Decision no. 4024, it was stated that:

‘The Director of the Foreign Workers Department at the Ministry of Industry, Trade and Employment shall be directed to carry out special periodic supervision of the conditions of employment of the company’s workers, in order to ensure the payment of wages and ancillary benefits to the workers according to law.’

In addition, the Israeli Ministry of Labour and Social Affairs is also carrying out checks, on a regular basis, of the manner in which Yilmazlar treats its workers.

15. From all of the aforesaid and after reviewing all the additional documents in the application to attach documents, it transpires that the position of the Yilmazlar company’s workers is materially different from the position of the foreign workers whose case was considered in the aforesaid Kav LaOved Worker’s Hotline v. Government of Israel [1]. In the circumstances described, I am satisfied that the rights of Yilmazlar’s workers are being protected, thanks to the strict supervision that is imposed both from the Turkish side and from the Israeli side. Indeed, the arrangement under review in this petition is an unusual and special arrangement. Counsel for the state emphasized that, according to Government Decision no. 4024, it will not be possible in the future to make an additional arrangement to bring foreign workers to Israel or to employ them as a part of reciprocal purchase agreements without the approval of the government. In view of the state’s foreign affairs and security interests that are in the balance, the fact that the arrangement under discussion is supposed to continue only until the end of this year, and that the workers’ terms of employment were dictated by the Turkish government, which has a sincere concern for the conditions in which its citizens are employed, there are no grounds for granting relief to the workers. This is especially so when considering that it is questionable whether they want such relief. I propose to my colleagues that the petition should be denied.

16. I have studied the comprehensive opinion of my colleague Justice E.E. Levy and the opinion of my colleague Justice E. Hayut. I agree in principle with everything stated in them. Indeed, no one could dispute that the restrictive employment arrangement is highly undesirable, and that its causes very great harm to the foreign workers.

In the course of his wide-ranging opinion, my colleague devoted approximately two pages to an examination of the ‘actual harm’ to the Yilmazlar workers. In his consideration of the concrete expression of the harm to the workers, my colleague reaches the conclusion that ‘the factual picture is not entirely clear,’ but he determines that, from his point of view, it is sufficient that there is ‘a real concern that arises from the case that the rights of the Yilmazlar workers may be violated in various respects.’ The heart of the matter, in his opinion, is therefore ‘the normative situation created by the Government Decision’ (paragraphs 19 and 20 of his opinion; emphasis in the original). It should be noted that this is the point of dispute between us: I agree with the rule held in Kav LaOved Worker’s Hotline v. Government of Israel [1] as well as with the vast majority of the legal analysis put forward by my colleague in the course of his opinion in this case. But, I am of the opinion that this Court cannot consider the legal position without reference to the actual factual position. In our case, we are dealing with a special group of workers, and in the special circumstances that have been brought before us. As I have emphasized and I emphasize once again,  there is no basis for granting the petition.

17. In the case before us, it is not possible to examine the specific work relationship between the parties — the foreign worker on the one hand and the employer on the other — without reference to all of the factors that are involved in the transaction between them. In the case before us, the contract between the foreign workers and Yilmazlar is based on the agreement between the Israeli and Turkish governments, with the respective supervision mechanisms contained therein, which constitute a kind of ‘collective protection’ for Yilmazlar’s workers. The fundamental agreement between the governments strengthens the position of Yilmazlar’s workers; these workers benefit ab initio from a different status than that of other foreign workers, since the Turkish government represents them, conducted the negotiations concerning their terms of employment and is responsible for ensuring that the terms that were agreed to are upheld. In the present case, the protection of the rights of Yilmazlar’s workers does not rely solely on the goodwill of the employer, but involves international political interests, which arise from the relationship between the two countries. Thus, the Yilmazlar workers are employed within the framework of a government arrangement, by virtue of a political agreement, which imposes on the private subcontractor (Yilmazlar) duties that do not apply in general to private manpower contractors. We cannot ignore the clear purpose of the offset agreement between the two countries, which is the background to the employment of the workers. Whereas, as a rule, the assumption is that the employer, who is motivated by economic interests, is likely to minimize his workers’ rights, in the present case it is in the interest of the Turkish government that foreign currency—the  workers’ wages—will flow into it. In these circumstances, the Turkish government can be presumed to ensure that the economic value that was agreed to will actually be transferred, since this is the main declared and agreed purpose of the agreement.

18. Finally, I should point out that a consideration of the operative consequences of my colleague’s opinion raises the question of whether, if the outcome proposed by him is adopted, the condition of Yilmazlar’s workers will actually be improved. Since a cancellation of the open skies policy is no longer a possibility, adopting my colleague’s position would lead to the cancelling of the offset agreement, and, as a consequence thereof, completely denying the Yilmazlar workers the possibility of earning their livelihoods in Israel. I think that, in view of the serious state of the Turkish job market, which my colleague also discusses in his opinion, the actual harm that such a decision will cause the Yilmazlar workers is very serious indeed, and is far greater than the theoretical concerns raised by my colleague. The interests and concerns of the foreign workers are the main focus of my decision. I also agree with the remarks of my colleague, Justice E. Hayut, that we are dealing with an agreement that is limited in time and subject to special supervision, and that any change will justify a reconsideration of the matter by this Court.

 

 

Justice E.E. Levy

1.    On 30 March 2006, this Court held that a procedure that made the entitlement of a migrant worker to a residency and work licence in Israel conditional upon his remaining with the employer whose name is stipulated in the licence was void because it violated basic rights excessively (HCJ 4542/02 Kav LaOved Worker’s Hotline v. Government of Israel [1]). It was held that the procedure blatantly conflicted with a major principle in labour law — the right of a person to cease  working for an employer with whom he no longer wants to be associated, without this involving such a serious sanction that it makes the termination of the employment relations not worthwhile. If you deny this right of someone — and with it the fundamental principle of competition between employers — there is a significantly greater risk that his rights as an employee will be violated. This violation, as we know, frequently results in serious cases of exploitation. It deprives the worker of the only real protection that he has — his "market value". Thus, in the absence of any sense of moral responsibility, which it would appear many people have long forgotten, it is as if we have removed the last barrier preventing the dissemination of the outlook that seeks to blur the image of the worker as a human being and to reduce his existence to being no more than a pair of working hands, a machine to be used by the employer. In the works of Aristotle:

καὶ ὁ δοῦλος κτῆμά τι ἔμψυχον, καὶ ὥσπερ ὄργανον πρὸ ὀργάνων πᾶς ὑπηρέτης. [Greek letters unclear in source – Trans.]

‘And the slave is a living possession, and every slave is like a tool that is preferable to all others’ (Aristotle, Politics 1, 21).

The fundamental case law ruling that the restrictive arrangement is void remains valid, even if it has not been implemented in full (see the decisions of October-December 2006 in the aforesaid Kav LaOved Worker’s Hotline v. Government of Israel [1]; see also Hotline for Migrant Workers and Kav LaOved Worker’s Hotline, Binding Migrant Workers to Corporations, 11 (March 2007), and Freedom Inc. — Binding Migrant Workers to Manpower Corporations in Israel, 14, 38 (August 2007)). It created a new legal position, in which the law is no longer prepared to tolerate the making of arrangements of this kind. It plays a major role in the normative framework in which migrant workers are employed in Israel. It looks equally to the present and the future. It binds all the organs of government, and in particular the government. As long as it is valid, it is also the concern of the court, whether it is this Court, the administrative courts, the labour courts or the detention courts.

2.    The ink has not yet dried on that ruling, and the question of employment restrictions has once again come before us. This time, it is alleged, it takes a different form, which should be distinguished from the case that we decided. It presents us with a specific and special arrangement that is based on important security, economic and political interests. This arrangement is limited in scope and prima facie concerns no more than several hundred workers. The seriousness of this arrangement is reduced — so it is alleged — because of the low level of the violation of rights that is actually inflicted. In all of this my colleague Vice-President Rivlin found a basis for departing from the case law ruling that was made. My position is different. Adopting my colleague’s approach means nothing more than turning the normative clock back and returning to a previous legal position that was found to betotally unacceptable. Were my opinion heard, we would hold that the restrictive element in the Government Decision cannot stand, because it is inconsistent with the provisions of the prevailing law.

Restrictive arrangements come in many forms but have the same result

3.    In Kav LaOved Worker’s Hotline v. Government of Israel [1] my colleagues and I discussed briefly the negative effects of restricting foreign workers to one employer, throughout the world in general and in Israel in particular (see, inter alia, paragraphs 24 and 38 of that decision and the citations there). I personally wonder whether the normative position that was set out in that case was not clear enough. I will not mention my own comments there, but can  anyone who reads the judgment not be be disturbed by the profound question of Vice-President Cheshin who asked —

‘What has happened to us that we are treating the foreign workers, those human beings who leave their homes and their families in order to provide for themselves and their families, in this way? We are overcome with shame when we see all this, and how can we remain silent?’ (ibid., at paragraph 4 of his opinion).

It is therefore incumbent upon us,  and this time with even greater force, to reemphasize the gravity of the  harm caused by restrictive employment mechanisms, and the immense injustice caused by their toleration. By considering these, we will also find an answer to the claims that are unique to the case before us.

4.    Throughout the world there are arrangements that apply to migrant workers, which, despite the many ways in which they are expressed, the different methods that they adopt and the various sectors of industry to which they apply, all have a similar purpose — to restrict an employee to one employer. By denying the employee of the natural protection inherent in the idea of the free market, the restrictive arrangement exposes him to violations of his rights concerning wages, including the payment of lower wages than the minimum wage provided by law and prohibited deductions from the wages actually paid, to the imposition of hours of work that are far longer than those permitted, to the seizing of travel papers by employers as a means of guaranteeing the continued existence of the work relationship, to poor quality housing, to the denial of proper medical care, to forced movement from one work site to another, and not infrequently also to sexual abuse and actual imprisonment. Where it concerns the treatment of migrant workers there is a considerable, surprising and most regrettable similarity between countries that are very distant from one another and between peoples who are completely foreign to one another. .

5.    A description of some of these phenomena in Israel was given by the State Comptroller in reports that he issued (State Comptroller, Annual report no. 49 (1998), at page 279; State Comptroller, Annual Report no. 55b (2005), at p. 379). Scholars have also written about them (see, inter alia, Amiram Gill and Yossi Dahan, ‘Between Neo-Liberalism and Ethno-Nationalism: Theory, Policy, and Law in the Deportation of Migrant Workers in Israel,’ 10 Mishpat uMimshal (Law and Government) 347 (2006), at p. 361; Adrianna Kemp and Rivka Reichman, ‘“Foreign Workers” in Israel,’ 13 Information on Equality and Social Justice in Israel 1 (2003), at p. 13). They were well described in the annual journal of the Israeli Society for Labour Law and Social Security for 2004:

‘The “restrictive arrangement” has led to widespread and serious phenomena of abuse and violations of the human rights of foreign workers. Many employers have exploited foreign workers in various ways. Workers are “charged” for fees and taxes that they [the employers] are liable to pay to the state, huge sums are deducted from the salaries of foreign workers on various pretexts and the workers are housed in wretched conditions. A large number of employers do not pay the foreign workers for all the hours during which they work, they pay less than the minimum wage and they do not pay overtime. Many employers do not pay medical insurance for their workers, and they shirk responsibility for them when they are hurt in work accidents and need medical treatment’ (Sharon Asiskovitch, ‘The Political Economy of Migrant Workers in Israel and the Immigration Policy vis-à-vis Foreign Workers in the 1990s,’ 10 Labour, Society and Law 79 (2004), at p. 90).

6.    But the negative consequences of restricting workers to their employers are not found in Israel alone. In Great Britain the recognition of the serious harm caused by this restriction to foreign domestic workers led to the amendment of the law in 1998 and the cancellation of the restriction (recently human rights organizations are warning of its return, de facto, because of government policy. See Kevin Bales, Disposable People: New Slavery in the Global Economy (2000), at page 28; Kate Roberts, ‘An important progressive response to globalisation is about to be reversed,’ Compass (May 22nd, 2007)). In Italy migrant workers are compelled to endure harsh treatment by their employers, since an attempt to change employers results in immediate deportation from the country and a three-year ban upon returning to work there (John Wrench, Migrants and Ethnic Minorities at the Workplace — The Interaction of Legal and Racial Discrimination in the European Union (Danish Centre for Migration and Ethnic Studies, Papers, Migration No. 19, 1997), at p. 29). In the United States the restriction of a whole sector — seasonal migrant workers whose main occupation is in agriculture — is a key factor in the serious exploitation of migrant workers by their employers. A comprehensive report, which was published this year by an American human rights organization, discussed this relationship between the restrictive arrangement and the violation of the rights of temporary migrant workers, who are sometimes treated like commodities:

‘Unlike U.S. citizens, guestworkers do not enjoy the most fundamental protection of a competitive labor market – the ability to change jobs if they are mistreated. Instead, they are bound to the employers who “import” them. If guestworkers complain about abuses, they face deportation, blacklisting or other retaliation… They are the foreseeable outcomes of a system that treats foreign workers as commodities…’ (Southern Poverty Law Center, Close to Slavery — Guestworker Programs in the United States (2007) 1, 2, 33-40).

7.    Some people regard restrictive arrangements as a means used by the host countries to keep the migrant workers apart and estranged from society, and to make them a cheap and available work force that can only be employed in difficult and unattractive jobs. The direct link between being bound to one employer, on the one hand, and a reduction in the wages paid and the migrant worker being forced to the bottom of the work ladder, on the other, was well illustrated by what is happening in the labour markets in East and South Asia (Stuart Rosewarne, ‘The Globalisation and Liberalisation of Asian Labour Markets,’ 21 World Economy 963 (1998), at page 973) as well as in Canada (Nandita Sharma, ‘On Being Not Canadian: The Social Organization of “Migrant Workers” in Canada,’ 38 Canadian Review of Sociology and Anthropology  415 (2001), at pages 425, 433). This was also discussed in a working paper describing the territory of Macao in China, which each year attracts a significant number of migrant workers:

‘[Scholars] have gone a long way to expose the role of the state in keeping the migrant workers “cheap” and “flexible.” The state has constructed a regulatory system in managing this category of foreigners. Many of these mechanisms are legislated into laws. Typically, migrant workers are denied the right to change employers. Since the ability of foreign workers to switch employer is severely curtailed, they are forced into a status of bonded labour and thus allow their employers to pay them a rate below that of the local workers’ (Alex H. Choi, ‘Migrant Workers in Macao: Labour and Globalisation,’ Southeast Asia Research Centre Working Paper Series no. 66 (2004), at page 6).

In the United Arab Emirates, migrants that constitute the majority of the work force, are forbidden to change employers during their first two years and thereafter can only do so with the employer’s consent. A particularly serious consequence of this is in the construction industry, where dozens of migrant workers lose their lives every year as a result of poor safety conditions. Dozens of others, in their distress, take their own lives. Others do not receive wages on time, live in poor conditions and are compelled to work long hours. All of this is because the employers regard themselves as not needing to compete for the market value of the worker (Hassan M. Fattah, ‘In Dubai, an Outcry from Asians for Workplace Rights,’ The New York Times (March 26th, 2006)). This was discussed by the international human rights organization, Human Rights Watch, in a comprehensive report published last year:

‘In most other places, a worker faced with hazardous working conditions and unpaid wages, in a free market economy that has an extreme shortage of labor, would move to a different job. But this is not an option for the migrant construction workers of the UAE, who like all other migrant workers in the country are contracted to work only for a specific employer’ (Human Rights Watch, Building Towers, Cheating Workers – Exploitation of Migrant Workers in the United Arab Emirates (2006), at p. 13).

8.    But what happens around the world does not only include direct restrictive arrangements. Sometimes the arrangements in the law take on an indirect guise, so that it appears that they originate in the free will of workers, even though this is not the case. The United States also provides an example of this. Not many years ago, in 2000, the American legislator addressed the impropriety whereby foreign skilled workers were subject to restrictions by law and repealed it (S. 2045 American Competitiveness in the Twenty-first Century Act of 2000, Pub. L. 106–313, title I, § 105, Oct. 17, 2000 (8 USCS §1184(n))). These workers are therefore allowed to change employers, but few of them take advantage of this, since their loyalty to a single employer is almost always an essential condition for recognition of their entitlement to a permanent residency visa (‘green card’). The strong desire to obtain this visa results in most workers binding themselves to an employer for many years. The direct and obvious result of this constraint — which as we have said appears to be a voluntary act deriving from freedom of choice — is the lack of competition for the workers, and consequently a significant worsening of their terms of employment. The figures show that even though these are skilled workers, including engineers, software and hi-tech personnel (who include, incidentally, no small number of Israelis), the wages paid to them are significantly lower than their American counterparts, they are compelled to work far more than the customary number of hours and they are harmed in other ways (Mark Krikorian, ‘Slave Trade: Permitting Guest Workers Sounds like the Perfect Solution to the Immigration Imbroglio: Look Again,’ National Review (September 14th, 1998); Norman Matloff, ‘On the Need for Reform of the H-1B Non-Immigrant Work Visa in Computer-Related Occupations,’ 36(4) University of Michigan Journal of Law Reform 50 (2003), at page 64).

9.    Additional aspects of an indirect restrictive arrangement, which results in workers refraining from changing employers and suffering unfair treatment and the loss of basic rights, may also be found in the following two measures. The first of these is where workers are required to sign promissory notes for large amounts or for unstated amounts, which allows the employer to sue the workers for large amounts of money at will and for any reason that he chooses. According to the petitioners, Yilmazlar’s workers were required to sign such promissory notes. The second is where there are ‘blacklists’ by means of which employers work together to blacklist workers who have the temerity to complain about their conditions of employment. Being blacklisted has serious consequences, since not only does the complaint result in many cases in an immediate termination of the work and deportation, but in the future also, even if those workers have a right in principle to ask for another work permit, they will have difficulty in finding someone who will be willing to employ them.

The restrictive arrangement and the alleged consent

10. Only a consideration of the complexity of the issue of restrictive arrangements, with the multitude of situations that it manifests, allows us to understand the real difficulty faced by migrant workers, for whom the restriction to one employer — whether overt or concealed, whether official or de facto, whether clearly the result of coercion or apparently the result of the worker’s free choice — is a main source of the violation of their rights. It is clear to everyone that were migrant workers not prepared to suffer the restrictive arrangement, because they have no choice, the restrictive arrangement would never have come into existence. Were the workers to make their arrival in the host country conditional upon their ability to change employers, were they to apply on a constant basis to the courts and to enforcement agencies in government ministries for help and receive a positive response, and were they to refrain from working under the restrictive arrangement system, then it is doubtful whether it would survive for long. Similarly, were they to refuse poor employment conditions, the employers would be compelled to improve them.

Does this lead us to the conclusion that the responsibility for the restrictive arrangement should be imputed to those who suffer from it? Do migrant workers bring upon themselves the wrongs that they suffer, by continuing to look for employment despite what they know of it? Should they complain to no one other than themselves for choosing to look for work abroad? This is exactly how we should understand the argument of the respondents before us. This can also be seen from an approach that, regrettably, has obtained some credibility in the public debate concerning migrant work in Israel. It was written in one research paper that the treatment of migrant workers ‘is based today on a contractual-commercial approach, according to which the consent of the migrant workers to accept the “rules of the game” makes the rules legitimate’ (Ofer Sitbon, ‘The Role of Courts in Israel and France in Designing the Policy towards Migrant Workers,’ 10 Mishpat uMimshal (Law and Government) 273 (2006), at page 278). This was well described by Professor Guy Mundlak:

‘One of the arguments raised in the public debate is that the discussion of the rights of the foreign worker is not important, since the state does not have a duty to take in foreign workers… The foreigner can decide if he wishes to accept the status that Israel offers and to work accordingly, or he can choose a competing status offered by another country or stay in his own country. [According to this argument], the willingness of a foreigner to enter a country with the status offered in itself indicates his consent to the conditions accompanying it that are presented before him. When this consent is given, it constitutes the moral basis for the whole set of rights that the state offers… If the number of foreigners who are interested in adopting this status, with its accompanying conditions, fills the quota, it means that these conditions are fair. The mere consent of the foreigners to accept them is the stamp of approval for their fairness’ (Guy Mundlak, ‘Workers or Foreigners in Israel? “The Basic Contract” and the Democratic Deficit,’ 27 Tel-Aviv University Law Review (Iyyunei Mishpat) 423 (2003), at page 428).

11. According to the respondents, the violation of rights inherent in the restrictive arrangement of the Yilmazlar workers is not a violation, since it can be remedied at any time by means of a simple act — the return of the worker to his country of origin. If he does not choose to do this, on the basis of a profit and loss reckoning that finally leads him to the conclusion that working in Israel is worthwhile, what right does he have to complain about a work system that he chooses to join? A similar approach is also implied in the position of my colleague, the Vice-President, when he says: ‘… an employee of the Yilmazlar company who is not satisfied with his conditions of employment may terminate his work relationship with the company [and] return to his country of origin…’ (paragraph 13 of his opinion, supra). Moreover, according to my colleague’s approach, the employee has the right to apply once again, when he returns to Turkey, for a work permit in Israel, as if there were no ‘closed skies’ policyand  as if the number of positions were not limited, and as if the workers could be confident or certain that they would not be prejudiced because they left in the first place.

In my opinion, this position cannot be tolerated, mainly for reasons of principle. It is inconsistent with the basic principles of our legal system. I am referring primarily to a fundamental principle in the law, which is a principle of public policy. It was my colleague, the Vice-President, who regarded this principle as ‘one of the legal tools that were designed to protect the fundamental core values of the legal system and to steer the operation of the rules of law in a direction that is consistent with those basic values’ (CA 11152/04 Pardo v. Migdal Ltd [6]). Indeed, the whole of public policy is based on the recognition of the superiority of social values, which are even capable of prevailing over a contractual consent that was made freely and willingly. It allows the court to invalidate a contract whose content is immoral (section 30 of the Contracts (General Part) Law, 5733-1973); it denies the right of a person to form a company whose purpose is not a proper purpose (section 2 of the Companies Law, 5759-1999); a mediator may terminate a mediation proceeding where he is of the opinion that the settlement reached by the parties is an improper one (regulation 4A of the Courts (Mediation) Regulations, 5753-1993), and so on.

12. Thus we see that the outlook that regards consent as the whole of the matter is an idea that is foreign to our legal system. A clear example of this was provided in the past by the rulings that addressed the serious issue of trafficking in human beings, which despite the clear differences has more than one point of similarity with the issue that we are currently considering. In several cases that came before it, this Court emphasized the limited value of the argument of consent in that context. In CrimA 11196/02 Frudenthal v. State of Israel [7], at p. 46, Justice D. Beinisch emphasized that the consent of the victim of the trafficking to what is done to him is of no relevance. In CrimA 7757/04 Borstein v. State of Israel [8], at p. 233, Vice-President Cheshin also held that ‘there is no significance to the issue of the consent or lack of consent of a person to work in prostitution; consent does not reduce the severity of the offence nor can it serve as a defence for the trafficker.’ Within the narrow limits of the case before us, we are not dealing with criminal liability. But the criminal prohibition is one of several tools for expressing our unwillingness to tolerate moral wrongs, which harm the ethical basis on which our society is founded. Where someone wishes to put forward the argument of consent in order to indicate prima facie acquiescence in a situation that is regarded as ethically wrong, we have the power — or perhaps I should say that we are required by the law — not to satisfy ourselves with that argument but to investigate further the moral basis underlying the matter, and where necessary to set matters right.

This is the position in the law in general, and it is also the position in labour law, which for some time has not regarded a contract as the final word with regard to the relationship between a worker and his employer. An approach that consent is sufficient to make a contract for providing a service valid, whatever its contents, is inconsistent with our understanding of the labour laws and their purpose — to encompass, within the well-established limits of decency and morality, interactions between an employer and an employee. It is also clearly contrary to the rationale underlying protective legislation, and regrettably we so often find ourselves acquiescing in the blatant breach of such legislation (see Gill and Dahan, supra, at p. 363). A ‘foreign worker,’ before he is a foreigner, is a worker. The spirit of labour law, which extends its protection to him, does not allow us to regard his relationship with his employer, as well as with the state, merely from the narrow viewpoint of informed consent.

Basic values of law, as well as basic principles of morality, cannot be excluded from the normative framework that applies to migrant workers. Mundlak answers the questions that we cited above so correctly that it is fitting that I should cite his remarks:

‘Even if we accept the premise that the arrival of the foreigner to work in Israel is based on consent, there are limits to the extent of the consent that can be attributed to the contract that was agreed by the foreigner when he came to work in Israel. First, there are universal rights that do not depend upon prior association with the national community; contracting out of these in an agreement with a foreign worker has no effect… The mere presence of foreign workers in Israel cannot provide the answer to the question of the extent of the rights to which they are entitled. In essence, the argument of consent grants a legitimacy that does not depend on content but merely on procedure (a kind of offer and acceptance). But offer and acceptance are not the proper procedure… There is a basis for making the prima facie consent in the basic contract subordinate to norms of public policy, including the protection of human rights and democratic norms’ (Mundlak, supra, at pages 430, 432, 480).

Although we have spoken above of ‘market value,’ we should always remember that this is a starting point, but not the end of the matter, and to this important element we ought to add other factors that are also capable of protecting workers — whether foreign or local — when their market value is limited.

13. The position adopted by my colleague also does not sufficiently take into account factors that are inherent to migrant workers. The first and foremost of these is the question of motivation. The foreign worker is almost always looking for employment opportunities outside his country of origin because of a desire to improve his economic condition. Sometimes poverty, which is clearly recognizable to western eyes, and a difficulty to support his family are what compel him to look for work abroad. The same economic distress is also what leads temporary workers to return time after time to countries in which they were exploited in the past, in the hope — usually a false one — that this time they will receive better treatment. Indeed —

‘Propelled by desperate economic circumstances in their home countries, and perhaps misplaced naive optimism, they return a second or third time with hopes of better conditions, only to experience salary reductions again’ (Human Rights Watch, Bad Dreams: Exploitation and Abuse of Migrant Workers in Saudi Arabia (2004), ch. 2).

In other cases, and it is possible that this is also the case before us, the background from which the migrant worker comes is better. But we should not treat lightly the economic constraints which the migrant worker faced and which led him to seek an alternative source of livelihood. Not infrequently the opportunity of employment in the host country is the alternative to a high level of unemployment in the country of origin, which reduces a person’s chances of finding work in his homeland. The wages paid in the host country, which are often considerably higher than those in the country of origin, are also a major factor in encouraging migration for the sake of work. The economic enticement is great, and its effects are considerable. It is not difficult to imagine what motivates a person who earns a relatively low wage in his country of origin, sometimes merely a few dollars a day, to uproot himself from his home and his family and look abroad to the promise of wages that are hundreds of times higher. This promise, whether it is realized or not, is very powerful and has great effect. Frequently, it overrides concerns of difficulties, and even specific knowledge concerning the danger of exploitation and the loss of rights. This too was considered by the American report, which asked:

‘This raises the question: Why do workers choose to come to the United States under these terms? The simple fact is that workers from Mexico, Guatemala and many other countries often have very few economic opportunities… Where jobs exist [in those countries], the pay is extremely low; unskilled laborers can earn 10 times as much, or more, in the United States as they can at home. So even though they risk being cheated, many workers are willing to take that chance. Most perceive the guestworker program as their best chance to provide a better life for their families. These desperate workers are easily deceived’ (Southern Poverty Law Center report, supra, at p. 12).

14. Turkey is a developed country in comparison with many of the countries from which workers come to find employment in Israel. The Turkish economy has undergone considerable changes in recent years, and the economy of that country is experiencing growth and making efforts to increase employment opportunities. Notwithstanding, the report of the World Bank, which was written in 2006, indicates that the increase in jobs available there still lags considerably behind the natural growth of the population. Whereas the number of residents of working age has increased considerably — between 1980 and 2004 approximately 23 million potential employees entered the market — only six million additional jobs have been created (World Bank, Turkey Labour Market Study, report no. 33254-TR 12 (April 2006)). For this reason, the World Bank states that the employment rate in Turkey is one of the lowest in the world (ibid.). The report goes on to reveal that as a result of economic crises that Turkey underwent in 1994 and 2001, there was a significant reduction in the amount of the average wage paid in Turkey, and only recently has there been some degree of improvement in this index (ibid., at p. 21). To illustrate this, in 2004 — the year in which the arrangement that is the subject of the petition before us began to be implemented — the average monthly salary of a worker in Turkey was the equivalent of approximately 3,600 NIS. In Israel the amount of the average wage at that time was double — approximately 7,000 sheqels.( http://www.databasece.com/international.htm)

Moreover, precisely because of extensive protective legislation that is included in the Turkish code of laws and that makes the dismissal of a worker there very expensive for his employer, not only is the incentive for Turkish employers to take upon themselves the risk of creating new jobs small, but there is a flourishing market of informal workers who do not benefit at all from the protection of the labour laws (World Bank report, supra, at pp. iii, 21). The vast majority of formal workers do not benefit from proper protection because they are not parties to collective arrangements that are the result of collective bargaining (ibid., at p. 26). Turkey has, of course, a long tradition as an ‘exporter’ of migrants to foreign countries, and the migration consciousness in Turkey, including for the purposes of work, is well developed. According to official figures of the Turkish Ministry of Labour, in June 2005 more than three and a half million persons with Turkish nationality lived in countries around the world (approximately five per cent of the country’s population at that time), and of these almost a million and a half persons worked in the foreign workers market.

15. From reading all this it becomes very clear what motivates the persons who are employed as workers by Yilmazlar to look for a livelihood outside their country of origin, notwithstanding the difficulties that may accompany their work in Israel, including the absence of any possibility of choosing their employer here. Even more important is the understanding that it is not their informed choice — their preferred choice between several good options — that is the basis for their agreeing to the restrictive aspect of the agreement. Difficulty and distress are the essence of the matter. Their fear of a harsh economic fate, their natural desire to improve the living conditions of their families, their ambition to take advantage of an opportunity that the global village of the beginning of the twenty-first century has opened up to them — these are the motives of these workers to agree to a well-institutionalized denial of their rights. Can anyone fault them for this?

The argument concerning enforcement

16. It may be argued, and this reasoning is also used by my colleague the Vice-President in his opinion, that the concern with regard to the evil consequences of restricting the workers is allayed by the protection given to them in labour law, and especially the declared policy of the Israeli and Turkish governments that the employment of the workers shall be subject to ‘institutional supervision and strict review,’ in the words of my colleague. First I will say that I question how strict the supervision measures adopted can really be, and of this I will say more below. But before this I will emphasize that experience in most countries around the world, as well as in Israel, proves that in the main the enforcement authorities cannot provide a solution to the concern that we have described.

Not infrequently there is an inherent conflict of interests, even if it is an unspoken one, between the system of laws that is the basis for the policy whose main purpose is to provide a cheap and effective work force for various industries in the economy and the part of the legal system that concerns workers’ rights.

‘If supplying this labor force is a primary goal of immigration policy, then legal protections for guest workers cannot be guaranteed, since they contradict its essential purpose’ (David Bacon, Be Our Guests, The Nation (September 27th, 2004)).

Second, the protection of the rights of foreigners, who are found on the margin of society, is usually a low-level priority for governments, and only limited resources are devoted to it. As a direct result, in many countries that host foreign workers the enforcement system has difficulty in preventing a violation of their rights. It should be emphasized that I am not referring to rights of a vague or external nature that rely on the overburdened foundations of universal morality or general principles, which may well not be given any expression in the law of the host country. Even those principles that are expressly enshrined in the laws of the state and whose solid foundations are unchallenged, both in their application to local employees and also to temporary guests in the work force, are not sufficiently enforced. Often, even if on paper these rules are quite well-developed, when put to the test they are an empty shell and have no real effect (Sitbon, supra, at page 278). This is the case throughout the world, including in the United States (Southern Poverty Law Center report, supra, at pages 1, 7), in East Asia (Rosewarne, supra, at page 22), in Africa (Nasseem Ackbarally, Foreign workers in Mauritius face torrid time, Mail & Guardian Online (28 November 2006)), and in the countries of the United Arab Emirates (Human Rights Watch report regarding UAE, supra, at pages 9, 13, 48).

Even the countries of origin of migrant workers do not always have the same interests as their citizens abroad. Even if in some cases an effort is made to further the rights of the workers, usually in agreements with host countries, this effort is often confronted by, and sometime in direct conflict with, the interest of the country of origin to develop its economy by means of income from a foreign source and the import of knowledge and work methods. When this interest prevails, the first to be harmed are the workers (S. Rosewarne, Globalisation and the Valorisation of Migrant Labour: Recasting the Migration-Development Nexus (Paper presented to the Regional Conference on Institutions, Globalisation and their Impacts on Labour Markets in Pacific Island Countries, October, 2006), at page 4).

17. The case of the Yilmazlar workers, which according to the state’s argument before us — an argument that my colleague the Vice-President sees fit to accept — also benefits from the protection of representatives of the Turkish authorities, is very similar to the case of temporary workers in Canada, who are employed in the agricultural industries and are bound to a single employer during all the months when they are in that country (Sharma (2001), supra, at page 423). The unique aspect of work migration to Canada is that almost all of it is based on bilateral agreements, in which the federal government is one party and the authorities of the country of origin the other. These agreements contain mechanisms that allow the two countries to supervise the enforcement of proper conditions of employment. If a foreign worker has any complaint with regard to any aspect of his work, he may bring it before the representatives of his country, and they, in turn, are supposed to raise the matter with the Canadian authorities. In practice, those representatives of the countries of origin are faced with a conflict: on the one hand, they owe a duty of faith to the worker, but on the other hand, they have a similar duty to the interests of their country, including to its good diplomatic relations with Canada. It is not surprising to discover that in this competition of interests, the workers find themselves at a disadvantage. They are employed in very harsh conditions and with small salaries, and there is no real address for their complaints. Because they fear being deported, they are compelled to suffer conditions that would be unacceptable to local workers (Nandita Sharma, Mexican Standoff – Canadian ‘Guest Workers,’ The Globe and Mail (March 29th, 2006)). The Supreme Court of Canada discussed this in a judgment in 2001, in which it set aside a provision of legislation that forbade foreign workers to form unions (Dunmore v. Ontario (Attorney General) [19], at paragraphs 41, 102). This harmful reality is also described in an article that was published last year and reviewed the Canadian experience, which is so bad that some have called it ‘Canada’s shameful little secret.’ The article states:

‘…the consular liaison officers [of the sending nation] appointed to look out for the workers suffer from a conflict of interest: maintaining good relations with Canada and the smooth operation of the scheme versus taking up the fight on behalf of individual workers.

 As one former contract worker from Mexico puts it, a complaint to a consular official “enters in one ear and goes out the other.” It is simpler for consular officials to replace workers who raise concerns in the workplace than to address the root cause of their complaints’ (Peter Mares, Workers for all seasons, The Diplomat (July-August, 2006). See also World Bank, Pacific Islands At Home & Away — Expanding Job Opportunities for Pacific Islanders Through Labor Mobility, Report No. 37715-EAP 117 (September, 2006)).

Moreover, contacting the enforcement authorities, which is often the most effective way in which workers who have been harmed can bring their case to the attention of the authorities, is not practicable in view of the concern, which is a common occurrence in the experience of migrant workers, that it will lead to the loss of their livelihood. Another report of Human Rights Watch, which deals with the American labour market, found that migrant workers in that country are generally reluctant to sue for legal remedies to which they are entitled under the law, in case it leads to their being blacklisted for work. In the words of the report:

‘… found widespread fear and evidence of blacklisting against workers who speak up about conditions, who seek assistance from Legal Services attorneys, or who become active in [labor organizations]’ (Human Rights Watch, Unfair Advantage: Workers’ Freedom of Association in the United States under International Human Rights Standards (2002), at pages 42, 202, 206).

18. To all of this we should add the recognition that despite the well-developed labour law in the country of origin of Yilmazlar’s workers, the legal protection actually afforded to workers in Turkey leaves much to be desired. This was discovered by the World Bank, which said: ‘Compliance with labor law is weak in Turkey. Many workers are not receiving the protection that is the intent of the laws’ (World Bank report, supra, at page xi). In view of the aforesaid, one can only look sceptically upon the promise that the authorities will carry out enforcement measures, both in Israel and in Turkey. In the absence of any real course of action in the legal sphere, there is additional support for the conclusion that a worker who refuses to acquiesce in his being bound to one employer faces a real difficulty in protecting his rights.

To complete the picture I will add that this difficulty is aggravated by an additional element that is integral to work migration, and this is the limited ability of foreign workers to form unions and to achieve collective protection. In many places the local workers’ organizations are not prepared to admit foreigners into their ranks, and there are places where the law prevents this and even forbids the creation of alternative frameworks. It is also natural that temporary workers, who come from different countries, speak different languages and sometimes have conflicting interests (for example, because of the competition over a limited number of positions or a desire to improve their work conditions at the expense of other workers), have difficulty in forming unions. To all of this we should add the well-known difficulty, which is inherent in work migration, of being removed from a familiar environment, the normative system to which the workers are accustomed and the family unit, which is capable of weakening them and preventing them from becoming organized in an effective manner.

Theoretical harm and actual harm

19. What is the concrete expression of all this in the case of the Yilmazlar workers? The parties disagree on this question. On the one hand, workers of the company have testified, in affidavits that were attached to the petition before us, with regard to difficult conditions in which they were employed, harsh treatment that they received, being required to sign contracts whose content — which is sometime draconic — was unclear to them, prolonged delays in receiving wages, the confiscation of passports, the payment of wages that are lower than the minimum wage in force in Israel, non-compliance with the provisions of the Hours of Work and Rest Law, 5711-1951, and an absolute dependence on their employer, which prevents any possibility of improving the situation. On the other hand, Yilmazlar remains insistent that everything stated in those affidavits is false and unfounded. As proof, the company presented affidavits from other workers, in far greater numbers, that testify to fair employment conditions and the payment of wages on time. Unfortunately, these affidavits are all drafted in identical language, as if they were all dictated word for word. All that I can hope is that it is merely a false concern that someone wished to have workers sign a declaration that does not reflect their true position. In any case, these affidavits do not address at all the amount of the wages paid to the workers, the content of the work contract, the claim that workers were compelled to sign blank promissory notes, the question of the workers’ dependence on the company including the claim that passports were confiscated, the proper housing conditions that are provided and the question of vacations and rest days.

In practice, checks that were conducted by the Ministry of Employment on the work sites where Yilmazlar operates, on 8 November 2005 and 23 November 2005, found nothing detrimental to the company. This was also the case when a visit was made by representatives of the Undersecretariat for Defence Industries (SSM) at the Turkish Ministry of Defence. On the other hand, in a legal proceeding that took place not long ago against Yilmazlar in the Ramla Magistrates Court, a case was considered in which dozens of its workers were housed with considerable overcrowding in a residential house in a village in the centre of the country. At the request of the village, the Magistrates Court ordered the company to remedy the matter immediately (CC 2992/05 (Ram) Yagel v. Nomdar [18]). In its decision to deny an application for leave to appeal filed by Yilmazlar, the Tel-Aviv District Court (the honourable Judge S. Dotan) held that: ‘If we are dealing with the rights of the workers, there is no greater violation of their rights than housing them with inhuman overcrowding as described above’ (LCA (TA) 2782/05 Yilmazlar International v. Yagel [17]). The same conclusion was reached by this Court, which approved the decision and added (per the honourable Justice E. Arbel): ‘I agree with the remarks of the District Court with regard to the serious conditions in which the workers were placed — a hundred people in one overcrowded house’ (LCA 267/06 Yilmazlar International v. Yagel [9]).

20. Even though the facts are not entirely clear, it is sufficient that there is a real concern, which arises in this case, that the rights of the Yilmazlar workers are likely to be violated in various respects. In any case, this Court is not the appropriate framework for clarifying questions of fact (HCJ 4999/03 Movement for Quality Government in Israel v. Prime Minister [10], in the second paragraph of the opinion of President A. Barak). The focus of the matter, therefore, is upon the normative situation created by the Government Decision. This has created an opportunity, which is very considerable, for the abuse of Yilmazlar’s workers, as well as other foreign workers in the future. Experience teaches us that where there is an opportunity, there will always be someone who tries to avail himself of it. I cannot acquiesce in this.

The argument concerning the imminent expiry of the arrangement

21. I should further emphasize that the respondents should not rely on the assumption that in any case the entire arrangement is soon to expire,  at the end of 2007. First, I should say that I would  not be surprised if someone decides to extend it. Second, even though the decision of the Ministerial Committee for Foreign Workers no. FW/3 of 7 June 2005 states that ‘only the government has the power to approve, in very exceptional cases, an additional arrangement for the bringing or the employment of foreign workers as a part of reciprocal purchase transactions,’ I think that I will not be mistaken in my assessment that giving legal sanction to the Government Decision in this case will result in similar decisions in the future. Indeed, the normative impropriety of the decision is the heart of the matter, and this should not be countenanced, no matter how long it is valid.

22. My colleague the Vice-President bases his position mainly on the fact that the case of the Yilmazlar workers does not involve debt bondage. This is almost the entire basis for the distinction that he wishes to make between the case before us and the ruling made in the aforementioned Kav LaOved Worker’s Hotline v. Government of Israel [1].

Indeed, the question of debt bondage is of critical importance in the context of migrant workers, and a major factor in the cruel fate — no less — that ensnares them in host countries. In brief, the meaning of this concept is that a worker who wishes to obtain a visa to work in a foreign country is often required to pay huge sums to various agencies and middlemen, who are responsible for obtaining it. To illustrate the point, the average agency fee that a foreign worker is required to pay, when he earns in Israel an average wage of 500-1,000 US dollars a month, is 10,000 dollars and even more (Binding Migrant Workers to Corporations, supra, at page 23; Freedom Inc. — Binding Migrant Workers to Manpower Corporations in Israel, supra, at pages 12, 26). Most of the workers borrow money for this purpose in their countries of origin, and they thereby become debtors who pay high rates of interest. Often they are given a promise that they can work in Israel for several years, even though their residency permit in Israel is valid only for one year and there is no certainty that it will be renewed. Even a very small delay in receiving the wages — for example because of not turning up to work because of illness or another reason, may result in a situation in which this debt increases significantly to a point where it can no longer be repaid. This harsh reality, which threatens to bring serious economic disaster upon them, is the lot of foreign workers throughout the world. It is possible that it is the main problem in work migration in modern times. There are three petitions addressing this issue that are pending in this Court (HCJ 2405/06, HCJ 1193/07, HCJ 2768/07).

It also cannot be denied that when the two evils — debt bondage and being restricted to one employer — befall a worker simultaneously, the extent of the harm to him is greatly increased. In the absence of any bargaining power, not only does the worker have difficulty in earning the true value of his work (which is usually greater than what he is paid) and repaying his debt, but he will think twice  before he dares to complain about his conditions of employment, because of the fear that he will be dismissed, which means — in the absence of an alternative possibility of employment — that he will be unable to repay the debt. Indeed, a worker who is not burdened with a debt, but is bound to one employer, is in a better position that his fellow worker who both has a debt and is also bound to one employer.

23. But all of this is not capable of combining the two — the debt and the restrictive arrangement — into one entity that cannot be separated. It should be emphasized that we are dealing here with two different factors that are independent of one another, even though each one of them may be affected by the other in its deleterious effects. A restrictive arrangement without a debt is still a restrictive arrangement, and the harm that it causes, as I have described  above, is great.

It is therefore clear that there is no basis to the state’s claim that the special position of the Yilmazlar workers, who do not leave behind them any debt to be repaid when they come to Israel, lies in the fact that the restrictive arrangement does not cause them any real harm. This harm, the essence of which is the worker’s loss of his bargaining power, does not depend — it should be emphasized once again — on the existence of a debt and does not derive from it. It is independent. Can it seriously be argued that the removal of the element of debt is sufficient to make employers willing to pay their workers wages that will reflect the true value of their work, adhere strictly to the hours of employment, stop taking passports or provide fitting housing conditions? Is the absence of a debt capable of repairing the moral flaw inherent in the restrictive arrangement mechanism? I think that the answer to these questions is self-evident.

24. Another aspect of the argument, if I have understood it fully, is that in the absence of a debt there is nothing to prevent an employee, who is not satisfied with the conditions offered to him, from leaving Israel. Once again the same error has arisen, since, as I clarified above, often the option of leaving Israel and giving up the job is a bad one, both because of the alternative in the country of origin and because of the reliance that has already taken place. If there are workers — and there are very many of these — who are prepared to work under a regime of both a debt and a restrictive arrangement, with its double evils, then a fortiori there will certainly be those  who  will be prepared to work subject to the restrictive arrangement only, while suffering the harm that it causes them. I have already discussed the weakness of the argument of consent, and I need not elaborate further.

My colleague, the Vice-President, bases his position on remarks that were written in Kav LaOved Worker’s Hotline v. Government of Israel [1]. In this matter too I think I should make matters clear. Debt bondage was mentioned there as one of the factors that made the restrictive arrangement so evil, but it is not the only one, and not necessarily the dominant one. The violation of ‘the foreign worker’s autonomy of will’ — in the words of my colleague in paragraph 10 of his opinion above — does not arise solely from the debt bondage. The following is what I wrote in Kav LaOved Worker’s Hotline v. Government of Israel [1]:

‘The restrictive employment arrangement violates the basic rights of the foreign workers. It violates the inherent right to liberty. It violates human freedom of action. It denies the autonomy of the free will. It tramples the basic right to be released from a work contract. It takes away a basic economic bargaining power from a party to employment relations who is already weak. By doing all this, the restrictive employment arrangement violates his human dignity and liberty in the most basic sense’ (paragraph 29 of my opinion).

These violations, regrettably, are unaffected by the absence of debt bondage.

All of the above shows that the special characteristics of the Turkish transaction cannot undermine the basis of the claim that the restrictive arrangement seriously violates the rights of the workers. I shall now consider how this violation is consistent with the public interest.

The public interest and the purpose of the administrative act

25. The contract with the Turkish Ministry of Defence is important to the respondents. It is important to the State of Israel. Their counsel emphasized the interests that it serves, in both the economic and the political spheres. First and foremost it would appear, and I am prepared to accept this as a fact, that without the offset component, the agreement would not have been made. The Israeli economy, and especially the fifth respondent, Israel Military Industries Ltd, would then have lost substantial income in foreign currency. IMI’s ability to enter into future transactions with the Turkish authorities would have been impaired. It would have to suffer the consequences of a breach of contract. The effects on workers in the security industries would have been considerable, and possibly employment in the economy as a whole would have been affected. It is possible that in the long term this would have even harmed the security of Israel. Moreover, it cannot be denied that the agreement plays a part in Israel’s relationship with Turkey, a main ally without any doubt, and it is difficult to exaggerate the importance of maintaining good relations with it. In so far as the agreement, with its various elements, can benefit the interests of that country, this too is indirectly desirable for Israel, its ally. Indeed, ‘the phenomenon of work migration is an inseparable part of international relations’ and of ‘the mutual interest of governments in developing relations’ (Kemp and Reichman, supra, at page 10).

The realization of this interest by means of implementing the Turkish transaction imposes a duty on Israel, which is not at all a light one. It is obliged to carry out its share in the offset mechanism, and for this purpose it was required to take upon itself an undertaking with a significant financial value. A particularly creative mind gave rise to the idea that it would be possible to make use of human beings in order to cover a part of this liability. As the state explained in its response to the petition (in paragraph 9 of the preliminary response), of the two hundred million dollars that Israel is required to ‘return’ to Turkey, approximately 28 million dollars are supposed to be derived from the employment of the Turkish workers (which is only approximately fourteen per cent of the total amount). The restriction of the workers to their employer makes it much easier to reach this target. It ensures that the majority of the wages will be transferred in an orderly manner to Turkey. It is particularly important in view of the fact that the Turkish Ministry of Defence has taken upon itself the task of supervising the implementation of the agreement and it refuses to hold discussions with several different employers but is prepared, and it has its reasons, to work only with Yilmazlar.

26. When  enquiring into the dominant purpose of an administrative act such as the one undertaken by the government of Israel in the case of the Yilmazlar workers, we should of course consider those aspects that indicate, in so far as possible, the essence of the act and properly reflect the reality and the context in which it arose (see and cf. HCJ 1030/99 MK Oron v. Knesset Speaker [11], at page 665; CA 10078/03 Shatil v. State of Israel [12], at paragraph 26 of my opinion)). In view of the aforesaid, it is possible to determine without any difficulty that a main purpose of the Government Decision is to create an effective mechanism of discharging a part of the offset debt, by means of ensuring that Yilmazlar has foreign manpower available at all times.

But this is not the only purpose of the restrictive arrangement mechanism. It serves another purpose. The concern of the authorities that the floodgates will be opened, after they have been erected with considerable effort in recent years and prevented Israel from being inundated by legal and illegal migrant workers, is what led them to act so that the number of Yilmazlar’s workers would be limited and watched carefully at all times, and that no use would be made of the narrow route that was provided for individual cases in order to bring hundreds and thousands of others into the Israeli economy.

These, then, are the two dominant purposes of the decision that is the subject of this petition. They seek to realize important interests, and to this end the government of Israel took the liberty of restricting the rights of the Yilmazlar company’s workers. In order to determine whether the government did this lawfully, we are required to consider the matter — just as we did in Kav LaOved Worker’s Hotline v. Government of Israel [1] — from the perspective of the formulae that we have borrowed from the limitations clauses in the Basic Laws.

Judicial scrutiny

27. The first stage in the process of scrutiny seeks to ascertain whether the purposes are proper ones. With regard to the first purpose of which I spoke above, I think that it can be determined with the utmost clarity that it is not a proper purpose. Whoever looks at the facts of the case before us cannot, in my opinion, fail to be outraged at the use that has been made of these workers as an instrument and a means of furthering the interests of the Israeli government and commercial companies. After all, of what concern to the Turkish worker are international relations? What does he care for the success of the security industries in Israel? Of what interest is it to him that tanks are improved for his country’s army? What is the source of the obligation, for which that worker is required to pay with his liberty, his dignity, his ability to earn a livelihood and his hopes for a better future for his family, in order to further these interests? What justification is there that he should be subjected to the binding force of the restrictive arrangement? (cf. HCJ 6427/02 Movement for Quality Government in Israel v. Knesset [13], at para. 6 of my opinion). What justification is there that in addition to the consideration that he is required, in the usual manner, to provide within the framework of a free and fair contract with an employer, he should be required to pay an additional price, from which he does not benefit and with regard to whose nature and character he was never consulted?

28. This purpose is inherently inconsistent with the ethical foundations on which the State of Israel was established. The basic principles of liberal morality have taught us that a human being is always an end and not merely a means to an end. Kant wrote:

‘… der Mensch und überhaupt jedes vernünftige Wesen existiert als Zweck an sich selbst, nicht bloß als Mittel zum beliebigen Gebrauche für diesen oder jenen Willen… dagegen vernünftige Wesen... das nicht bloß als Mittel gebraucht werden darf... mithin sofern alle Willkür einschränkt (und ein Gegenstand der Achtung ist).’

‘… man and generally any rational being exists as an end in himself, not merely as a means to be used arbitrarily by this or that will…; but rational beings… are… something that should not be used merely as a means, and consequently all arbitrariness is thereby eliminated (and he is an object of respect)’ (Immanuel Kant, Groundwork of the Metaphysic of Morals).

To this I would add that, prima facie, even if a person is required to take part in achieving any purpose, it should be one in which he is directly the goal of that purpose. Any other approach is tantamount to treating a human being as an object, and in our case, as the property of the employer. Justice M. Cheshin said: ‘An inanimate object and likewise an animal may be taken by its owner from place to place, transferred from one person to another, and no one will object. But man is different; nothing should be done to him against his will’ (HCJ 8111/96 New Federation of Workers v. Israel Aerospace Industries Ltd [14], at p. 575). And Justice D. Beinisch emphasized: ‘The dark ages in which a person could be regarded as the property of another person have passed’ (CrimA 11196/02 Frudenthal v. State of Israel [7], at p. 47). Particularly appropriate here are remarks written by my colleague  Vice-President Rivlin himself in New Federation of Workers v. Israel Aerospace Industries Ltd:

‘… We should not also include within the scope [of the employer’s property rights] the power to hold onto the worker, even if only as a premise. I said as a premise, because no one disputes that the worker always has the power to leave his new employer, just as he had the power to leave his previous employer. But a right to leave an employer that is based on the premise of the liberty of the worker is not the same as a right to leave an employer that is based on the premise of the employer’s prerogative. There can only be one premise, the former one, if we agree that the employer’s property rights will never also include control of the worker’s liberty… The liberty of the worker to choose his employer is derived from the right to liberty, which is enshrined in the Basic Law: Human Dignity and Liberty, and from the value of human dignity, which is the foundation of the aforesaid Basic Law… This liberty of the worker is derived directly from the outlook that the human being is an end and not a means’ (ibid., at page 595).

These remarks were admittedly written with regard to Israeli workers, but I do not know what moral basis there is for distinguishing between them and their foreign counterparts. The principle is simply that the idea that Yilmazlar’s workers can be used as a tool for performing the obligation in a commercial transaction between third parties is immoral and cannot stand. The restrictive arrangement mechanism, which turns the migrant worker into an object, cannot be accepted in a normative environment that seeks to emphasize — in the course of implementing the processes of globalization and openness — the value of the human being, every human being, as a subject rather than an object (Stuart Rosewarne, ‘Globalization and the Recovery of the Migrant as Subject: “Transnationalism from Below”,’ 15(3) Capitalism, Nature, Socialism 37 (2004); Ivan G. Alvarado & Hilda Sánchez, ‘Migration in Latin America and the Caribbean: A view from the ICFTU/ORIT,’ 129 Labour Education 101 (2002), at page 104). Such an environment, which raises the banner of the autonomy of the human will and the dignity of the human being, cannot stand idly by when it sees, in the words of the poet Yehuda Amihai: ‘How people who went out whole are returned in the evening to their homes like pocket change’ (Yehuda Amihai, ‘Out of three or four in a room,’ Poems 1948-1962 (2002), at page 97).

29. I might have ended here, since the impropriety of the dominant purpose of an administrative act is sufficient in order to annul the act itself . But since a similar conclusion — that the act should be set aside — also arises from a consideration of the second purpose of which I spoke, I should also add the following: admittedly, preventing a possibility that the employment market in Israel will be flooded with  migrnat workers is likely, as a rule, to be regarded as a proper purpose, and therefore it will pass the first part of the test of judicial scrutiny. But my opinion is that the measures that were adopted to realize this purpose do not satisfy the second part of the test of judicial scrutiny, by which I mean the principle of proportionality.

30. I have difficulty in imagining what motive may induce a  migrant worker who enjoys fair conditions of employment that are compatible with his market value to stop working for his employer. If the picture is so rosy, and reflects — in the words of counsel for Yilmazlar — the ‘huge advantage given to the Turkish workers in the offset agreement’ without which ‘they would not be able to come and work in Israel at all’ (pages 708 of the statement of reply), why is there any need for a restrictive arrangement? One is compelled to wonder why this ‘huge advantage’ is not capable of ensuring loyalty to the employer. Is it perhaps because the main advantage is actually enjoyed by the Yilmazlar company, which, because of the power of control given to it by the restrictive arrangement mechanism, must be an object of envy to other employers?

It is precisely the restrictive arrangement that threatens to deprive the worker of fair conditions that is likely — and this is the heart of this case — to provide an incentive for workers to leave their employers, and to result in an increase in the market of unlicensed workers and the breakdown of control over what happens in this sphere. As I said in Kav LaOved Worker’s Hotline v. Government of Israel [1], figures that were compiled by the Ministry of Industry, Trade and Employment indicate that there is such a connection between a restrictive arrangement and illegal work, since the latter is ‘a rational act necessitated by reality’ in the efforts of the  migrant worker to improve his conditions (Yoram Ida, Factors Influencing Foreign Workers to Revert to Illegal Employment (Research Department of the Ministry of Industry, Trade and Employment, 2004), at page 57). That research found that the phenomenon of foreign workers in Israel resorting to illegal employment was not usually the result of a worker receiving a better financial offer, nor of the expiry of his residency permit. It was mainly the result of the worker’s desire to extricate himself from the difficulties that he experienced in consequence of unfair employment conditions enforced by the employer (ibid., at pages 64, 74; see also Malsiri Dias & Ramani Jayasundere, ‘Sri Lanka: Good Practices to Prevent Women Migrant Workers From Going Into Exploitative Forms of Labour,’ 9 GENPROM Working Paper 26 (ILO, Geneva, 2000)). From this we can see the lack of a rational connection between the purpose and the means adopted to achieve it, since the restrictive arrangement not only does not reduce the illegal employment market but it is one of the factors creating it. An additional conclusion is that the restrictive arrangement is a more harmful measure than other measures that could be adopted in order to realize the purpose under discussion, especially the measure of ensuring that workers are given their rights.

31. The proportionality test in the ‘narrow’ sense is also not satisfied, since in my opinion, as I explained above, the impropriety in the restrictive arrangement is greater than the benefit that it provides. In this respect I should add the following: it is hard to dispute the contribution of work migration to economic success in the host country and to ensuring the existence of industries in which it would otherwise be difficult to recruit workers, by which I am referring especially to the construction and agriculture industries. This can be shown clearly by Germany after  World War II, the markets of the United States and Canada today and what is happening in additional countries (see, for example, Michael J. Piore, ‘Illegal Immigration to the U.S.: Some Observations and Policy Suggestions’, in Illegal Aliens: An Assessment of the Issues 26 (1976). But the foreign work market does not only make a positive contribution. The public interest is not monolithic, and some aspects of it may be harmed — even from a narrow economic viewpoint of the interests of the economy — as a result of acquiescing in a reality where  migrant workers are deprived of their rights. Thus, inter alia, there is a concern that unemployment may be increased among local workers and the level of their salaries may be adversely affected by being ‘dragged’ down by a whole sector of  migrant workers whose salary is inconsistent with what is required by law. The willingness to ignore the value of having fair employment relations in the economy is a two-edged sword, which will ultimately harm local workers. Cheap labour also removes the incentive to develop new technologies and hi-tech industries, and it leads instead to an excessive focus on manual labour industries that impede the development of the economy. There are other negative aspects as well (see and cf. O. Yadlin, ‘Foreign Work in Israel,’ Menachem Goldberg Book 337 (2001), at page 342). All of these, which are strengthened when the restrictive employment mechanism operates, should not be ignored. We should also consider the possible risk of harm to the international standing of the State of Israel as well as its image in the eyes of the exploited community of workers, who ultimately return to their country of origin and share their impressions with others.

On membership of the community of civilized nations

32. In this last context, I would add another significant aspect that may have remained, unjustifiably, in the background of the discussion of the technical aspects of the restrictive arrangement. I am referring to the responsibility that the State of Israel is obliged to take upon itself as a member of the community of civilized nations and on the basis of its commitment to universal values of justice and morality (CA 105/92 Re’em Contracting Engineers Ltd v. Upper Nazareth Municipality [15], at p. 206). In my opinion, these do not allow the continued implementation of the restrictive arrangement. Even if the  migrant worker does not have an inherent right to work in Israel, the state has a duty not to harm him once he comes within its borders, especially after the state has itself invited him to do so. The spirit of the twenty-first century, a spirit of openness and transnational cooperation, cannot allow this. A strange and questionable combination of globalization on the one hand, and adherence to old laws of serfdom and bondage on the other, is unacceptable. Indeed, in the first part of my remarks I gave many disturbing examples of the harm that restrictive employment arrangements inflict on foreign workers all around the globe, including in progressive and enlightened western democracies. I do not think that the conclusion that follows from this is that we should regard restrictive arrangements as a necessary evil or — worse still — as a desirable and acceptable phenomenon. We can learn from the bad experience of others, and we should not hasten to adopt into our legal system anything other than what should be adopted. In the words of Justice A. Witkon: ‘It is possible that in one question or another the [Israeli] public will have an outlook of its own that is different from the outlook of other peoples, and it need not be said that in such a case we will be guided solely by the outlook of our public’ (CA 337/62 Riezenfeld v. Jacobson [16], at page 1026 {113}). The rights of the weak are naturally not the subject of great popularity and enthusiasm, but they are rooted in a solid and well-founded ethical outlook. This is the direction in which our social conscience leads us, and we can only hope that its light will also shine on others.

With regard to work migration in Europe in the 1970s, the Swiss novelist and playwright coined a phrase that many  quote. ‘Wir riefen Arbeitskräfte, und es kamen Menschen’ (‘We called for workers, and human beings came’). Indeed, the Yilmazlar workers, before they are workers, are human beings. We should recognize this. This should be reflected in our legal arrangements. This is how we should treat the migrant worker who enters into our gates.

 

 

Justice E. Hayut

My colleague Justice E. Levy has once again set out in his comprehensive opinion the basic principles that this Court addressed not long ago in HCJ 4542/02 Kav LaOved Worker’s Hotline v. Government of Israel [1]. By virtue of these principles, the decision in Kav LaOved Worker’s Hotline v. Government of Israel [1] set aside a procedure that was practised in the agriculture, nursing and manufacturing industries, according to which the residency and work licence of foreign workers was conditional upon being bound to a specific employer. With regard to this procedure, my colleague Justice E. Levy said in that case (in para. 29 of his opinion):

‘The restrictive employment arrangement violates the basic rights of the foreign workers. It violates the inherent right to liberty. It violates human freedom of action. It denies the autonomy of the free will. It tramples the basic right to be released from a work contract. It takes away a basic economic bargaining power from a party to employment relations who is already weak. By doing all this, the restrictive employment arrangement violates the individual’s human dignity and liberty in the most basic sense.’

These pertinent remarks were adopted by President A. Barak and by Vice-President Emeritus M. Cheshin who added some remarks of his own in that case, and as a result the arrangements that bound foreign workers to their employers were set aside. It seems that there is not, nor can there be any dispute between my colleagues with regard to the basic principles underlying the ruling made in Kav LaOved Worker’s Hotline v. Government of Israel [1], but my colleagues are in disagreement with regard to the implementation of this ruling in the special circumstances of the case before us. In this dispute, I agree with the opinion of my colleague Vice-President E. Rivlin, and like him I too am of the opinion that the offset arrangement is an exceptional arrangement with special characteristics that justifies the exclusion of the Government Decision under consideration in this petition from the rule that invalidates restrictive arrangements. Notwithstanding, I would like to emphasize that in my opinion it is possible to allow this arrangement as an exception inter alia because it is limited in time. But if the concern that my colleague Justice E. Levy raises is realized, and the denial of the current petition ‘will result in similar decisions in the future,’ then it will be necessary to re-examine the legality of those decisions and it is not improbable that a different conclusion will be required in those cases. I would also like to emphasize that in view of the restriction imposed on the Yilmazlar workers when they are in Israel that prevents them from changing over to another employer, there is in my opinion an extra and special duty to protect the rights of these workers, and it is to be expected that the respondents will take care to do this and will continue to carry out regular and strict supervision of their conditions of employment.

 

Petition denied, by majority opinion (Vice-President Rivlin and Justice Hayut), Justice Levy dissenting.

7 Tishrei 5768.

19 September 2007.