We are pleased to present you with our first quarterly update for 2025, focusing on the local Israeli treatment of employee transfers during changes in employers.

 Israeli Market Delivers!

Despite the ongoing security situation, the local market has shown remarkable resilience. Israel’s dynamic and innovative economy continues to attract interest from both domestic and international investors, regardless of external challenges.

Therefore, we decided to share a brief update on the important matter of change of employers within transactions. This update cannot cover all aspects of this important issue, but we hope it provides you with some valuable insights and tips.

Employee Consent is always required – No TUPE

Israel does not have rules similar to the European Union Transfer of Undertakings Directive (“TUPE regulations”), and therefore Israeli employees do not automatically transfer and become employees of the buyer upon transfer of the business. Rather, employees may refuse an offer to transfer to another company, thus remaining employed by the seller and requiring the seller (as the original employer) either to continue their employment or terminate the employment relationship, all subject to applicable law.

Did you know? Although the transactional parties can enter into an agreement regarding the transfer of employees, any transfer is fully subject to employee consent, and they cannot be transferred without their consent.

There are Two Methods of Transfer

1. Fire and Rehire – The seller terminates the employees’ employment and the buyer rehires them. This method requires conducting a termination process and triggers severance pay obligation, as the seller must settle all accounts with the employees.
2. Continuity of Rights – The buyer “steps into” the seller’s shoes as the employer for all intents and purposes, which results in the employees maintaining continuity of employment. In this case, all of the employees’ accrued rights and length of service transfer with the employee, and any rights that are dependent upon the period of employment, are preserved as the buyer fully assumes seller’s obligations with respect to the employees.

Did you know? The physical place of work matters. If, following a “Fire and Rehire” transfer, the employees continue to be employed in the same physical workplace, their past length of service with the seller will still count for purposes of calculating various statutory social entitlements.

Can employers make changes to employment contracts?

Generally, yes, subject to the employee’s consent.

• Under the “Fire and rehire” transfer method, the employees will be signing new employment agreements, which may contain new terms.
• Under the” continuity of rights” transfer method, the contract terms should generally remain the same; however, it is not uncommon for the new employer to make certain changes, amongst others, to harmonize the terms of employment to their business.

Did you know? If there are collective relations within either the buyer or the seller, collective obligations may arise and terms of any Collective Bargaining Agreements should be followed.

Did you know? Even if there is no union, employees may unionize in fear of the coming transaction. Accordingly, it is important to structure all plans sensitively.

 Can employers terminate employees during transfers?

As always, any dismissal must follow the general rules for dismissal, which include conducting a hearing prior to making a final decision as to termination. After a hearing is conducted, and assuming the grounds for termination are legitimate, the dismissal can proceed. Naturally, employees may always raise claims in relation to their period of employment or termination.

Did you know?  The termination of certain groups of employees is either prohibited or restricted. It is important to obtain local advice after the list of planned terminated employees is finalized.

Meet our Employment M&A practice

As a department within a commercial law firm, the Labour and Employment Law Department at Herzog deals with all areas of Employment law. Contrary to boutique labour law firms, our department is not limited to employment litigation and ongoing advice, but rather also advises on all aspects of employment law in transactions, mergers and acquisitions, privatizations, and more. In order to advise on these aspects, our team has skills not only in employment law but also in all commercial aspects and practices relevant to transactions and liaises with our firm’s best specialist from other departments.

 Some of the most leading experts in the country in the field of employment law in transactions are members of our department, who have significant experience in the field. Our support includes due diligence support, drafting employment agreements, employee aspects including retaining key employees in the transaction, changing working conditions, dealing with a works council, if relevant, and integrating the working conditions between the seller and the buyer. If required, we also provide support in litigation accompanying the transaction.

 If you are interested in further details, please contact us – shaked@herzoglaw.co.il

The Labor & Employment Department

Herzog, Fox & Neeman