New Legislation Concerning Reservists and Employer Reimbursement as well as Recent Case Law Developments

In recent days, a legislative amendment and an Extension Order have entered into force, which for the first time establish a permanent arrangement regarding the rights of male and female reservists and their spouses, as well as regarding the reimbursement of employers in respect of the continued payment of social benefits during reserve service. These developments have broad and significant practical implications for both employers and employees. In addition, during the past month a number of judgments have been delivered on key issues in labour law and employment relations, which merit attention and an examination of their implications for workplaces, even in times of routine.

In this update we shall provide a concise overview of the new legislation alongside recent case law developments, in the hope of a swift return to routine. As always, we remain at your disposal for any questions and for any assistance required in reviewing and implementing these matters.

 

New Legislation Concerning the Rights of Male and Female Reservists, Their Family Members, and Employer Reimbursement

Over the past week, several significant legislative amendments have been published, converting temporary arrangements that were put in place during the period of the war into permanent arrangements, thereby reshaping key aspects of the employment world. These are developments with broad practical implications for both employers and employees. Below we review these developments and their implications:

 

Employer reimbursement for social payments and contributions for reservists

On April 29, 2026, the National Insurance Institute Law (Amendment No. 265), 5786–2026, was published, codifying as a permanent provision a mechanism for reimbursing employers in respect of employees serving in reserve duty, which until now had been regulated on an ad hoc basis through regulations.

Under the approved arrangement, an employer (other than a public employer, as defined by law) will be entitled to reimbursement at a rate of 20% of the employee’s daily income, multiplied by the number of days of reserve service performed. This reimbursement is granted in respect of the continued payment of social benefits and contributions.

This is a significant development, following a prolonged period during which the matter was regulated by temporary mechanisms and ad hoc solutions.

 

Amendment to the Discharged Soldiers Law (Return to Work)

Concurrently with the amendment to the National Insurance Institute Law, the Discharged Soldiers (Return to Work) Law was also amended, such that the protections against dismissal afforded to spouses of male and female reservists were renewed and extended until 30 days from the expiry date of the declaration of a Special Situation on the Home Front, which commenced with the outbreak of Operation “Lion’s Roar”, on February 28, 2026.

In this context, we recall that the amendment to the law prohibits the dismissal of, or placement on unpaid leave of, an employee who is a parent of a child, during the reserve service period of his or her spouse or of the child’s other parent, unless a permit is obtained from the Employment Committee, provided that the following conditions are met:

• The reserve service is performed pursuant to a “Call-up Order No. 8”, or its actual or anticipated duration is at least 21 consecutive days; and
• The employee notified the employer in writing of the reserve service no later than three working days from the date on which the employer notified the employee of the intention to dismiss or place the employee on unpaid leave.

 

Extension Order for a Collective Agreement Concerning Reservists, Their Spouses and the Accrual of Annual Leave for Certain Employees under the Collective Agreements Law

Further to previous publications on this matter, on April 29, 2026 the provisions of the collective agreement concerning reservists and their spouses were extended by way of an Extension Order, such that they apply to all employers and employees in the private sector (in respect of employers and employees in the public sector, a collective agreement signed on March 26, 2026 applies).

The Extension Order is not time-limited and provides, inter alia, as follows:

• Extension of the protection period against dismissal or placement on unpaid leave for reservists from thirty days to sixty days;
• A prohibition on derogating the employment terms and conditions of reservists;
• An entitlement to paid absence of up to eight days for parents (including a spouse) of a child up to the age of 14;
• The ability to carry forward annual leave days of a reservist and his or her spouse that were not utilised due to the emergency situation, for the following two years (subject to the circumstances specified in the Order).

This constitutes a significant regulatory development, expanding and strengthening the protections and rights of reservists and their family members, and imposing broader obligations on employers, including in respect of past periods. In light of the permanent and retroactive nature of the arrangement, employers are advised to examine its implications also in relation to prior conduct, and to prepare for its ongoing implementation.

 

Recent Case Law

Alongside the intensive activity of the legislature, the labour courts continue to actively shape the employment world, with a series of significant judgments delivered in recent times, bearing practical implications for both employers and employees. Below we review the principal decisions and the key messages arising from them.

Expansion of Employer Liability in respect of Sexual Harassment by a Third Party

The Tel Aviv Regional Labour Court considered the case of an employee in a psychiatric ward at Sheba Medical Centre, who was subjected to sexual, physical and verbal harassment by a patient in the ward during the course of her employment. The judgment held that although the Prevention of Sexual Harassment Law does not apply where the harasser is external to the employment relationship, an employer may nonetheless be held liable by virtue of its duty to maintain a safe workplace free from sexual harassment. This liability derives from the duty of good faith.

In this case, it was held that the employer failed both at the preventive stage and in its handling of the incident: inter alia, no dedicated training had been provided on dealing with harassment by patients; and in real time, the employee’s distress was not adequately addressed. In addition, the handling of the complaint was deficient; no thorough investigation was conducted, relevant testimonies were not collected, and effective measures were not taken. The Court emphasised the employer’s role as the “best preventer of harm” and awarded the employee compensation in the amount of NIS 75,000.

Attention! This judgment underscores the importance of actively ensuring a safe working environment. This duty applies also in relation to risks originating from third parties to the employment relationship. Employers are therefore required to prepare in advance (including by providing training and formulating procedures) and to handle complaints thoroughly and effectively, particularly in work environments where the potential for harassment incidents is high.

Labour Dispute (Tel Aviv Regional) 69438-06-21 Plonit v. Sheba Medical Centre (judgment dated April 12 2026)

 

The Labour Court Enforces Senior Executive Remuneration Mechanisms According to Their Wording

The Tel Aviv Regional Labour Court dismissed a claim for payment of significant remuneration in respect of accelerated vesting of options, which was conditional upon the termination of the employee’s employment within 12 months following a change of control in the company in which the claimant was employed and which was acquired by the defendant (the “Acceleration Period”). The claimant argued that the decision to dismiss him had been taken within the 12-month period following the acquisition transaction, but implemented thereafter, with the aim of denying his entitlement to remuneration.

The Court held that the language of the agreement was clear and explicit, and that the condition for entitlement was the actual date of termination of employment, rather than the date on which the decision to dismiss was adopted. It was further held that even if a tentative early decision had been taken to terminate the employment, this did not give rise to entitlement to remuneration, so long as the employment relationship in fact continued until after the end of the Acceleration Period. In this context, the Court attributed weight to the fact that the agreement was concluded between sophisticated parties, who had defined a clear and measurable economic mechanism.

With respect to the allegation of lack of good faith, the Court acknowledged that there was a connection between the timing of the dismissal and the end of the Acceleration Period, but held that it had not been proven that the employer acted in an improper or exceptional manner justifying deviation from the contractual provisions. It was emphasised that managing the timing of actions based on legitimate business considerations, including in the context of equity-based remuneration, does not in itself constitute a breach of the duty of good faith.

Attention! This judgment highlights the importance of precise drafting of remuneration mechanisms, including the definition of remuneration conditions and clear timelines. The labour courts will tend to enforce contractual language as written, particularly in complex commercial engagements. Planning the timing of actions (such as termination of employment) may be legitimate even where it has financial implications for the employee, provided that it does not exceed the bounds of good faith or indicate improper conduct on the part of the employer.

Labour Dispute (Tel Aviv Regional) 25035-07-25 Dr Barkan v. Akamai Technologies Israel Ltd (judgment dated March 18 2026)

 

Continued Trend of Increasing the Burden on Employers to Make Adjustments for Employees with Disabilities

The National Labour Court upheld an appeal by an employee employed as a forklift operator and held that his dismissal was effected on the background of his medical disability, without proper examination of reasonable adjustments. It was held that the mere summoning of an employee to a hearing due to a medical limitation may constitute grounds for an award of compensation, and that the employer had failed to demonstrate that the adjustments required in the circumstances constituted an “unduly heavy burden”.

The Court emphasised that the duty of adjustment is an enhanced obligation, which includes the active examination of possible adjustments, the involvement of the employee in the process, and reliance on professional bodies. In this case, it was held that the alternative position offered to the employee was incompatible with his limitations and thwarted the possibility of continued employment. Accordingly, the Court awarded the full compensation claimed (NIS 50,000 for breach of statutory provisions and NIS 35,000 for defects in the hearing process).

Attention! This judgment reiterates and sharpens the existence of a substantive duty to actively and meticulously examine adjustments and alternatives concerning employees with disabilities. This examination must include involvement of the employee, consultation with professionals, and an in-depth review of alternatives, prior to making any decision regarding termination of employment.

Labour Appeal (National) 69644-04-25 Sasson v. Al-Bad Meshot Yitzhak Ltd (judgment dated March 10 2026)

 

Between Authority and Harassment: Even Professional Criticism Must Be Communicated Respectfully

The Tel Aviv Regional Labour Court examined claims by an employee alleging harassment, discrimination and unlawful dismissal, in the context of professional criticism levelled against her during the course of her employment. The Court held that it had not been proven that the claimant was discriminated against on grounds of origin or subjected to a campaign of deliberate harassment; that the majority of the criticism directed at the employee was legitimate and based on professional difficulties and failures in her performance; and that the employer acted over a prolonged period in an attempt to improve her performance, including through professional guidance, feedback and opportunities for improvement.

However, alongside recognition of the legitimacy of the criticism and of the decision to terminate employment, the Court identified flaws in the employer’s conduct. It was held that some of the expressions used by supervisors towards the employee were at times blunt, inappropriate and fell below the standard expected of a public employer. In addition, the hearing process was not fully conducted: the hearing invitation did not adequately reflect all of the allegations, and the employee was not presented with a concrete and detailed factual basis to enable her to properly defend herself.

The Court rejected the claims of discrimination and harassment, acknowledged that the decision to dismiss was reasoned and substantive, but awarded the employee compensation for the procedural defects and inappropriate expressions.

Attention! This judgment illustrates the distinction between the legitimacy of a managerial decision and the manner in which it is implemented. Even where there is a professional basis for dismissal, care must be taken with the manner in which matters are phrased, with the orderly documentation of the evaluation process, and with the conduct of a hearing that includes a detailed presentation of the allegations, a genuine opportunity to respond, and the maintenance of an “open mind”.

Labour Dispute (Tel Aviv Regional) 2415-06-19 Nachman v. State of Israel (judgment dated April 6 2026)

 

Continuing to Delineate the Boundaries of Freedom of Expression in the Workplace

The Be’er Sheva Regional Labour Court held that significant defects fell in the dismissal of a lecturer, who had been employed for approximately 30 years at a college of education, on the background of social media posts published following 7 October 2023.

The judgment held that the suspension of the claimant following the publications was carried out without normative authority; and that an ad hoc disciplinary committee was established contrary to the college’s regulations, creating the impression that the decision had been predetermined.

In addition, the judgment emphasised the weight of freedom of expression, and in particular academic freedom of expression, as well as the need to consider alternatives to dismissal and to give weight to the employee’s length of service. At the same time, the Court criticised the employee’s conduct, inter alia noting that she had not retracted various statements even after it was established that they lacked a factual basis. An appeal against the judgment is expected to be filed with the National Labour Court.

Attention! In this judgment, the Court reiterated that even in cases that generate turmoil in the workplace (and at times also beyond it), it is essential to act in accordance with existing procedures and to maintain due process. Decision-making that is not grounded in applicable procedures and on an orderly factual and legal foundation may lead to an award of compensation, and in certain cases even to annulment of the decision.

Labour Dispute (Be’er Sheva Regional) 67742-07-24 Dr Saadeh v. Kay Academic College of Education (judgment dated April 19 2026)

 

We will continue to provide updates on developments.

Employment and Labour Law Department.