Landmark Ruling – Obligation to Engage in Discussions with Workers’ Union of Service Providers

On December 11, 2025, the National Labour Court, sitting in an expanded panel of judges, delivered a precedent-setting decision in the matter of (Collective Dispute Appeal [National] 5448-04-25, Koach La’Ovdim Democratic Workers’ Union v. State of Israel). This ruling addressed a petition by Koach La’Ovdim Workers’ Union seeking to require the State to engage in discussions before publishing a new tender for operating welfare programs serving at-risk youth.

This case arises against the backdrop of long-standing privatization processes, under which welfare services previously provided by the State have been outsourced to non-profit organizations selected through public tenders.

The Labour Court examined the consequences of the “triangular” employment structure – Service User, Service Provider, and the latter’s workers – and noted that replacing a Service Provider at the end of its tender period may result, in cases where the workers continue working for the new Service Provider, in a “reset” of their seniority; and in other cases, in termination of employment.

The Labour Court began its analysis by affirming that the outsourcing itself is legitimate and genuine. However, according to the ruling, this determination serves as a starting point, but not the end of the discussion. Even where outsourcing is legitimate and genuine, it remains necessary to examine whether the Service User is obligated to engage in discussions with the workers’ union representing the workers providing the services, regarding the terms of the new tender that it intends to publish.

The Labour Court ruled that although the Service User is not considered the employer of the workers providing the services for all intents or purposes, it may still be considered an employer for certain purposes, including the obligation to engage in discussions at the collective level. Whether such an obligation exists prior to publishing a new tender depends on the specific circumstances of the case. This assessment takes into account, among other factors, the degree of the Service User’s involvement in the employment relationship with the Service Provider’s workers, as well as the impact of the tender terms on their employment conditions. In the case at hand, the Labour Court determined that an obligation to engage in discussions did arise, given the State’s substantial influence over the worker’s employment conditions; its involvement in the history of the employment relations (including signing a collective agreement); and the significant implications of the tender for the workers.

Please Note: Where an obligation to engage in discussions at the collective level exists, the Labour Court established the following general process:

• The Service User must notify the workers’ union of its intention to publish a new tender, including details of the relevant provisions in the tender that will affect the workers’ employment conditions.
• Following this, discussions should be held with the workers’ union, for which a reasonable period of time should be allocated.
• Once the Service User considers the discussion process complete and intends to proceed with publishing the tender, it must provide advance notice of its intention.
• In the absence of special circumstances, a period of at least 15 days should elapse between the notice and the publication of the tender, to allow the workers’ union to consider its options.

The ruling also raised the question of whether, when a new Service Provider is selected following the tender, the collective agreements that applied (if any) to workers during the period they were represented by a workers’ union prior to the tender will continue to apply to the new Service Provider and its workers. The National Labour Court refrained from deciding this issue but emphasized that bidders must be informed that collective agreements apply to employees, to the extent such agreements exist.

Please Note: While the decision addressed obligations imposed on the State in a tender published as part of the privatization of welfare services, its core principles may also be relevant and apply to employers issuing tenders for provision of services in other contexts.

Given the significance of this ruling and the precedent-setting questions it raises, we recommend seeking tailored legal advice whenever considering publishing a new tender for selecting a Service Provider. This will help determine whether, under the circumstances, an obligation arises to engage in discussions before issuing the tender, and, if so, how it should be conducted.

This assessment should take into account that the obligations imposed on the Service User by the Labour Court depend on the actual circumstances of each case, including, whether a workers’ union exists that may be a party to the discussions; the potential impact of publishing the tender on the workers’ rights; the necessity and scope of the discussions in the relevant circumstances; and, the manner in which the obligation to engage in discussions should be implemented, where applicable.

We are available for any question you may have or clarification you may need.

Labour and Employment Department

Herzog Fox Neeman