Dear Colleagues and clients,

We wish to update you of a new and fundamental ruling by the National Labour Court, regarding the duty of the user of contracted services, to conduct a hearing for the contractor’s employees, especially in cases in which the user of the services (the “User”) wishes to end the placement of a service contractor’s employee at its premises.

The ruling revolved around the claim of an employee, employed by a cleaning services company. The employee was placed at the premises of the User for many years, and his employer – the service contractor – changed from time to time, depending on the identity of the winner of tenders for the provision of cleaning services, which the User published from time to time.

The User began to suspect that the service contractor employee was involved in stamping other employees’ attendance cards. Accordingly, it approached the service contractor, and demanded to terminate such employee’s placement at the User. The service contractor summoned the employee and notified him that he would transfer to provide services at another client. Following such, the employee filed a claim with the Labour court.

The Regional Labour Court in Haifa rejected the employee’s claim whereby the User was his joint employer, together with the service contractor. However, the court required the User and the service contractor to compensate the employee, since a hearing did not take place prior to making the decision to end his placement at the User’s premises. The service contractor appealed the ruling. Within the appeal, the National Labour Court discussed the fundamental question of whether a User is required to conduct a hearing for a service contractor employee, and the scope of such requirement.

According to the ruling, the nature and purpose of the hearing meeting leads to the conclusion that both the User and the service contractor should be required to conduct a hearing for the contractor’s employee prior to making a decision in his/her respect, especially if such decision is related to the termination of his/her placement at the User’s premises. According to the ruling, the scope of the requirement to conduct the hearing will derive from the relevant circumstances. Such circumstances include the service contractor employee’s performance; the length of his/her placement at the User’s premises; the reasons for ending his/her placement and their consequences; and the possibility that the termination of his/her placement at the User’s premises will lead to the termination of his/her employment by the service contractor.

According to the Labour Court, the correct way to conduct the hearing in these circumstances is jointly, by both the User and the service contractor.

The National Labour Court clarified that imposing the duty to conduct a hearing on the User does not exempt the service contractor from fulfilling its duties. Such duties include the requirement to assist the employee in exhausting his/her right to raise claims before the User; and, the requirement to conduct a hearing in relation to relevant aspects of the relations between the service contractor and the employee, such as, placing the employee at an alternative workplace.

The court did not detail the scope of the requirement imposed on the User, in cases in which the User’s decision is broader, and does not relate to a specific employee. Such circumstances may include cutbacks to the scope of services provided by the service contractor; or, the possibility of ending the engagement with the service contractor before the elapse of the agreed upon term.

We recommend that Users contemplating making a decision, which may affect the status of a service contractor employee, seek specific advice regarding the requirement to conduct a hearing under such circumstances, the scope of the requirement and the way in which they should carry out such requirement.

The Labour and Employment Department
Herzog Fox & Neeman