2025 Year-End Review: Israeli Employment Law
Summary
- Labor Court Rulings and Employer Discretion: In 2025, labor courts clarified employers’ rights in key areas, including dismissal of senior executives following changes in control, the lawful use of workplace surveillance subject to proportionality and consent, employer exposure arising from conditional equity grants, and limited circumstances permitting scrutiny of sick leave certificates during dismissal processes.
- Legislative and Regulatory Developments: Late-2025 and early-2026 amendments expanded employee entitlements and employer obligations, including extended maternity and parental leave in special circumstances, minimum wage increases with payroll implications, updated travel expense reimbursement following public transportation reforms, and continued gender pay gap reporting requirements for large employers.
- Emergency-Related Employment Arrangements: During wartime conditions in 2025, employment arrangements were adjusted regarding remote work, wage entitlement during absences, and dismissal protections, including enhanced protections for reservists and bereaved family members, alongside the expiration of certain temporary protective orders at year-end.
- Sector-Specific Wage and Enforcement Obligations: As of 2026, employers and service recipients in the security, cleaning, and catering sectors face strengthened wage structures, collective agreement extensions, and mandatory quarterly reconciliation duties, increasing enforcement exposure for noncompliance.
2025 was replete with dynamic changes with far-reaching implications for employers and employees in Israel. We are pleased to present a selection of client updates we published over the past year, along with several new and important updates already relevant at the outset of 2026.
New Trends in Labor Court Rulings
In a precedent-setting ruling, in a proceeding in which we were privileged to represent the employer, the National Labor Court held that a CEO may be dismissed following a change in controlling shareholders and the new controlling shareholder’s wish to appoint a CEO of its own choosing, even in the absence of any claim of personal or professional fault. This ruling constitutes a milestone regarding the termination of senior officers and anchors the right of new controlling shareholders to shape senior management according to their business interests.
The ruling includes several other important legal determinations. Inter alia, it states that employers may prepare to replace the CEO and interview candidates for the office even before completing the incumbent CEO’s termination hearing, provided the hearing itself is a genuine and substantive proceeding. The ruling also holds that there is nothing wrong with a candidate for the position (including a director) being involved in the decision-making process, when the reason for dismissal is a change of management by a new controlling shareholder. Moreover, an annual bonus is not automatically granted by virtue of previous payments, especially when it is subject to the discretion of the board of directors.
A new National Labor Court ruling found that the installation of surveillance cameras near a workstation does not necessarily constitute a material worsening of employment conditions. In fact, each case must be examined based on striking a balance between the employee’s right to privacy and the employer’s legitimate interests. The court defined a three-stage test: (1) the existence of a legitimate purpose and the possibility of achieving it by less intrusive means; (2) the severity of the privacy violation, considering, inter alia, the manner of installation and the footage’s volume of use; and (3) the required extent of employee consent, such that the greater the violation, the more explicit and voluntary an employee’s consent must be.
In the case at hand, the court found the employer had legitimate reasons for installing the surveillance cameras. However, considering the extreme violation of privacy and the employee’s express objection, the court held that the installation of cameras without her explicit consent constitutes a material worsening of employment conditions. This renders her resignation tantamount to dismissal and entitles her to severance pay. The ruling aligns with Privacy Protection Authority guidelines and emphasizes the need for a clear policy, informing employees in advance, and minimizing privacy violations.
In a guiding ruling, the Regional Labor Court clarified that undertakings to grant stock options to employees, even when worded as conditional undertakings (for example, subject to board of director approval or the completion of a minimum employment period), may create legal exposure for employers if they act with mala fides or prevent employees from fulfilling the suspending conditions. In this case, the court held that the employee’s dismissal shortly before the first vesting date, to prevent her from exercising her options, does not allow the employer to rely on nonfulfillment of the suspending condition. The court thus recognized the employee’s entitlement to the first tranche of options according to the vesting schedule.
Accordingly, when employers issue undertakings, even if conditional, they must be backed by genuine substantive intentions and concrete measures toward implementation. This will reduce exposure to allegations of underhanded actions or mala fides.
- Addressing the “sick leave during a dismissal hearing” phenomenon: an employer may obligate an employee to be examined by a physician on its behalf
In a guiding ruling, the Regional Labor Court held that in exceptional circumstances, when an employer has real and substantive doubts about the credibility of sick leave certificates, it may require an employee to be examined by a physician on its behalf, even if the employee presented valid sick leave certificates from an HMO. The court ruled that, as a rule, employers do not have such an automatic right, inter alia, due to the privacy protection rules applying to sick leave certificates.
However, when there are concrete indications of mala fides or abuse of sick leave certificates -such as prolonged sick leave shortly after a summons to a hearing, or a substantiated suspicion the employee is working elsewhere concurrently – the interpretation of the regulations may be expanded to allow an additional examination, so as not to force employers to continue paying sick pay without any ability to examine the claims. At this stage, this is a regional ruling and does not yet constitute a binding precedent.
Legislative Amendments and Updates at the End of 2025 and Looking Ahead to 2026
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New amendment to the Employment of Women Law: extension of maternity and parental leave for employees who gave birth to a baby with a complex disability
The legislature approved an amendment to the Employment of Women Law in early 2026, prescribing that an employee who gives birth to a baby with a complex disability, recognized as such during the maternity and parental leave period, is entitled to extend the maternity and parental leave by an additional five weeks.
This also indirectly amends the National Insurance Law, whereby any employee who utilizes this extension will be entitled to an additional maternity allowance for the extension period, up to a maximum of five weeks, subject to the cumulative restrictions prescribed by law regarding other extensions.
This amendment will come into effect on April 1, 2026.
An increase to Israel’s minimum wage, both monthly and hourly, became mandatory as of April 1, 2025, beginning with the April salary (payable at the beginning of May). This required corresponding updates to payroll systems and pay slips in compliance with the provisions of the Wage Protection Law. The update clarifies that minimum wage includes certain components, such as base wages and fixed increments, but excludes components like bonuses and reimbursement of expenses. The update also has implications for salary components and rights derived from the base wage, including social contributions and various wage-dependent payments. Employers must also post a notice in the workplace about the minimum wage update. Additionally, a further update in minimum wage is expected in April 2026.
Public transportation fares were updated on April 25, 2025, within the framework of the second phase of the “transportation justice” reform. This reform may have a significant impact on the reimbursement of employees’ travel expenses, due to the increase in single-ride fares and relative updates to daily and monthly passes, coupled with expanded benefits to various populations, such as senior citizens over age 67, young adults, and residents of peripheral regions.
The reform does not change employers’ obligation to reimburse travel expenses nor the statutory cap on reimbursement. Reimbursement is calculated based on the cost of the relevant trip up to the daily cap prescribed by law or according to the daily cost derived from a pass, whichever is cheaper unless otherwise stipulated in the employment agreement. We recommend employers examine and update, as necessary, each employee’s actual travel costs according to travel route and eligibility for discounts, while keeping in mind that travel reimbursement is paid solely for physical attendance at work (and not for remote work, vacation, or sick leave). Employees entitled to organized shuttles or a company car are not entitled to travel reimbursement.
Pursuant to Amendment 6 to the Equal Pay Law, employers with more than 518 employees must issue two annual reports on gender wage disparities. Employers must compile an internal report based on their data, presenting average monthly wages and disparities by category, as well as a public report (including on the employer’s website, if any) based on the internal report with general data in percentages. Employers must also provide each employee with information about the category they belong to in the internal report and save the data used to prepare the report. This reporting obligation will also apply in 2026.
Work During Emergencies: 2025 Updates, Expanded Protections Against Dismissal, Lack of Regulation, and Expiration of Existing Arrangements at the End of 2025
During Operation Rising Lion and the declaration of a special emergency on the home front, the arrangements applying to workplace operation and employee rights were updated. The update clarified that remote work is permitted and wages must be paid for it. However, an employer may not compel remote work, except in exceptional circumstances and in conformity with the arrangements applying to essential enterprises by virtue of the law.
To date, no relevant collective bargaining agreement prescribing entitlement to wages during the period of absence during Operation Rising Lion has been extended to the entire economy. Therefore, although many employees were absent from work due to the war, there are no arrangements defining entitlement to wages for such absence nor is there expectation of such entitlement.
Expiration of the extension order extending reservists’ protection from dismissal
On December 31, 2025, the extension order that extended the protection period for reservists against dismissal and a material worsening in employment conditions to 60 days after the end of service, in lieu of the regular period prescribed by law, expired. As of January 1, 2026, the regular legal framework of protection applies, i.e., during reserve duty and for 30 days after the end of any reserve duty exceeding two days. However, we note that the legislature may renew the extended protection period, as occurred at the end of 2024 upon the expiration of the previous order. Therefore, we recommend that you continue checking our updates in this regard.
An amendment to the Families of Fallen Soldiers Law in early 2025 prescribed significant protections for family members of fallen soldiers, including a prohibition on dismissal, docking wages, and reducing appointment percentages.
During the initial bereavement period, i.e., the first three months after the soldier’s death, employers may not dismiss bereaved employees, dock their wages, or reduce their appointment percentages, apart from a temporary reduction in appointment percentage if the bereaved employee so requests due to a medical condition or family circumstances. In exceptional instances, employers may obtain a permit from the Ministry of Defense’s Employment Committee.
During the second period, i.e., from the fourth month until the end of 12 months, employers may not dismiss bereaved employees or place them on unpaid leave without a permit from the Employment Committee. Such permit will only be granted if the conditions and circumstances prescribed by law are fulfilled and subject to proof there is no connection to the soldier’s death.
These protections also apply to employment through manpower contractors and actual employers of contract employees.
Furthermore, if a bereaved employee resigns within twelve months of the soldier’s death, the resignation will be deemed a dismissal for the purpose of calculating severance pay.
Violating the Families of Fallen Soldiers Law may expose employers to criminal liability and financial sanctions pursuant to the Law for Increased Enforcement of Labor Laws.
Employment of Workers in the Security, Cleaning, and Catering Sectors
- Wage update and employment by service contractors in the security and cleaning sector effective January 1, 2026
An amendment to the Employment of Workers by Service Contractors in Security and Cleaning in Public Bodies Law came into effect on January 1, 2026. It prescribes a structural update to the wages of cleaners and cleaning supervisors employed through service contractors as a permanent addition to the minimum wage pursuant to the Minimum Wage Law. This update also applies to all employers and employees in the cleaning sector in the private market, pursuant to a recent circular published by Israel’s Chief Commissioner for Labor Relations.
Accordingly, employers in the cleaning sector and clients ordering cleaning services must pay employees in accordance with the update. This directive is not at the discretion of employers or clients ordering service.
As of January 1, 2026, the rates will be updated in the Ministry of Labor’s simulator for the purpose of calculating the value of an hour of work under the Hourly Value Regulations.
After the Regulations for Increased Enforcement of Labor Laws came into effect on January 1, 2024, it was clarified that recipients of cleaning, security, and catering services must perform quarterly account-settling with their service contractors regarding payments due to the contractors’ employees assigned to them. This includes wage components affected by an employee’s seniority, actual work, and qualifying events (such as sick pay, holiday pay, transportation, and contributions during specific periods depending upon the service sector).
During this account-settling, the contractor must send notice to the service recipient specifying the additional payment it is entitled to receive, if any. The service recipient must then verify whether payments were actually paid to the contract employees, including by demanding supporting evidence such as pay slips and deposits confirmations. Subsequently, the service recipient must transfer payment to the contractor approved in conformity with the engagement agreement. The regulations also state that service recipients can stipulate in their engagement agreements with contractors that the value of the contract employee’s basic work hour will also include certain components. However, if components remain or additional qualifying events arise that are not covered, they must be settled during the quarterly account-settling.
An extension order in the institutional catering sector came into effect on April 1, 2025, extending the application of the 2022 collective bargaining agreement to all employers and employees in the sector and improving catering employees’ employment terms. The order applies to institutional catering service providers (through engagements with companies, institutions, and various bodies, apart from restaurants and event/banquet halls) and to employees directly employed in the provision of catering services, including employees stationed at the service recipient and employees in central kitchens, including operational roles and shift managers, but excluding management employees who are not stationed at service recipients.
This order also has implications for service recipients, who must verify that catering providers comply with the order and review and update their engagement agreements.
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Adv. Netta Bromberg is a partner and head of our firm’s Employment Department.
Adv. Erica Barmack is an associate in our firm’s Employment Department.
Barnea Jaffa Lande’s Employment Department is at your service to provide professional advice and support in employment termination proceedings and in addressing any other matters across the various aspects of labor law.