New Israeli Labor Court Ruling on Limits of Employer’s Duty of Good Faith in Employment and Dismissal

The Tel Aviv Regional Labor Court recently ruled[1] on a lawsuit filed by the founder, principal shareholder, and CEO of an Israeli startup that was acquired by companies in the Facebook Group.

The court adjudicated two principal issues:

1. Is the founder entitled to future salaries and restricted stock units (RSUs) after his employment by Facebook Israel was terminated?
2. Facebook Israel’s conduct during the founder’s onboarding, employment, and dismissal and, in particular, whether he was given a genuine opportunity to integrate into his role and whether the company conducted a lawful dismissal proceeding.

Background (Shahar Ben Ami v. Facebook Israel Ltd.)

The plaintiff claimed that as part of the acquisition transaction and the related understandings, it was agreed that he would be integrated into a senior role in the Facebook Group for four years, during which RSUs granted to him as part of his employment terms and the transaction consideration would vest. The plaintiff alleged that, shortly after he began his role, the attitude toward him changed, his position was reduced, authorities were taken away from him, and he was excluded from work teams. He also alleged that Facebook Israel effectively decided to terminate his employment long before it held a dismissal hearing, which was conducted solely for the sake of appearances.

In his lawsuit, the plaintiff petitioned, inter alia, to receive the balance of the RSUs that had not yet vested by his employment termination date, or monetary compensation in respect thereof, payments of salary and employment benefits for the remaining 35 months of his promised four-year employment period, and compensation for the flawed dismissal process, mental anguish, and reputational damage.

No Proof of a Commitment to Four Years of Employment or Entitlement to RSUs After Termination of Employment

The court rejected the plaintiff’s claim that he was promised employment for four years, since it found that the employment agreement contained no undertaking to employ the plaintiff for a fixed period, but rather only a six-month provisional period. The court also held that the employment agreement contained a provision enabling Facebook Israel to terminate the plaintiff’s employment at any time subject to advance notice, as well as a provision stipulating that the employment agreement supersedes any previous representations inconsistent with the agreement. Consequently, the court ruled that even if promises or representations were made to the plaintiff prior to signing the employment agreement, the plaintiff failed to prove any binding contractual obligation to continue his employment for any particular period of time.

The court also rejected the plaintiff’s claim that the RSUs constituted a component of the consideration for the shares he sold as part of the acquisition transaction and found that the RSU grant documents and equity plan expressly stipulate that vesting of the RSUs was contingent upon his continued employment and actual performance of work. The court deemed the RSUs a benefit intended to incentivize employees to perform optimally and remain with the company until the vesting dates. Accordingly, the plaintiff’s entitlement to future vesting expired upon termination of his employment.

Facebook Israel made no real attempt to integrate the plaintiff into his role

Material Defects in the Plaintiff’s Employment; the Dismissal Proceeding Was Defective and Merely for Appearances

Although the court rejected some of the plaintiff’s claims, it sharply criticized Facebook Israel’s conduct toward the plaintiff and found that the dismissal proceeding was tainted by a lack of good faith.

The ruling stated that Facebook Israel made no real attempt to integrate the plaintiff into his role and took measures indicating that the company no longer regarded him as part of the team’s future activity. For example, he was not invited to project development or work meetings, was removed from the professional project to which he was assigned, and was excluded from routine work well before he was summoned to a hearing.

The court also found that the plaintiff was not interviewed or presented with expectations regarding his role prior to beginning his employment, yet later some of the reasons given for summoning him to a hearing were his alleged failure to complete tasks and meet expectations that had not been defined for him in advance. In addition, although his employment agreement stipulated that he would report to a particular officer, in practice the company changed his reporting line, split his role, and took away some of his authorities.

The court also found that Facebook Israel held feedback sessions too soon after hiring the plaintiff—before he was given any real opportunity to integrate into his role—made no real effort to find him a suitable alternative role, and even torpedoed a possible alternative role that the plaintiff found on his own.

Based on this set of findings, the court ruled that Facebook Israel held a defective dismissal proceeding solely for the sake of appearances, and that defects were found both in the plaintiff’s hiring and in the manner of his employment. Accordingly, the court awarded compensation of ILS 120,000 for unlawful dismissal and additional compensation of ILS 150,000 for mental anguish and reputational damage.

This ruling joins a consistent line of Israeli case law emphasizing the importance of conducting a genuine, substantive, and well-founded dismissal process, with alignment between the reasons presented during the hearing and the reality in practice, so that they reflect the true grounds underlying the decision.

This importance is heightened where the employee is a senior executive absorbed into the acquiring organization following an acquisition transaction, and where the manner of his integration into the role and the opportunity afforded to him to demonstrate his capabilities stand at the center of the dispute.

The court gave both parties a continuance to file appeals with the National Labor Court.

[Labor Dispute (Tel Aviv) 54930-03-21 Shahar Ben Ami v. Facebook Israel Ltd., issued on April 12, 2026.]

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Adv. Amit Hadad is an associate in our firm’s Employment Department.

Barnea Jaffa Lande’s Employment Department is at your service to provide professional legal counsel on this matter and all other aspects of labor law.