Balancing Justice and Compensation: A Landmark Decision on Employee Theft and Severance Pay

Employee Termination in Israel: Resignation or Dismissal?

Employee Termination: Resignation or Dismissal?


In a recent case, a bakery manager was summoned for a hearing following suspicion of embezzlement. During the hearing, the employee expressed a desire to leave the company due to the accusations against him. Subsequently, the employer sent him a letter accepting his supposed resignation and terminating his employment. However, the employee contested this, filing a lawsuit for the payment of severance pay, arguing that it was a dismissal rather than a voluntary resignation. The regional court sided with the employer, ruling that the employee had resigned and was not entitled to severance pay.

The national court overturned the regional court’s decision, ruling that the employer had initiated the termination of the employment relationship. The court held that the totality of the circumstances leading to the termination must be examined to determine who brought the relationship to an end. The employee’s statements during the employer-initiated hearing were not seen as expressions of his free will. Without the employer’s intervention, the termination would not have been on the table. The court stated that the letter from the employer accepting the employee’s “resignation” should instead be considered a dismissal letter.

The Role of Proportionality in Denying Severance Pay

The national court delved into the law surrounding severance pay denial, considering various rulings where the denial was questioned. The court stated that the denial of severance pay should be reserved for extreme cases where the employee’s conduct has caused severe and long-lasting damage to the employer.

In this case, the regional court’s decision to deny the employee’s full severance pay and entitle the employer to recover part of the severance pay deposited in the provident fund was deemed wrong and disproportionate by the national court. The court found that the theft was not continuous, significant, or profitable for the employee, nor damaging to the employer’s profitability. Given the employee’s long, loyal service without prior complaints, the court ruled that the denial of severance pay should be partial, reflecting the balance between the employee’s dedication and the seriousness of the act. Consequently, the employee was denied 50% of the total severance pay.

The Dilemma of Non-Monetary Compensation

The national court also addressed the issue of non-monetary compensation for employee theft. The court acknowledged that an employee who stole from their employer could be required to pay compensation that reflects the severity of the theft. However, multiple factors should be considered when determining the compensation rate, such as the frequency and extent of the theft. The court cautioned against double punishment, emphasizing the need to examine each case individually.

A Comprehensive and Fair Verdict

In this case, the employee had worked for 16 years, mostly to the satisfaction of the employer. The theft was proven after the employee was photographed taking money and loading a box of bread into his car. However, the employee did not admit to the thefts attributed to him, and no indictment was filed against him. With the denial of 50% of the severance pay and advance notice, the court ruled that there was no reason to impose additional non-monetary compensation.

The Broader Implications of the Case

This landmark decision showcases the importance of considering the totality of circumstances, proportionality, and the potential for double punishment when dealing with employment termination, severance pay, and compensation. It serves as a precedent for future cases involving employee misconduct and compensation disputes. In the end, it highlights the significance of finding a fair and just balance between holding employees accountable for their actions and protecting their rights and livelihoods.

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