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Israel: Labor Court Orders Compensation for Age-Based Discrimination

(Sept. 7, 2016) On August 21, 2016, the Regional Labor Court in Tel Aviv Yafo accepted a suit for compensation for unlawful dismissal of an employee in violation of the prohibition on age discrimination under Israel’s Equal Opportunities in Labor Law (EOL Law), 5748-1988. (Sefer HaHukim [BOOK OF LAWS, the official gazette] No. 1240 p. 38,); File No. 4701-05-14 Madi Levi v. IBM Israel Ltd. (Aug. 21, 2016), TAKDIN LEGAL DATABASE, by subscription (in Hebrew).)

Background

The plaintiff was employed by IBM Israel from 1977 to 1996. Following a decision by IBM in 1996 to outsource the internal activities of its subsidiaries to Global Johnson Controllers (JC), the plaintiff’s employment by IBM was terminated. She signed a release form and received severance pay and other benefits. The plaintiff continued working for IBM in the same position and the same office, however, as an employee of JC’s subsidiary in Israel. (File No. 4701-05-14, supra, ¶¶ 2.5-2.8.)

In 2013, the plaintiff was informed that IBM had decided to terminate her IBM employment through JC and that no alternative job had been identified for her in either company. Having received 30 days’ prior notice of her dismissal, the plaintiff was instructed to perform work that overlapped with the work of a younger employee appointed by IBM to replace her. (Id. ¶ 2.16.) The plaintiff’s request to continue her employment at least until the end of the year, considering her economic situation and her being two-and-a-half years short of eligibility for retirement benefits, was denied by IBM. In a letter to the plaintiff, IBM stated that it was not satisfied with the service she had provided through JC “and therefore decided to receive the same service from another staff employee (Insourcing), within the framework of [that employee’s] additional duties.” (Id. ¶¶ 2.9-2.17.)

 Decision

The Regional Labor Court decision rendered by Judge Hana Trachtingot made the following determinations.

  1. Responsibility for Dismissal

Trachtingot determined that IBM hired the plaintiff, directed her employment and pay, and supervised her work. The plaintiff performed services for IBM and on IBM’s premises. IBM therefore should be viewed as a co-employer of the plaintiff together with JC. The decision to stop the service rendered via JC by the plaintiff was IBM’s, the Judge held. Even if the prohibition on termination based on age discrimination under the EOL Law refers to the actual employer, IBM’s instruction to terminate the employment of the plaintiff contradicted public policy. IBM should therefore be viewed as a co-employer for purposes of its responsibility to pay compensation in connection with the plaintiff’s termination. (Id. ¶¶ 25-26.)

  1. Illegality of Dismissal is Evaluated by Outcome, Not by Intention

On its face, Trachtingot opined, IBM’s decision to fire the plaintiff was not based on an intention to discriminate on account of her age. Instead, it appears to have been based on a legitimate budgetary consideration of using “insourcing” to cut costs. (Id. ¶ 32.) A legitimate budgetary consideration, however, is insufficient for rejecting a claim for unlawful discrimination, the Judge wrote, as it is the outcome of the decision to insource, not the intention behind it, which has to be examined. (Id. ¶ 32.) The employer’s right to conduct its business in a way that would minimize costs and increase profits had been previously recognized by the National Labor Court. Such business considerations, however, are unsatisfactory, Trachtingot ruled, when they result in age-based discrimination, which constitutes harm to an individual’s basic rights. (Id. ¶ 34.)

Having reviewed the circumstances of the case, Trachtingot rejected IBMs claim that its decision to terminate the plaintiff’s employment was based on its dissatisfaction with her work. (Id. ¶33.)

  1. Alternatives to Termination

Trachtingot recognized that the plaintiff’s wages were significantly higher than those paid to the young student hired to replace her. The discrepancy was due to the plaintiff’s indirect employment by IBM and her seniority as compared with that of her replacement. Having been fired after working at IBM for over 35 years, Trachtingot held, IBM should have at least offered her an alternative position for lower wages or part-time employment, as the plaintiff had requested. The company’s omission in this regard constituted discrimination against the plaintiff in  hiring. (Id. ¶ 35.) In this context, Trachtingot added, “the fact that the plaintiff’s replacement performed additional duties, or that she had been employed previously by IBM did not change the fact that the plaintiff’s role had not become obsolete and that it was possible to offer her [continued employment]under different conditions.” (Id. ¶ 36.)

Before deciding to terminate the plaintiff’s employment, Trachtingot held, the respondents had to consider her older age as having a potential impact on her economic future and future employment prospects. It appears that the plaintiff’s supervisor at JC understood the impact of the layoff on the plaintiff and even asked IBM to continue her employment considering her age and the fact that JC could not offer her alternative work. IBM, however, chose to disregard these considerations. Therefore the Judge opined, the plaintiff’s dismissal was done in violation of IBM’s legal obligations, and JC had not explained what steps it followed to find the plaintiff alternative employment. (Id. ¶ 37.)

  1. Remedies

Trachtingot held that IBM’s omission from consideration of continuation of the plaintiff’s employment under different terms, which could have involved reduction of pay, part-time employment, or additional requirements, effectively discriminated against the plaintiff on account of her age both in hiring and by terminating the employment relationship. (Id. ¶ 47.)

The Judge found JC similarly responsible because it could have made a real effort to place the plaintiff in a different job. The plaintiff’s supervisor at JC had made some inquiries regarding the plaintiff’s possible alternative employment within the company, but was not found to have effectively contacted other customers in addition to IBM in the course of those inquiries. (Id. ¶ 48.)

As a result, Trachtingot imposed liability for compensation on both IBM and JC. IBM was found responsible for violation of the EOL Law, and IBM and JC were found jointly responsible for loss of earnings to the plaintiff caused by termination of her employment. (Id. ¶ 49.) Both respondents were also required to pay court and lawyers’ fees. (Id. ¶¶ 65.1-.65.3.)