The Employees’ Dilma – Record in the Book or “All Bets Are Off” ?

The Employees’ Dilma – Record in the Book or “All Bets Are Off” ?

Yair Aloni, Adv.
December 10, 2023

In an employee's employment agreement, it is recorded that the employee will be entitled to a 'bonus' at the employer's discretion after six months of employment. Although the employer did not give the employee the bonus, the employee chose not to confront the employer about it or declare that "all bets are off." About two years later, the employee is dismissed due to a reorganization plan carried out in the company and then recalls that the employer breached the employment agreement and demands a compensation reflecting a bonus as is customary in the market. Is the employee's demand justified?

An employee may waive the salary, or a certain salary component, a salary increment, a right or other benefit promised, provided that it is not a waiver of a non-dispositive right, whether explicit consent was given or by behavior. Labor Courts caselaw teaches that a bonus is an element subject to the discretion of the employer, as part of its managerial prerogative, and is not an employee’s inherent right or a non-dispositive right (one that cannot be waived). Thus, an employee who continues to work under such existing conditions, despite failure to honor the commitment of granting a bonus, and does not resign or file a claim soon after the date of breach, may be deemed as having agreed to the change by behavior or waived it. Sometimes the employee's "silence" may even indicate that it did not see the employer's failures as a "breach" at all. Thus, for example, in a caselaw heard at the Eilat Labor Court in January, 2016, an employee continued to work for two years despite the "breach of the commitment" to provide him with various benefits. In that case, it was held that the employee's silence indicates that he did not consider this a binding undertaking.

Note that the requirement for an employee to express its opposition to changing the contract derives from the duty to act in good faith and loyalty owed by the parties to the employment relationship because it is inappropriate to allow the employee to raise contentions retrospectively contrary to its real-time presentations to the employer, while the employee "enjoys all the worlds." Thus, for example, in a caselaw heard at the Labor Court in Nazareth in June, 2022, the employer undertook to update the employee's salary after six months of work, but never acted accordingly. In that case, the employee never waived in writing its right to the salary revision, but the employee did not express a clear and consistent objection to the salary that was actually paid to it and continued to work for an extended period of time in such a way that the employer assumed that the employee waived the salary revision and agreed to the salary that was actually paid to it. Therefore, the employee's claim for payment of salary differences was rejected.

In another case, heard at the Tel Aviv Labor Court in October, 2023, a commitment in the employment agreement to grant a quarterly bonus was never followed through. The employee officially contacted the employer in this matter only over a year and a half thereafter. In that case as well, the employee conveyed by her behavior that she does not insist on being paid the bonus and continued to work without expressing any protest. Therefore, her claim for this component was rejected.

It should be noted that the Labor Court is not in a rush to intervene in the employer's discretion, especially in professional matters that are under full employer's discretion. However, for employers, it is recommended to document in writing a decision not to reward the employee a benefit (as far as this is at the discretion of the employer) as well as the conversation in which the employee was informed about this. Thus, if the employee continues to work without expressing any immediate protest, the employee will be deemed as one who consciously waived the 'right', even if the 'benefit' appears in the employment agreement and the employee will not be entitled to demand it upon termination of employment. For the employees, it is recommended to document the formal correspondence with the employer and insist on rights or benefits according to the provisions of the employment agreement in real time. However, it is advisable to remember that even if there is a desire not to declare that "all bets are off" due to personal considerations or constraints, there may be a price to pay. Either way, it is advisable to consult a lawyer who is an expert in the field and receive real time advise as to the rights and make an informed decision at the relevant time.