"The rules regarding lifting the veil require special examination in the field of labor law, taking into account the special duty of trust that the company owes to its employees, and in connection with the special status of the company's employees, as its creditors. The ruling emphasized the special closeness between the employee and the employer, which creates increased responsibility."
- Moreover, the court is authorized to order a partial lifting of the veil for a full difference, in appropriate cases, "Accordingly, even a partial lifting of the veil requires the exercise of individual discretion and an examination of the existence of an evidentiary and legal basis that justifies the very lifting of the veil in general (since even a partial lifting of the veil constitutes a deviation from the principle of the separate legal personality of a limited liability company), and to this extent (as opposed to a full scope) in particular. As a rule, the use of a partial lifting of the veil should be done proportionately, i.e., this doctrine will be used where an infrastructure has been laid that justifies lifting the veil, but it does not justify lifting the full veil. For the sake of clarity, and by way of reversal, care must be taken against the use of this doctrine where the circumstances do not at all reveal a cause for lifting the veil to any extent, or in a case where there is a cause that justifies a full lifting of the veil" [Labor Appeal (National) 35231-02-19 Yad Consulting and Corporate Support Services in Tax Appeals - Elad Stepansky, dated March 17, 2020, hereinafter – the Stepansky case].
- As for our decision – after examining the arguments of the parties, the testimonies and all the material in the case, and in the opening counsel according to which "the starting point is that the principle of the separate legal personality of the corporation should be given validity" (the Miara case), and while taking the necessary degree of caution, we are satisfied that in the circumstances of the case, it is correct and just to order a partial lifting of the veil, This is because the plaintiffs did not lay a sufficient factual basis justifying the provision of an extreme remedy of lifting the corporate veil in relation to all the components of the claims, as will be detailed below.
- With regard to the claim that the defendant is the sole owner of the farm and its founder, the living spirit and the decision maker, we are persuaded that this argument does not justify, in and of itself, lifting the corporate veil and excluding the principle of the separate legal personality of the farm, "since these characteristics characterize a small company that operates through its owner and its management in his capacity as an organ of the company" [Labor Appeal (National) 39047-11-22 Naval Concrete in Tax Appeal - Sweety Napez, dated June 20, 2023, (hereinafter – the Nafaz). Moreover, "responsibility for the management of the companies, in and of itself, is not a reason to lift the corporate veil, since naturally a company must be managed by organs, and sometimes the managing entity is the shareholder" [Labor Appeal (National) 1774-09-16 Amnon Porat - Gabriel Okanin, dated May 26, 2021].
- As for the claim regarding the lack of economic capacity of the farm, the plaintiffs did not prove that the farm lacked economic capacity. The defendant's version that the farm is active, employs workers, and includes 430-440 head of cattle, equipment and vehicles (his testimony: s. 9-18, s. 36, p. 2, s. 1, p. 3 of the prot.) was not challenged. In addition, the defendants' version that this was a farm covering an area of about 14,000 dunams, which was purchased from the Israel Lands Administration, was not even challenged (see paragraphs 7 and 18 of the statements of defense). We did not attribute weight to the defendant's application to the Legal Aid Bureau in the framework of the present proceeding, or to the fact that at the end of the day he did not receive representation from the Bureau, since we are dealing with an examination of the financial situation of the farm and not necessarily of the defendant. The rejection of the defendant's request for legal aid indicates that it is not possible and does not lack financial ability. To complete the picture, we note that even if the farm is in financial difficulties, "the business failure of a company is not enough to bring about lifting the corporate veil between it and its shareholders, and that not every case will be the employment of an employee by a company that has encountered difficulties, and in retrospect has not fulfilled its obligations, will lead to the lifting of the corporate veil, and each case will be examined on its own merits" [Labor Appeal (National) 32995-02-16 Anonymous - Anonymous, dated 14/09/2017, andalso Labor Appeal (National) 54810-11-12 Talia Segev - Sylvia Levy, dated April 16, 2020].
- As for the claim that there is no separation between the defendant and the farm – apart from the claim that the defendant took the seriousness fees into his own pocket and these were not documented in the farm's books, an argument that should not be underestimated, the plaintiffs did not vote and did not prove conduct without separation between the defendant and the farm. Therefore, we have been persuaded that this argument is not sufficient to justify an extreme remedy regarding lifting the corporate veil.
- With regard to the claim regarding the non-payment of social benefits by virtue of the Extension Order and pension contributions - it is based on the basic wisdom that "the mere violation of the various labor laws and the very issuance of fictitious pay slips is not sufficient to constitute grounds for lifting the veil" [Labor Appeal (National) 24256-06-17 Minrav Engineering and Construction in Tax Appeal - GOITOM TWELDE, dated 09/06/2020, and also Labor Appeal (National) 53252-10-22 Yaakov Peretz - Dvir Azrak, Dated 30/10/2023].
- They were not persuaded that the mere non-payment of rights in accordance with the expansion orders justifies lifting the corporate veil. The defendant's claim that he acted in accordance with the legal advice he received is acceptable to us, and therefore it is not possible to attribute to him a conscious intention to exploit and harm the plaintiffs and the rights to which they are entitled by law. Moreover, it was proven that the employees, including the plaintiffs, received full wages (without social benefits) throughout the period of their employment (even though they were housed during the period of their last employment – the testimony of Mr. Friedilander at s. 33, p. 4, testimony of Dvir, s. 16-20, p. 18 of the prot.), including during the period when they went on vacation (testimony of Dvir at s. 10, p. 28.Noam's testimony in paras. 38-39, p. 46 of the protégé).
- Moreover, similar arguments such as these were raised in the application for leave to appeal (national) 52353-08-16 B. TOKO CHEF LTD. ADMARIAM GAVR NEGOUSE (DATED 13/11/2016) AND THE NATIONAL COURT HELD THAT "A WORRYING PICTURE EMERGES REGARDING THE MANNER IN WHICH THE COMPANY EMPLOYED THE RESPONDENT. Among other things, not making records as required by law, employing long hours, and issuing fictitious pay slips. However, no factual basis was laid before the Regional Court from which it can be learned that the company was intended to serve as a cover for the violation of the respondent's rights or his deception. It was also not proven that the company was managed by taking an unreasonable risk, despite the regional court's factual determination that the company was in financial difficulties. In the case before us, we were not under the impression that the non-payment of the social rights to the respondent justifies lifting the veil of the company's incorporation – determinations that are appropriate in our case as well.
- We would like to clarify that we have not lost sight of the testimony of the defendant according to which he was required to mortgage his private home to cover the debts of the farm (S. 11-12, p. 3 of the prot.), which ostensibly testifies to the mixing of assets. Notwithstanding the aforesaid, we are persuaded that this fact does not constitute a proper basis for deviating from the principle of separate legal personality, even more so when it has not been claimed or proven that this is a cover to defraud the plaintiffs or to smuggle away the farm's assets. This is an alleged influx of funds from the defendant's own pocket, in order to improve the economic situation of the farm, which cannot stand to be a problem for him (the above-mentioned Napaz).
- This is not the case with regard to non-payment of a deposit to a pension fund , and we will reason. In the Stepansky case above, it was held that "the starting point is that the transfer of funds intended for deposit for pension security for the employee may constitute a significant circumstance that may indicate the fulfillment of the conditions in section 6 of the Law. However, this starting point is not necessarily the end point, and weight must also be given to the totality of the circumstances of the case.".
- After examining the arguments of the parties, the testimonies and all the evidence, they were convinced that in the circumstances of the case, this was not a mistake or mistake as claimed in the statements of defense, but rather the conduct of the system regarding the non-contributions to the pension fund in relation to all the farm workers, and not only in relation to the plaintiffs (see the pay slips of other employees in Appendix F to Dvir's affidavit). The defendant's explanations as to the defendant's conduct did not satisfy us, and we were not persuaded that the defendant acted in accordance with the employees' requests, nor out of awareness of the termination of payments that the farm is liable for without delay (the defendant's testimony at paras. 22-25, pp. 15, paras. 1-23, p. 16, s. 4, p. 17 of the prut). Moreover, it was proven that the defendant was aware of these omissions and did not take any action despite receiving warnings from the pension fund (the defendant's testimony at s. 32, p. 11 of the protégé).
- It was proven that in March 2015, the defendant stopped depositing funds into the pension fund in respect of pension and compensation in relation to Dvir, and that it did not deposit at all for the second period of Noam's employment, as detailed above. The defendants' arguments as to the reason for the termination of the deposits did not satisfy us, and the court views with great severity that the plaintiffs were left without insurance or pension coverage for more than 4 years. Moreover, it was proven that the plaintiffs approached the defendant in order to correct his omissions and act to deposit the funds intended for the pension fund, which were repeatedly rejected; It is not for nothing that the defendant did not know how to refute the plaintiffs' claims in his testimony before us (paras. 31-38, p. 13, paras. 36-39, p. 14, paras. 8, p. 15 of the prot., Dvir's contact with the defendant between the years 2016-2019 as Appendix D to his affidavit). Moreover, it was proven that on October 31, 2019, Dvir forwarded a copy of the identity card to the defendant at his request (Appendix D to Dvir's affidavit) and the defendant did not take any action, as is evident from Dvir's agency's requests on September 30, 2020 to the defendant or anyone on his behalf in order to deposit the funds intended for the fund (Appendix C to Dvir's affidavit) but in vain. Only after the plaintiffs were forced to take appropriate legal action did the defendants transfer the funds intended for pension (see also S. 14-23, p. 4, p. 5 for the transcription of a conversation between Noam and the defendant, Appendix 13 to Noam's affidavit, Appendix 19 to Dvir's affidavit).
- Therefore, the defendant, consciously and deliberately, refrained from depositing funds or transferring the funds to the plaintiffs, and therefore the corporate veil should be lifted and charged jointly and severally with the defendant for the component claimed for a pension, which was received, as detailed above, in relation to Noam's claim only.
In conclusion
- Therefore, the plaintiffs' claims are accepted in part, as follows:
Dvir - Defendant 1 must pay Dvir the following sums:
- Compensation for failure to give notice of working conditions, in the sum of NIS 5,000.
- Severance pay, in the sum of NIS 55,079.
- Redemption of annual leave, in the sum of NIS 34,270 .
- Convalescence pay, inthe sum of NIS 28,596.
- Economic fees, in the sum of NIS 8,137.
- Seniority supplement, in the sum of NIS 39,685.
- Family supplement, in the sum of NIS 1,145.
- 13th salary, in the sum of NIS 69,154.
- Compensation for the lack of a contribution to the study fund, in the sum of NIS 24,353.
The aforementioned amounts will be paid within 30 days from today, and will bear linkage differentials in accordance with the law, starting from 01/11/2019 until the date of the actual full payment.