My father's claim - the determining salary
- According to Avi, given the period of his employment with the company, he is entitled to payment of ILS 141,507 for this component (ILS 18,008 X 7.858 years of employment), since his salary consists of the following components: basic salary of ILS 8,000, payment of a fixed bonus of ILS 1,000 which was allegedly paid after Avi requested a salary increase, a sales commission from the company's total sales (0.8%); a sales commission from personal sales (1.2%); and a variable commission that Avi calls a "corona bonus".
- In his affidavit, Avi specifies that he was entitled to 3% commissions from the sales in addition to the base salary (paragraph 66 of my father's affidavit), while in the relief chapter he lists a commission from the company's total sales (0.8%), a personal sales commission (1.2%), and a "corona bonus" (paragraph 94 of my father's affidavit). In his testimony, Avi noted that the additional percentage to which he refers in section 6 is the same "corona bonus" (p. 45 of the transcript of May 12, 2024, para. 29).
- Although there is no mention of this element in my father's affidavit, he claims for the first time that the beneficial arrangement compared to the agreement was agreed upon between the parties as of 2018, and according to him, "if my memory does not mislead me." and also that Tsafrir did not issue an orderly appendix to this effect (p. 46 of the minutes of May 12, 2024, para. 17, para. 21).
- On the other hand, according to the counter-defendants, "in view of the actions and omissions of the counter-plaintiffs, they are not entitled to a single shekel as severance pay and any additional sum to which they are entitled is detailed in Appendix 2 to this statement of defense." Moreover, the counter-defendants did not include any reference to the counterclaimants' claims regarding the inclusion of commissions or bonuses as part of his salary for the purpose of calculating his entitlement.
The Normative Framework
- According to the Mandatory Pension Extension Order, the employee's insured salary for the purpose of making the contributions is the employee's salary and its components as enacted in the Severance Pay Law, 5723-1963 and the regulations enacted thereunder. According to Regulation 1(c) of the Severance Pay Regulations (Calculation of Severance Pay and Resignation Considered as Dismissal), 5723-1964, severance pay will be calculated according to "regular wages without increments".
- Section 6(c) of the Compulsory Pension Extension Order [Consolidated Version] establishes the obligation to contribute to the salary paid to the employee, or the average wage in the economy - whichever is lower.
- With regard to the distinction between "supplement" and "regular wages", it was determined that "the classification of a payment will not be made according to the designation given to it by the parties, but according to its essence, where a payment given to an employee without any additional condition beyond his regular work should not be regarded as an increase but as part of the salary itself (Labor Appeal 33793-12-16 Avital - Bug Multisystem [published in Nevo] (December 6, 2020); Labor Appeal 55550-09-14 Ben Eli - Kumba [published in Nevo] (September 24, 2017)). With regard to sales commissions, according to case law, insofar as they are not conditional on any condition, including a condition of meeting targets, they will be considered part of the regular salary for the purpose of calculating severance pay, and hence even for the purpose of making pension contributions (Labor Appeal 76/06 Gimelstein - Yizmako [published in Nevo].
- The burden of persuasion that a certain payment known as a "supplement" constitutes an integral part of the wages rests on the employee who claims to do so [National Labor Court Hearing 41/78-3 Amnon Barzilai v. Albani Israel Ferrit, [published in Nevo] PDA 13 21; CA 300327/98 Etka in Tax Appeal v. David Retter [published in Nevo] PDA 39:49)]. The test on this issue is whether the payment was fictional and was paid for the employee's regular work or not [Labor Appeal 300370/97 Avraham Zebedi v. IDI Technologies Ltd., (December 24, 2001)].
From the general to the individual
- Avi Moreh's employment agreement is as follows (Appendix A to the employment agreement, Appendix 2 to Tsafrir's affidavit):
"6. The monthly base salary for full-time work as defined in the employment agreement will be ILS 8,000 gross, which will also serve as the sole basis for calculating pension and dismissal.
- Commissions and bonuses:
- Monthly bonus: Every month, the employee will be paid a total of 0.8% of the company's total sales turnover of rehabilitation and medical products (minus VAT, and invoice operations that are not in the field of business defined below).
- In the event that transactions occur at profit rates that are significantly lower than the Company's customary gross profit rates, the Company is entitled to exclude such sales from this "Salary Appendix" with all that such exclusion entails.
- The monthly bonus will be calculated in accordance with the month in which the payment was received and a receipt was issued for it, transactions that did not meet the above conditions will not be considered a sale for the purpose of the monthly bonus.
...
- Sales resulting from other commercial activity carried out by the Company, other than in the field of medical equipment - rehabilitation, will not be included in the calculations detailed above.
...
- The purpose of this agreement is to provide the employee with a salary based on his success and contribution to the company's sales, in the event that the company expands its areas of business, as well as its basket of products, there may be changes in the salary structure to reflect the required changes."
- A review of Avi's employment agreement shows that the "bonus" payment is monthly and constitutes 0.8% of the total sales turnover of A.T. rehabilitation and medical products. Although the company notes that the company is entitled to exclude transactions "at significantly lower profit rates," it does not clarify clear criteria for the payment of bonuses and their rate. This provision of A.T. is not sufficient to indicate a conditional supplement - when it was not clarified at all in the agreement between the parties.
- Tsafrir does not bother to refer to this in his affidavit and does not mention anything regarding the existence of targets or criteria for these payments. Moreover, the counter-defendants did not present an orderly plan detailing the manner in which the payments were made. The counter-defendants did not specify a single example of the manner in which the payments were made. Therefore, IT did not provide any information regarding the calculation of the commissions and bonuses and how they were calculated in real time. We are aware of the counter-defendants' argument that my father was responsible for calculating all the bonuses for the employees and according to his calculations the amount was paid, but this does not negate the employer's obligation to explain how these components were calculated and well-off, which were referred to in the pay slips as a "bonus" or sales commission, were calculated and safe.
- In light of the aforesaid, our conclusion is that where the pay slips include a component for a sales commission and a fixed component that does not change, and even a component titled "Corona Bonus" without any explanation of how and how it is thought by the counter-defendants, the argument that this component should be considered as part of the plaintiff's salary should be accepted.
- From the moment my father has borne the burden of proving that the commissions and bonuses are part of his salary for the purpose of calculating his entitlement , and in the absence of counter-calculations on behalf of the defendants, we accept the calculation inthe matter of his salary, and accordingly the sum of ILS 18,008 should be considered as his determining salary.
- As to the date of termination of employment - we note that with respect to the date of termination of employment, we are of the opinion that the plaintiff's claim in this matter according to which my father terminated his employment on June 29, 2021 should be rejected. A perusal of the resignation letter on my father's behalf reveals that as of July 1, 2021, he requested to retire from his job, and there is no indication that he ended his employment on June 29, 2021, as the plaintiff claims, and not on June 30, 2021, as he claims. The fact that on the evening of June 30, 2021, Avi wrote to Tsafrir about the attempt to break into the device he was using actually strengthens this claim, since it is reasonable to assume that on the last day of work he gave the device to the counter-defendant. In addition, the counter-defendants' argument that in the letter of the counter-plaintiffs' counsel dated August 10, 2021, it was recorded that my father terminated his employment on June 29, 2021, alone does not provide an explanation as to why it should be argued that my father terminated his employment on that date and not on the day preceding July 1, 2021, as stated in the resignation letter.
Differentials in Deposits for the Provident Component and Severance Compensation
- From the moment we determined that the base salary was significantly higher than the salary according to which the plaintiff should have made her calculations in relation to the rights deriving from labor law, it is clear that the plaintiff is entitled to differences in deposits in respect of the provident component. It should be clarified that in the absence of a counter-calculation on behalf of the counter-defendants, and since the counter-defendants' argument according to which the sales commissions and the fixed bonus should not be considered as part of the plaintiff's salary, the lawsuit in respect of this component should not be accepted. We have not lost sight of the fact that in relation to a number of years the calculation was made on the basis of an estimate, however, since the defendant did not present a sum of money regarding the plaintiff's entitlement to provident deposit differentials, to the extent that his claim regarding the determining salary base is accepted, the defendant will bear the sum of ILS 18,614 in respect of this component.
- As for deposits in respect of severance pay, it should be clarified that there is no dispute that my father resigned from his job and that his employment period came to an end after he gave him days of prior notice, and therefore he is not entitled to the severance compensation claimed by him.
- There is no dispute that if it were not for the plaintiff's claim to deny the funds accumulated in the severance pay component in light of the plaintiff's conduct, he would have been entitled to all the funds accumulated in the fund in respect of the severance pay component, as well as to the payment based on the determining salary, which, as stated, is approximately ILS 10,000 higher than the basic salary that was taken into account by the counter-defendant for the purpose of calculating the entitlement to pension deposits.
- The question of whether severance pay should be denied (and, in accordance with our purposes, deposits for this component) was examined in the case of Labor Appeal 659/08 Tulip Engineering Industries in a Tax Appeal - Alexander Paskhov [published in Nevo] (December 20, 2009) and was held as follows:
"As a rule, the dismissal itself is a punishment for the employee even if he has been paid severance pay. Therefore, the denial of severance pay and the denial of advance notice will be done sparingly and "in the most extreme cases" as "the upper limit of the power of punishment"... The denial of severance pay and its rate is delegated "first and foremost to the employer, who is entitled to consider the proportionality of the application of the sanction, and of course the matter is left to the court that reviews the employer's decisions"... When an argument is raised by the employer regarding the denial of severance pay from the employee, or the reduction thereof, the tribunal will take into account the totality of the circumstances of the employment relationship between the parties, and not only the employee's actions, which, according to his employer, constitute grounds for denying severance pay...".
- As appears from the provision of Section 17 of the Severance Pay Law, 5723-1963, the provisions of the Labor Regulations between the Manufacturers Association and the Histadrut apply when exercising its discretion when denying severance pay.
- After hearing all the testimonies and examining the fabric of evidence as determined in the chapter dealing with my father's conduct, in which we determined that he knowingly breached the duty of good faith and trust that applied to him by virtue of the employment relationship in general and the employment agreement in particular; when the fact that it was not proven that he benefited financially or otherwise from his conduct and that it was not proven that he actually caused financial damage to the company; when it was not proven that he stole trade secrets or enriched himself illegally; since his conduct occurred only after the outbreak of the COVID-19 pandemic And about a year before the end of his employment, and not in the many years that preceded it, in which he worked in the plaintiff's ranks, we were persuaded that the full amount to which my father was entitled should not be denied in the severance pay component.
- Accordingly, we determine that the severance pay differentials that have not yet been deposited in the funds (ILS 10,000 per month multiplied by the period of work and the deposit rate), which amounts to about 60% of the total deposits in respect of this component, should be negated, in light of the breach of discipline and the breach of the increased trust in which he is committed to the company. Therefore, only the amounts accumulated in the severance fund will be released in favor of my father, without entitlement to supplement the difference in deposits for severance pay in accordance with his salary asdetermined by us.
- Upon the issuance of the judgment, the plaintiff ordered the release of the funds accumulated in the funds, at the expense of the provident and compensation components.
Fee and bonus differentials
- According to the counter-plaintiffs, the counter-defendants owe Avi payment for fee differences as well as bonuses in the amount of ILS 14,197, plus wage withholding compensation. My father attached a calculation to his affidavit (A/34 to my father's affidavit). According to the plaintiff, it was my father who made the calculations of the commissions for all the employees and for themselves, and therefore his claims in this matter should be rejected.
- As appears from my father's testimony, he was the one who made the calculations of his commissions and bonuses as well as those of other employees of the company (p. 44 of the minutes of May 12, 2024, paras. 32-33). My father also noted that he had the Excel tables according to which he calculated the fees, as it emerged from his testimony:
"The witness, Mr. Matzliah: I would have made this calculation myself, that is, I would have submitted it to Tsafrir to confirm what I had sold.