According to the employees, the sequence of events that began with the announcement of Segev's intention to change the terms of employment indicates that the employees did not accept the expected changes. The workers' decision to unionize, to continue negotiations with Segev regarding the applicability of the deviant condition, as well as their refusal to sign the new working conditions, indicate the lack of agreement.
Therefore, Segev's decision to apply the new employment conditions and the new calculation method unilaterally, while deducting about 20% of the gratuity money to cover the costs of the restaurant and social benefits that are not paid directly to the employees is unlawful.
With regard to the two main issues reviewed above, as a result of the erroneous legal determinations claimed by the workers, the workers are demanding additional monetary remedies in addition to those awarded by the Regional Court.
- Factual errors: payment of travel fees - the burden of proof should not have been imposed on the employees; waiting times - the burden of proof should have been transferred to Segev after the latter admitted that the waiting times were variable; the tribunal erred in determining that the pay slips were in order; the tribunal erred in relation to the determination regarding the payment of holiday pay.
- 2. The Respondent's Arguments
- Segev replied briefly in this way:
"1. The Respondent relies on the results and reasons of the judgment of the Court of Transfer of the Place of Preliminary Hearing in the Labor Dispute Proceeding 48424-01-22 [Nevo].
- In the transfer of the place of hearing, it will therefore be requested to leave the judgment of the first instance in place, and not to obligate the respondent for any additional expenses."
- 3. Positions submitted in the course of the proceeding
- In the course of the hearing that took place in the proceeding before us, on January 7, 2025, we informed the parties that in view of the questions of principle raised in the appeal, we intend to request the position of the Israeli Restaurant Association (hereinafter: the "Restaurant Association"). Accordingly, my decision of January 13, 2025 regarding this position request was given.
- On January 12, 2025, in response to the notice given at the hearing regarding our intention to request the position of the Restaurant Association, a request was submitted to the National Court for the submission of a position on behalf of the Histadrut.
- In my decision of January 21, 2025, I determined that taking into account that a representative of the Histadrut was present and argued in the course of the hearing in the proceeding, the Histadrut may submit its position in the framework of the response to the position of the Restaurant Association only.
- In addition, on January 23, 2025, a request was submitted by the organization "Strong Restaurateurs Together" to join the proceeding as an auxiliary party with the consent of the parties. The request was made by my decision from that day. On April 1, 2025, the position of the submitters of the position was submitted in Meuhad.
- In their position, the proponents of the position argued that the Regional Judgment does not raise interpretive questions relating to the Case Rule, since it does not relate to the default set therein or to the question of the rights that can be paid by means of the deviant stipulation. Despite the above, for the sake of completeness, they expressed their position on these questions as well.
- According to the position of the proponents of the position, the default in the Kiss rule lists an unclosed list of the wage components that the employer is entitled to pay as wages to service chain employees out of the gratuity money. This argument is based on the language of section 1 of the Wages Protection Law, 5718-1958 (hereinafter: the "Wages Protection Law"), where the definition of "wages" is "including payments for holidays, productivity and overtime and other payments due to the employee as a result of his work and during his employment". The word "including", according to the position of the submitters, indicates a broad definition that includes all the payments due to the employee as a result of his work and during his work.
- The conclusion that arises from this definition, according to the position of the authors of the position, is that the gratuity money includes the basic salary of the employees of the service chain, as well as all the accompanying rights to which they are entitled. Therefore, according to the position of the proponents of the position, the employees' argument that the gratuity constitutes only basic wages is erroneous, as is the workers' claim that the payment of the rights accompanying the gratuity is in essence a total wage.
- According to the position of the proponents of the position, the Case Rule defined in detail the content and definition of the deviant stipulation, according to which it is correct and proper that it will embody the mandatory payments that apply to the employer.
- As to the issue of consent to the deviant stipulation, according to the proponents of this position, this position should continue to be examined as examined in the Regional Court - as a factual issue that must be discussed in each case on its merits, and that to the extent that the requirement in the Case Rule was informed consent, this would have been explicitly determined in the judgment. Therefore, consent to a deviant stipulation can also be in behavior.
- According to the Histadrut's position, the correct interpretation of the Kis rule states that the application of the deviant stipulation for the use of gratuity funds requires that the details of the wage components and the amount of deductions be written and explicitly stated in the framework of notice to the employee or in other lawful ways, and that the employee's explicit and informed consent be obtained. The Histadrut detailed in its position that it is not possible to base an agreement on general principles for calculating wages, and that the parties must know and agree on the manner in which wages are calculated.
- The Histadrut's position is based, inter alia, on various rulings relating to the examination of the employee's consent to various prerogatives of the employer that deviate from the defaults that prevail in the field of labor relations, in which the employee's knowledge of the details of the arrangement has decisive weight for changes in the terms of employment or the nature of the work.
- The Histadrut's position even in the presence of a lawful consent to the application of the deviant stipulation has limitations on the use of the gratuity funds. According to her, the use should be subject to section 5 of the Wage Protection Law, which prohibits the payment of total wages, and therefore the payment of overtime pay, weekly rest pay, vacation pay and holiday pay from the gratuity money is unlawful.
According to the Histadrut, payment of the gratuity money for overtime pay and weekly rest days is contrary to the purposes of section 5 of the Wage Protection Law, which is intended to protect the employee from deprivation and to preserve the purposes of the Hours of Work and Rest Law. Similarly, the payment of annual vacation pay and holiday pay from the gratuity money thwarts the purpose of the Annual Leave Law and the Extension Order regarding holiday pay. According to the Histadrut, the payment of all of these components from the gratuity money eliminates the negative incentive for employers to employ workers during multiple working hours, or alternatively on holidays and rest days.
- Therefore, the correct interpretation of the Kiss Rule , according to the Histadrut, is that the gratuity money should not be used for the purpose of paying wage components that are expressly forbidden to be included in the wages. According to the Histadrut, the payment of these components of the gratuity money leads to the result that the more hours a worker works in overtime, rest days, and holidays, the lower his hourly wage. Moreover, the use of the annual leave is done at the expense of the employee's hourly wage, and thus violates his will and in fact his cogent right to exercise his annual leave. The Histadrut also noted that the use of the gratuity money to pay the rights causes a decrease in the pension insured.
- In response to the Restaurant Association's position regarding employment patterns in the restaurant industry, the Histadrut cites data from an independent survey it conducted on the subject in cooperation with the "Brain Pool" institute. The survey shows a picture according to which 41% of the employees testified that they did not receive any notice document to the employee regulating their working conditions; 52% of the employees testified that they had deducted money from their gratuity money to cover the employer's debts, in addition to embodying their social rights at the expense of the gratuity money. Information collected by the Histadrut also indicates that the application of the deviant stipulation has become the default in the restaurant industry. According to her, employers routinely deduct sums ranging from 15% to 30% of the gratuity money to finance their expenses, and record in the pay slip on account of the balance of the gratuity money after deductions all the payments due to the employee.
- According to the Histadrut's position, these patterns strengthen the argument regarding the need to clearly define the deviant stipulation presented in the Case Rule, and to regulate the issue of consent to its applicability, as well as to define what is the default for the payment of social benefits from the gratuity funds.
- Before concluding this section, we note that on May 18, 2025, a notice of clarification was submitted on behalf of the submitters of the position, and on May 25, 2025, the Histadrut's response to this was submitted. The two notices were filed without the permission of the court and touched on issues that are not directly relevant to our case, and therefore we did not find room for the contractor or to relate to what was stated therein.
Discussion and Decision
- We will preface by saying that after we have considered the written and oral arguments of the parties and the positions of those who submitted the position, we have reached the conclusion that the appeal should be accepted in part, as will be detailed below.
- Normative background
- 1. The Legal Situation Before the Case Rule
- For years, the legal status of the gratuity was shrouded in legal disputes and ambiguity. into the missing regulatory and jurisprudential framework regarding the use of gratuities as a payment included in or in addition to the minimum wage; Inclusion of gratuity funds for the purpose of social payments to which the employer is obligated; calculating the employee's rights vis-à-vis the National Insurance Institute, with the rights (unemployment benefits, maternity allowances, dependents' allowances, etc.) calculated according to his salary prior to the event that entitles him to the pension; The right of the employer to take part of the gratuity money as the income of the business, the National Court began to pour content into the judgment in the Malka Rule, which was the guiding rule until the introduction of the Kiss Rule.
- The Malka ruling regulated the use of gratuity funds according to the "registration test" - an employer is obligated to pay wages and cannot be released from his obligation by relying on the payment of a gratuity that was paid directly to the waiter without passing through the business's coffers, while a tip that passes through the business's coffers and is registered in the employer's books, will be considered the employer's income that he can use for the purpose of paying the salaries of service chain employees. The main purpose of the Malka rule was to assist in enforcement, and to create an incentive for employers to record the gratuity money.
- Justice Shmuel Tzur, as he was then called, listed a number of cumulative conditions under which the gratuity money can be used for the purpose of paying the salary (ibid., in paragraph 7 of Justice Tzur's opinion):
“)a) There is a personal agreement between the parties or a collective agreement that expressly establishes that gratuity payments paid to the employee may also be taken into account in the salary.