Labor Appeal 30310-05-24 Given on June 22, 2025 - part 5

(Section 110 of the judgment in the 116 ruling).

40. In a direct continuation of these words, the judgment expands on the possibility of another express stipulation (hereinafter: "the deviant stipulation") by stating as follows:

"The employer, as the person who determines the wage arrangements and all the conditions of employment in the restaurant, including with regard to gratuity money, is entitled, subject to any law, to reach an agreement with the employees of the service chain in his business, regarding a stipulation that deviates from the aforementioned default...  Thus, for example, an exception stipulates that the employer may use the gratuity money, which exceeds the minimum wage or a higher rate of wage that has been agreed upon...  for the purpose of paying the mandatory payments that apply to the employer, such as his share of the National Insurance contributions and pension contributions or the payment of the social rights of the service chain employees."

41. The option of the deviant stipulation, as presented in the Case Rule, is intended to enable employers to adapt the rule to the nature of the business they manage, and to provide a response to the unique needs that may arise in each case on its own merits. Based on the understanding that businesses in which the salary is based on gratuity range from a very wide and varied spectrum, so that a sweeping and inflexible application of the nature of the method of payment of gratuity wages may harm both the economic interests of the employer and the employees.  However, already in the judgment in the Case case, the National Court noted that this possibility is also subject to the existing law, and to the principles of labor law, stating as follows:

"It should be emphasized that such a deviant stipulation is subject to any law, for example, to the provisions of section 5 of the Wages Protection Law (regarding a total wage prohibition), section 26b(c) of this law (regarding a situation in which certain components are not included in the pay slip) and section 28 of the Severance Pay Law, 5723-1963 (regarding wages that include severance pay).  A deviant stipulation is also subject to the rest of the protective laws and/or provisions in collective agreements and expansion orders, as well as to the restrictions imposed by virtue of contract law and other relevant legislation, taking into account the circumstances of the granting of the tip and the parties involved."

42. For the avoidance of doubt, since its entry into force in January 2019, the KISS rule is the rule that applies to the entire restaurant industry, while the deviant stipulation, as its name implies, is an exception to the rule. This exception does not constitute a slight deviation from the working conditions on the premises, but rather relates to the method of payment of the employee's wages, an issue that relates to the core of the employment contract and may be sufficient to affect the entire nature of the employment and the feasibility of both parties to enter into an employment contract [National Labor Court (National) 47/3-108 Abd Elias Al-Duwaik v.  Estate of Haj Rashid al-Shuwaki, PDA 19 382 [Nevo] (1988)].
43. The default set in the Case Rule is that the employer is entitled to use the gratuity money only to pay the salaries of service employees and is not permitted to make any other use of the gratuity funds - he may not deduct various payments from them for himself or use them to cover his own expenses or liabilities. In the absence of an exception clause that meets the terms of the consent presented in the Kiss Rule and will be clarified later, the employer cannot take part of the gratuity money in order to finance his share of pension contributions, social security payments, or other social benefits; he must pay these charges out of his own money, like other employers.  The gratuity money is held by the employer as a trustee for the employees and for the purpose of paying their wages only.
    • 3. Consent to a change in the terms of the employment contract
44. There is no dispute that the employer's managerial prerogative also derives from his right to make managerial decisions that affect the employee as he wishes (see Elisheva Barak Osuskin, "The Managerial Right as a Constitutional Right," Steve Adler's book 99 (Yitzhak Eliasuf et al., eds., (2016)). Alongside this premise, there is also the subordination of the employment contract to general contract law, in which there is also a requirement for the employee's consent.  The tension between these two principles is not foreign to the world of labor law, and over the years case law has developed in this court in an attempt to reconcile the protection of the employee as a weakened party with limited bargaining power, and the employer's freedom of occupation and managerial prerogative.
45. In addition, constitutional rights and rights granted to the employee by virtue of the law, there are other elements of the employment contract that the premise is that consent is almost always required to change them in proportion to the essence of the component. "Sometimes the line is clear: the basic wage rate, for example, is almost always determined by an explicit agreement between the parties (written or oral), and the employer is not allowed to unilaterally reduce the salary.  On the other hand, the identity of the managers or the type of means of production are within the exclusive authority of the employer...(Guy Davidov, "The Employer's Prerogative and the Law of Contracts: In the Wake of the Nahari and Grinshpan Cases," Mishpatim 38 417 (2008-2009) (hereinafter: "Davidov").  However, certain questions remain more complex to decide, in situations where the change was made within the framework of the prerogative or some other source of authority (in our case, the case law in the case law), but these involve a violation of essential elements of the employee's working conditions.
46. The scope of the employer's managerial prerogative has traditionally been examined under an additional, proprietary prism. The employer's property right in the business grants him constitutional rights (for more information, see Aharon Barak, "The Labor Constitution," Steve Adler's book 59 (Yitzhak Eliasuf et al., eds., 2016)).  The two perceptions are perceived not as contradictory, but as complementary to each other.  Just as the right to property is not absolute, and brings with it obligations to the owner of the right, so the employer does not have an absolute and independent right to manage the business (see Davidov, at pp.  424-425).
47. One of the solutions proposed in the literature and also raised in the Nahari case [Labor Appeal (National) 300353/97 State of Israel - Moshe Nahari 318 [Nevo] (2000)] andGrynszpan [Labor Appeal (National) 350/03 State of Israel - Ministry of Labor and Social Affairs - Avraham Grynszpan [Nevo] (April 24, 2006)] was a separation between changes in work arrangements, which the employer may change unilaterally, and the working conditions affected as a result of the change, which the employer cannot change in the absence of consent without the change being considered as a breach of contract (for an in-depth review of this approach and the manner in which it was examined in the Nahari and Grinspan cases, see Davidov). Thus, it was proposed to classify managerial decisions into four groups: decisions that can be deduced from the language of the contract that the employer is allowed to receive unilaterally and do not entitle the employee to relief of any kind; decisions that the employer can make unilaterally and that will entitle the employee to compensation for the damage caused by the change; Decisions that the employer can make unilaterally, and which do not entitle the employee to compensation, but give him the right to resign legally because they are "a tangible deterioration in the working conditions; and decisions that require the consent of the employee, when their unilateral acceptance will be considered a breach of contract" (ibid., at pp.  436-437).
48. The classification of decisions that require the consent of the employee as opposed to decisions that are the result of the managerial prerogative in its entirety, leads to another question of great weight - the degree of consent that must be obtained from the employee.
49. Insofar as the element of consent is also derived from the principles of general contract law, changes that the employer is obligated to make by consent can also be made on the basis of implied consent. The employer can claim that the employee's consent was learned from the latter's silence regarding the new working conditions, or from his behavior in the very act of reporting to work after the change.  Reinforcement for this is found in section 6 of the Contracts (General Part) Law, 5733-1973, which states that acceptance "may be in an act for the performance of the contract or in some other conduct".  In fact, in the Protection of Privacy Law, 5741-1981, the legislature also determined, in the context of the laying out of the legal protection of the right to privacy, that even implied consent may constitute sufficient consent for the purpose of avoiding the violation of privacy.  In some cases, the court recognized such situations as reflecting consent [see, for example: Zoning Plan (National) 55/3-86 Yohanan Golan v.  Ltd., 27(1) 270 [Nevo] (1994); Labor Appeal (National) 21920-02-13 Diamant Toys in Tax Appeal v.  Valentina Frantsev [Nevo] (June 1, 2015); Miscellaneous Applications Civil (National) 122/09 Yosef Yanovsky v.  Israel Electric Company in Tax Appeal [Nevo] (August 5, 2010), para.  19; Labor Appeal (National) 8677-07-18 Joseph Turner et al.  - Schechter Institute of Jewish Studies [Nevo] (May 2, 2019) Section 8(d)].
50. At the same time, it has often been determined that there are circumstances that do not allow reliance on implied consent alone, due to the uniqueness of the employment contract. An employment contract is different from a regular contract, inter alia, due to the inherent gap in the structural balance of power that exists in the employment relationship, and it is not possible to contain the application of the ordinary rules of contract law when it comes to this contract.  Thus it was stated in the Labor Appeal Proceeding (National) 23901-07-23 Transportation and Tourism Axis in a Tax Appeal - Tova Dahari et  6 [Nevo] (October 30, 2024) by my colleague Judge Sigal Davidov-Motola:

"...  The legislature and case law recognize the uniqueness of the employment contract, both because the contract deals with the employee's labor power, which is part of his humanity, and in view of the inherent gaps in bargaining power between the parties.  These gaps may lead the employer to dictate the terms of the contract, and the employee to agree to the terms that violate his rights.  Both legislation and case law have established protections that are intended to prevent the abuse of the employer's excess power and to ensure the basic rights and basic values of labor law."

51. In addition, and in the context of examining the existence of an infringement of the right to privacy, as stated in section 3 of the Protection of Privacy Law, 5741-1981, I determined that due to the uniqueness of the employment contract, it will not always be possible to apply these rules to the employment contract, and it will not always be sufficient to have implied consent. And this is what I determined in the Labor Appeal Proceeding (National) 41179-01-24   Mark Friedman in a Tax Appeal - Revital Elkaner [Nevo] (March 26, 2025):

"As we noted above, the employee's degree of consent must also be examined taking into account the inherent power gaps that exist in the employee-employer relationship and taking into account the difficulty that the employee has in refusing to install the cameras, out of concern that refusal will cost him the loss of his job or non-acceptance of the job."

52. The validity of implicit consent may be based on the factual basis, in examining the totality of the facts of each case on its own merits, while attempting to trace the true will of the employee as reflected in his conduct. So it is more likely that if it is determined that there was an implied consent, it will also be determined that it is valid.  It is possible that the examination will also be based on the normative foundation, and then the center of gravity of the decision will be the question of whether it was appropriate to suffice with only implicit consent, with respect to the change in question.  This duality leaves the reliance on implicit consent under a heavy shadow of ambiguity, leaving the decision ad hoc in the hands of the court.  (Hani Ofek)Gendler, "Changing the Employment Contract: From a Contractual Paradigm to a Constitutional Paradigm," Elika Barak-Ossoskin 427 (2012) (hereinafter: "Ofek-Gendler")
53. Reliance on implicit consent raises additional difficulties for the lack of clarity, given the power disparities inherent in the labor relationship. Just as it is difficult to rely on the employee's consent to waive cogent rights, which can be the result of heavy pressure on the part of the employer (see Guy Davidov, Stipulation on "Employee" Status and its Implications, Mishpatim   87 (2020)), so too changing an existing employment contract between the parties, which relates to issues that are material to the employee, can be a product of the employee's economic dependence on the employer and the concern that expressing opposition to the change will cause damage to the employment relationship between him and the employer or to his dismissal.  These concerns intensify as the employee in question finds himself in a weaker position, both in terms of his bargaining power vis-à-vis the employer and in terms of the fear of being re-released into the labor market, and they make it difficult to examine the employee's implicit consent as genuine consent, and in some cases also explicit consent.  (Ofek-Gendler, pp.  2-5).
54. Interim summary: As it appears from the above, the case law recognized that in appropriate circumstances it is possible to learn about consent in behavior, including by virtue of the absence of protest or continued reporting to work. Our judgment does not cancel or detract from this possibility, but rather it is intended to shed light on the fact that its implementation should be done with the proper care in accordance with the circumstances of the case, in light of the considerations we have listed above.  Therefore, there is no room for a sweeping determination that the continuation of work after the change, and sometimes even in the absence of protest, necessarily indicates agreement to the change, just as there is no room for a sweeping determination that the continuation of work after the change is meaningless.  Each case must be examined according to its circumstances.
55. From the general to the individual
56. In examining the matter, we will follow the path paved by the Regional Court and discuss the questions that arise in the division into three relevant periods: from the beginning of the employment of the employees until the entry into force of the Case Rule (hereinafter: the "First Period"); From the date of the entry into force of the Kiss Rule until September 1, 2019 - the date on which the deviating stipulation was applied by the employer (hereinafter: the "Second Period"); From September 1, 2019 onwards (hereinafter: the "Third Period").
    • 1. The First Period
57. With respect to the first period, it was determined, as stated, that the employer acted lawfully, and therefore the claim in relation to this period was dismissed. As we noted at the time, Segev recorded the gratuity money given by the restaurant's customers, and these were used in part to cover the employer's expenses for social rights, and the rest of the money was transferred to the waiters.
58. We accept the Tribunal's determination that this arrangement did not deviate from the legal situation that existed prior to the entry into force of the Case Rule on January 1, 2019. The conditions set between the parties were agreed upon as part of the employees' entry into work at Segev.  The court ruled factually that the terms of employment were known to the employees and we did not find that there is room to deviate from the rule that the appellate court does not interfere with the factual determinations of the trial court.
59. It should be noted that in contrast to the legal situation after the case rule, during this period there was no need for consent in order to change an existing legal situation, but in fact there were two possible situations: first, the transfer of the funds through the employer's coffers, and thus these funds should be regarded as wages received from the employer with all the consequences derived from it; second, the receipt of the gratuity directly from the client, and thus these funds are not considered as wages.
60. When the waiters started working in Segev, the restaurant operated in the first way. In fact, the consent of the employees was not required to do so, since there was no legal default on how an employer should act, but rather instructions on how to act in each of the ways.  When Segev chose to act in the first way, it also acted in accordance with the provisions set forth in the case law in relation to that path.
61. Therefore, the workers' claim in relation to this period was dismissed, and the appeal in this matter should be dismissed.
    • 2. The Second Period
62. As stated, with respect to the second period, it was determined that between January 1, 2019 and September 1, 2019, Segev should have acted in accordance with the provisions of the Case Rule. In fact, as of January 1, 2019, the legal situation between the parties changed in such a way that the rulings of this court should have been automatically included in the employment contract between the parties.  This is because there is no dispute that in each of these periods there was no deviant stipulation that stipulated the conditions set out in the judgment.
63. With regard to this period, we did not find room to intervene both in the determination of the Regional Court and in the manner in which the rights were determined in connection with this determination.
    • 3. The Third Period
64. The main dispute in this proceeding relates to this period. In fact, the parties disagree on the question of whether the employees agreed to apply the deviant stipulation that Segev sought to include in the waiters' employment contract.  In the meantime, the question arises whether implicit consent is sufficient for the purpose of applying an exception stipulation as defined in the 10th ruling, or whether explicit and even written consent is required in order for an employer to be able to apply it.  Our position is that implicit consent is not enough and explicit consent is required in our matter - and we will clarify.
65. Further to the legal review presented at length above, we note that the parties do not disagree that Segev should have obtained the employees' consent to a change in the terms of their employment, but the parties disagree, as stated, on the question of what type of consent is required in such a case.
66. We would like to start with the obvious. The Kis Rule explicitly stated that with regard to the deviant stipulation, the employee's explicit consent must be obtained , and not only that, and the judgment also states that it is preferable that this consent be given in writing (see section 39.3 above).  Requiring explicit and preferably written consent is not a trivial matter and is determined by Israeli law in general and labor law in particular sparingly.  Once the court made this demand, it is not clear how Segev could have ignored this demand.  This reason is enough to accept the appeal.
67. Further to the above, we note that in the special circumstances of the case, it is possible to find a reason that justifies increasing the nature of the consent.  Beyond the consideration of the power disparities inherent in the labor relationship, in the circumstances of this case, the workers did not agree to the change, and as a result, they even joined the Histadrut out of a desire that in this way their voices would be heard more effectively.
68. In other words, the very organization of the workers is sufficient to show an explicit disagreement with the change in the terms of employment. The parties do not dispute that the unionization of the Histadrut workers stemmed directly from Segev's intention to change the terms of their employment as early as June 2019.  Therefore, the employees expressed their opinion regarding the need to negotiate the change in question.  Moreover, in paragraph 42 of the regional judgment, it was determined that some of the employees continued to work in the expectation that the organizational negotiations would bear fruit.  In these circumstances, there is a difficulty arising from the specific circumstances of the matter in the application of the principle of implied consent.  We will add that in our opinion, in the circumstances of the case, the fact that the Histadrut did not take organizational steps after the negotiations were unsuccessful, but rather filed a claim for financial relief, should not be regarded as an expression of the Histadrut's agreement, and certainly not the employees' agreement to change the employment contract.  Indeed, there are cases in which the acceptance of the workers' organization with a certain conduct by the employer can be considered a collective agreement, which also binds the employees.  However, it should not be determined in a sweeping way that the failure of the workers' organization to take organizational steps constitutes consent to the employer's conduct.
69. In fact, the more we accept this claim, the more a situation will arise in which a workers' organization will have a negative incentive to negotiate without disrupting the workplace's activity. In our case, the workers' organization chose to file a claim for financial remedies and not to take organizational steps.  It is not the role of the court to criticize the manner in which a workers' organization chooses to make use of the collective tools at its disposal, and to draw conclusions from it regarding its agreement or disagreement with changes in the workers' employment conditions, as opposed to a situation in which the workers' organization does not operate at all, in which case under certain circumstances it is possible to deduce from its conduct collective consent to a change in the working conditions introduced by the employer.    In our case, no collective agreement was signed, so in any event, the workers' working conditions were determined in the personal agreement between them and the employer, and therefore the conduct of the Histadrut cannot be a substitute for the explicit consent of the workers, which is required by the case rule.
70. In fact, taking into account the factual determinations in section 42 of the Regional Judgment regarding the manner in which the collective bargaining was conducted, the very fact that Segev chose to unilaterally change the terms of employment of the employees, while they were in negotiations on this specific issue, amounts to a lack of good faith in conducting negotiations. Accepting this argument by Segev would be tantamount to awarding a "reward" to someone who acted in bad faith, and inter alia, to alleviate this claim, and for this reason, this claim should be rejected.
71. As this is the case, we do not need to decide the question that also arose in the framework of the proceeding, namely, the written requirement regarding the application of the deviant condition. This is based on the case rule.  In light of the determination that in our case no explicit consent was obtained from the employees, regardless of the question of the obligation that the consent be in writing.  Therefore, we are not required to decide this question regarding the employees before us.  In accordance with the KIS rule, it was determined that it is desirable that the consent be in writing, but there is no obligation to give written consent.  However, we are of the opinion that it is appropriate to sharpen the case rule and strengthen the element of explicit consent in changing the default to another agreement, and to add that from the date of this judgment onwards, the application of an exceptional stipulation to employees in the restaurant industry will be by written consent.
72. In light of the aforesaid, we accept the appellants' appeal with respect to the third period in such a way that the wages of the employees should be calculated in accordance with the arrangement set out in the Case Rule.
73. Since the remedies derived from the application of the Case Rule to the third period require an individual calculation for each of the employees, we found it appropriate that the case be returned to the Regional Court for a hearing before the panel that rendered the judgment, the subject of this appeal, in order to determine the amount of entitlement of each of the appellants before us. The regional court will determine the manner in which this matter will be heard.
    • 4. Additional Components
74. The workers made additional arguments regarding entitlement to various components that the Regional Court rejected in its judgment (chapter 7 of the appellants' summaries in the proceeding before us), which we will now briefly address:
    • Wages for waiting times for shifts - According to the employees, in accordance with the provisions of section 26B(a) of the Wages Protection Law, the burden of proof was on Segev's shoulders to prove that the employees were not required to wait time, which should be considered work time.

The law of the appeal in relation to this cause of action should be accepted.  As can be seen from the rulings of the Regional Court in its judgment, the parties did not in fact disagree with respect to the question of whether the workers should have waited for a shift, but rather the dispute was on the question of the length of waiting for the shift and the scope of the number of times they were required to do so.  The Regional Court also noted in its judgment that Segev confirmed that the workers had to wait for a shift, but disagreed with the scope of the wait, according to paragraph 56 of the regional judgment: "Segev argued that out of 10 employees, 1 or 2 had to wait for varying times, not 45 minutes or 30 minutes, and that too not on every shift."