Labor Dispute (Tel Aviv) 1092-09-21 Dotan Peleg – Biofeed Environmentally Friendly Pest Control Ltd.

Judgment

Prior to the claim of Mr. Dotan Peleg, who was employed as a business manager for the defendant, in which he claims that the defendant breached its obligations to him during and at the end of his employment.  According to him, the defendant, the shareholder and the living spirit of the defendant, made representations to him and gave him promises, inter alia, to increase his salary.  These promises were not kept, and at the end of the day, the plaintiff was unlawfully fired from the defendant.  In these circumstances, the plaintiff argues that the veil of incorporation should be lifted against the defendant, and that the defendants should be obligated to pay: wage differences, allocation of shares in the defendant, and payment of compensation for mental anguish, following his unlawful dismissal from the defendant.

The Parties

1. The plaintiff, Mr. Dotan Peleg (hereinafter: "the plaintiff"), was employed by defendant 1 (hereinafter: "the defendant" or "the company") in the position of "business manager", from December 1, 2017 until his dismissal on July 20, 2021.
2. The defendant is a small bio-tech company engaged in the field of biological pest control (develops pest control systems against fruit flies and similar insects that are supposed to replace spraying).
3. Defendant 2 ("the defendant" or "Nimrod") is the defendant's entrepreneur and founder, served as its CEO from the day it was established and held all of its shares.

The Procedure

1. In the original statement of claim, Ms. Deganit Israeli, the defendant's wife, a human resources woman by training (hereinafter: "Ms. Israeli"), was also sued.  Ms. Israeli occasionally assisted the defendant, but was never employed as an employee of the defendant.  After clarifying the facts in the preliminary hearing on October 24, 2022, Ms. Israeli was deleted from the lawsuit and the statement of claim was amended accordingly.
2. At the evidentiary hearing that took place on November 3, 2024, the plaintiff testified on behalf of the plaintiff himself, Mr. Yaakov Kaul and Adv. Doron Afik, former directors of the defendant.  The defendant testified on behalf of the defendant himself, his wife Ms. Israel and Ms. Michal Shani, a former employee of the defendant.
3. I will add that the representatives of the public were invited to the hearing and did not appear.  In these circumstances, it was decided to hear their absence, inter alia, in light of the seniority of the case, the fact that the evidentiary hearing was postponed by several months at the request of the parties, the busy schedule of the tribunal and the large number of witnesses.

Background required for decision-making purposes

1. Environmentally friendly pest control, especially against fruit flies, is the defendant's "life's work." The defendant established the defendant about 20 years ago, with the aim of turning the pesticide method he developed into a commercial business - without success.
2. The Ottoman Settlement [Old Version] 1916The plaintiff used to work as a manager of a start-up company.  In 2017, a mutual acquaintance brought the plaintiff and the defendant together and recommended the plaintiff as someone who might "catapult forward" the defendant from an economic-business perspective.
3. 12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)The plaintiff began working for the defendant on December 1, 2017.  On January 14, 2017, an employment agreement (hereinafter: the "Employment Agreement"), [1] after the parties negotiated the terms of the agreement, as indicated by the correspondence between the parties.  [2]
4. In Appendix A to the employment agreement, it was agreed, inter alia: that the plaintiff would serve as a business manager for the defendant and report directly to the CEO; and that he would be employed in a 50% position, in exchange for a salary of ILS 14,000 per month, including a payment of ILS 2,000 for "global overtime".  This salary was defined as "total salary", and from this salary the social benefits were paid for the plaintiff, including the pension contributions.  [3]
5. The plaintiff's role in the defendant included: recruiting clients abroad, from countries such as India, Australia and Senegal, and raising funds and financing for these projects, as well as for all of the company's operations.  In this position, the plaintiff was directly subordinate to the defendant, who served as the company's CEO.
6. During the period of his employment, the plaintiff requested to move to full-time work while increasing his salary, accordingly.
7. The parties disagree on the content of the agreements regarding the possibility and date of increasing the plaintiff's position, and on the significance of these agreements, if any, in view of the company's financial situation, which has not improved.
8. In 2020, the defendant's financial situation worsened even further, due to the global COVID-19 pandemic.
9. In 2021, against the background of the company's precarious financial situation, the plaintiff's requests to other employees of the company and directors regarding a possible change in the company's strategy, as well as in light of the defendant's refusal to raise the plaintiff's salary, the relationship between the plaintiff and the defendant came to a standstill.
10. At the end of the day, the plaintiff was fired from his job.  In these circumstances, the claim before us was filed.

Summary of the plaintiff's arguments

1. The defendant made false representations to the plaintiff, the other employees and the board of directors regarding the defendant, its future and its current financial situation, and as a result of the defendant's ability to pay the plaintiff the plaintiff's salary, personally, as well as to raise the plaintiff's salary to the proper salary, according to his method.
2. The plaintiff is entitled to receive a full-time salary (ILS 28,000 per month) retroactively as of August 2018.  The plaintiff made it clear to the defendant that he relied on the latter's promises on the matter, which did not state to him that the defendant would not be able to pay him for a full-time position.
3. The plaintiff made it clear to the defendant that he needed a full-time salary, and asked that he be allowed to work in an additional position as well, to which the defendant objected.  For six months, the plaintiff did devote half of his time to another company, but after about a year, he actually began working full-time for the defendant.
4. It took a great deal of effort from the plaintiff to try to bring about deals, as is also evident from the defendant's statement, who was required to stay abroad (in Africa and Australia) for many months in order to promote these transactions.  The scope of his work and the defendant's commitment to employ him full-time can also be learned from the defendant's promise to raise his salary to ILS 100,000 per month.
5. The plaintiff made it clear to the defendant that he was not willing to settle for a salary of ILS 14,000 per month for a "full-time job." Upon the departure of Mr. Talmor, the (former) business manager, in August 2018, the defendant promised the plaintiff that "to the extent that the plaintiff accedes to his demand and invests his full efforts and energy in a full-time position in the company, it will soon break out and its cash flow situation will improve" and accordingly the plaintiff placed blind trust in him.  The defendant refused on various pretexts to give him a written reference regarding his full-time employment and the completion of his full salary.
6. With regard to the "shekel for shekel wage promotion" - the plaintiff is entitled to a wage supplement (in the same manner as the rest of the company's employees), ostensibly in continuation of the defendant's promise.  In August 2020, at the height of the coronavirus crisis, Nimrod convened the workers and asked them to stay at their jobs, not to go on unpaid leave and not to receive wages at that stage, while promising that the company would pay employees in the future double wages - that is, an [additional] shekel for every shekel that was not paid to them at that stage.
7. According to the plaintiff, this undertaking remains in place regardless of the company's situation.
8. The plaintiff is entitled to receive 20% of the company's shares - in accordance with the employment agreement in which he was entitled to 5% of the shares of the subsidiary, which the defendant promised to establish.  The shares of the parent company were supposed to be worth 4 times the shares of the subsidiary.  In practice, the defendant deliberately avoided establishing the subsidiary or even announcing an option plan for employees, and therefore the defendant must allocate 20% of its shares to him.
9. The plaintiff was unlawfully dismissed, and accordingly he is entitled to compensation for the mental anguish caused to him.  There is no basis for the defendant's claim that the plaintiff tried to take control of the defendant.  His intention was to propose a recovery plan.  In addition, there is no basis for the defendant's claim that the plaintiff failed a transaction.  With regard to the hearing that was held for him (in a visual conference), the plaintiff claims that it was prepared for the sake of appearances, and that there was no justification for Ms. Israeli's participation in the hearing.
10. The plaintiff argues that personal liability should be imposed on the defendant.  According to him, the defendant "was and still is the living spirit behind the company's activity and conduct." The defendant financed the company's activities through thin financing and abused the trust given to him "while dragging himself, his family, and his employees into the abyss of his duties under his failed management that borders on and even exceeds the threshold of criminal liability."
11. In light of all the above, the plaintiff is claiming the sum of ILS 661,882 for non-payment of wages and social benefits; a sum of ILS 620,426 for non-payment of an employee retention grant; and a sum of ILS 128,23.8 for mental anguish due to his dismissal, plus severity pay.  Antitrust is a plaintiff in the sum of ILS 1,410,538.

Summary of the defendants' arguments

1. The plaintiff is not entitled to a salary of ILS 28,000 - the plaintiff did not bring any evidence of his right to receive a "double" salary, i.e., ILS 28,000.  The employment agreement explicitly stated that the scope of the plaintiff's position would be 50%, and it was never agreed otherwise.  The plaintiff admitted that the transition to a full-time position was supposed to take place only when the company would have the ability to pay such a sum - and that date never came.
2. The evidence submitted by the defendants indicates that the plaintiff asked for a salary of ILS 28,000 for 80% of the position, but the defendant never approved this salary for him.  The defendant's witnesses strengthened the defendants' position on this matter.  The plaintiff did not explain why he demanded only ILS 28,000 per month and not ILS 100,000 (as Nimrod promised him), and on the other hand, why he did not resign when Nimrod refused to approve his salary of ILS 28,000 in writing.  Beyond all this, the defendants deny that the scope of the plaintiff's work was full-time and claim that he used to come to the company's offices only partially, and certainly not daily.
3. With regard to the plaintiff's claim for 20% of the company's shares , according to him, the plaintiff was never promised shares in the defendant.  All he was promised was options for 5% of the subsidiary's shares, as part of an employee option plan when it is formulated and subject to its terms.  In practice, the company's situation deteriorated, it did not recruit investors, and therefore no options plan was formulated, and hence "Dotan was not and is not entitled to anything." The defendants, the plaintiff himself, admitted that the granting of the shares was subject to a future event of the company's success, which would also allow (in the aspiration) to increase his salary.
4. Regarding the claims regarding the "Shekel for Shekel Wage Campaign" - the proposal was made by Nimrod spontaneously during a 2020 staff meeting, when his clear intention was that it was a short-term proposal.  In November 2020, the defendant informed the employees that such a grant (for the 3 months from August to November) would be paid only on the assumption that the company's situation would improve and when the cash flow would allow the payment, and this only to employees who would remain with the company until that stage.
5. As to the circumstances of the plaintiff's termination of employment , in the email that the plaintiff sent to Nimrod on May 27, 2021, he wrote that he could not give the company further deferrals in his salary, which was a "declaration of surprise war" by the plaintiff against Nimrod.  In response, on May 31, 2021, Nimrod informed the plaintiff that he must not contact the board of directors or the team without his prior approval.  The plaintiff did not comply and on June 2, 2021, he sent an email to the chairman of the board of directors, Adv. Afik, in which he claimed that the company had reached its end, and on June 3, 2021, he sent an email to Nimrod in which he stated that the staff was considering his steps.  The plaintiff acted with the aim of taking control of the defendant while the defendant was at that time in Senegal, Africa, in an attempt (unsuccessfully) to bring the transaction to fruition.  "These circumstances of a severe crisis of confidence and an attempt to take over the company" were sufficient to initiate a dismissal proceeding against the plaintiff.  With regard to the plaintiff's salary, the defendants note that given that the plaintiff demanded that his salary be immediately increased to ILS 28,000 and that he be paid retroactively, the plaintiff's salary demands were a relevant and even legitimate consideration at the termination of his employment.
6. In the circumstances of the case, there is also no room for imposing personal liability on the defendant, the plaintiff did not bring any evidence or claim to lift the corporate veil according to the case law, the plaintiff received his full rights and payments in accordance with the law.  It was proven that the defendant acted lawfully, in light of the testimony of the witnesses on behalf of the plaintiff who served as directors of the company.

Discussion and Decision