Labor Dispute (Tel Aviv) 1092-09-21 Dotan Peleg – Biofeed Environmentally Friendly Pest Control Ltd. - part 4

The witness, Mr. Peleg: That was the understanding, yes, it's true.

Adv. Armoni: That's great, and by the way, there's no written paper in which it is agreed that you're going to be promoted to a full-time position.

The witness, Mr. Peleg: I agree, unfortunately, I don't."

1. The plaintiff therefore admitted that the agreement between him and the defendants was that the transition to a full-time position would take place only when the defendant would have the opportunity to pay full-time wages.  In practice, the company did not succeed in achieving profits at any stage, and in any case no written agreement was formulated, as required by the employment agreement. 
2. The plaintiff's witnesses strengthened the defendants' version that the plaintiff was hired in order to help the defendant bring in additional funds and investors for the purpose of her success in his role as the defendant's business manager, that the plaintiff was unsuccessful in doing so.  The witness on behalf of the plaintiff, Mr. Kaul, who served as a director of the defendant, testified before me that he recommended that the plaintiff join the defendant with a modest salary that would increase when the situation improved, and that in practice the company's situation never improved.  [8]
3. In summary, I will add that the plaintiff's claim in his affidavit that the defendant even gave him an explicit promise to increase his salary to ILS 100,000 is also unfounded, when no evidence was produced for this alleged promise.
4. The plaintiff agreed that during his 3 years of employment he did not contact the defendant in writing, claiming that there was any debt and/or that the defendants must pay him additional wages in advance.  The plaintiff, who knew and approached with regard to additional issues, such as the matter of reimbursement of expenses,[9] did not put in writing, in real time, to the defendant, his demands as well as the summary of the matter, as he claims to me today.  The plaintiff agreed on the witness stand that he never contacted the defendant in writing regarding the alleged promises, according to him, due to a mistake.  The court made it difficult for the plaintiff and asked to know why he did not act, applied in writing and/or asked to terminate his work, in light of the alleged promises of such significant sums, but the plaintiff did not provide any explanation for this, except for the statement that it was a mistake on his part.[10]
5. The plaintiff also failed to prove that he was actually employed full-time.  The plaintiff, who bears the burden, in light of the provisions of the employment agreement, was unable to prove that he actually worked full-time and even beyond that in the company's offices and/or from his home and did not present evidence for his claim, except for one email in the evening.  The defendant, on the other hand, produced many documents indicating that the plaintiff was employed part-time, including the employment agreement and the exchange of emails, the pay slips, the exchange of messages between the parties in November 2020, as well as the photocopies of the whiteboard in the defendant's offices.  [11]
6. I will add that more than once it has been ruled by the court that in cases where an employee claims that he was orally promised a higher salary, but in practice his salary was not raised and the employee accepted it - there will be no retroactive claim that he is entitled to the salary that was promised to him.  Thus, for example, in the Brenner case,[12] the court rejected the claim of an employee who claimed that she had been promised that upon the retirement of an employee who had fallen ill, her position would be expanded, as well as her salary, and held: "If so, the conclusion that arises is that the contract signed between the parties was honored and the parties acted in accordance with it, but it was not possible to fulfill the promise given to the plaintiff orally because the employee who fell ill withdrew her retirement.  The plaintiff did not resign when she realized that she would not be promoted."
7. I will also add that it was proven to me that the defendant retired in respect of the plaintiff, from the full total salary, in the sum of ILS 14,000, including the overtime hours, as is also evident from the pay slips that were presented.  The plaintiff did not lift the burden of showing otherwise. 
8. From all of the above, it clearly emerges that the plaintiff's claim for the supplement of his salary in the sum of ILS 28,000, retroactively, in light of the alleged promises - is rejected. 

• "Operation Shekel for Shekel" (Employee Retention Grant)

1. The origin of this "sale", as the defendant claims, was not contradicted, in a spontaneous offer by the latter, during a team meeting, when he believed that the company was on the verge of engaging in significant transactions, as a short-term offer, for 2-3 months.  The defendant testified and did not hide that after seeing that the company's situation was not improving, and that the COVID-19 pandemic was still at its peak at the beginning of November 2020, he made it clear to the team members that he could not extend the commitment and that the retention grant would be paid only to employees who would remain with the defendant, until its situation improved and the cash flow allowed it.  According to him, in practice, the company's employees finished their jobs while the company was still in significant debts, and therefore the grant he hoped to grant was not paid to any of the employees.  [13]
2. The plaintiff did not produce any evidence to support his claim that he was entitled to the conservation grant.  I can agree with the defendants that the interpretation that the plaintiff seeks to cast into the defendant's words in these circumstances is unreasonable.[14] At the time, the company did not have cash flow so that it could pay 100% of the wages to its employees.  In these circumstances, taking into account the conduct as proven before us, I am of the opinion that there is no basis for the claim that the defendant gave the employees, including the plaintiff, an oral promise, unlimited in time, to pay 200% of their wages.
3. The only evidence on which the plaintiff bases this claim is the testimony of Ms. Michal Shani, the defendants' witness in her testimony, who testified that she received the grant.  The defendants succeeded in showing, to my satisfaction, that Ms. Shani, in the course of her testimony, was confused as to the money she received from the defendant at the end of her employment, and that in fact she did not receive the alleged grant.
4. Ms. Shani testified that she does not remember when and how the grant was paid and that "....  There was a problem of payments to the company and the payments were spread out, so I don't know how to put my hand up and give you when...".[15]
5. We will add that Ms. Shani testified in great detail about the company's difficult financial situation, as well as strengthened the defendant's claims that in November 2020 he announced that with regard to the 'shekel for shekel' bonus, he was stopping this arrangement, and that "...The bonus will be paid for the past four months (8/20-11/20) and no later, only when the company has the resources to do so and only for those who will continue to work for the company."[16]
6. It appears from her words that in any event it was clarified that the bonus would be paid only where the defendant would have the financial resources, while the plaintiff also agreed in real time that the defendant was in a state of almost "insolvency".  It should be recalled that the plaintiff was the company's financial manager, and was hired in order to assist it in bringing in additional transactions and investors.[17]
7. The plaintiff did not bring any evidence of his eligibility to receive the grant.  Ms. Shani's statements on the witness stand do not, in my humble opinion, substantiate his entitlement to this alleged grant.
8. In light of the aforesaid, I am able to accept the defendants' position on this matter as well.  This, as stated, in light of the company's financial situation as proven before me; the fact that the defendant received money from his wife's parents for the purpose of paying the cogent rights of the employees, including the plaintiff's rights[18]; Ms. Shani's difficulty in remembering the amount and when the amount was paid, when there is no dispute that her current salary for 2020 was paid late; and her testimony that the defendant undertook to give the grant for a limited period of time, subject to the company's financial situation.
9. In light of all of the above, and in the absence of an evidentiary or normative basis, the claim is dismissed on this component as well.

• The Alleged Share Allocation

1. Clause 15 of Appendix A to the employment agreement [19] states: "The employee will be entitled to options converting into shares that constitute, at the time of the company's establishment, 5% of the shares of the subsidiary that will be established, as part of an employee option program when it is formulated and subject to its terms.  Alternatively, if it is not possible, he will receive a quarter of the aforementioned percentage (1.25%) in the options plan that will be formulated in the company."
2. There can be no dispute that the subsidiary was not established.
3. There can be no dispute that there was no agreement on the granting of shares, but rather on the allocation of options.
4. There can be no dispute that an option plan for the defendant's employees was not formulated and accordingly its terms, insofar as they were formulated, are unknown.
5. Similarly, there can be no dispute at this time, that the company was in heavy debts and did not make profits, to the displeasure of all those involved, as they testified before us on behalf of the plaintiff as well as on behalf of the defendants.
6. It has been proven that the undertaking to receive options if and when the issue is relevant was also given to others, for example to the Chairman of the Board of Directors, Mr. Afik, who testified before me in the course of the proceeding.  Mr. Afik testified fairly that an option plan for employees was never formulated.[20]
7. We note that in accordance with the provisions of the employment agreement, to the extent that there was such a plan in the defendant, the plaintiff was entitled to options at the rate of 1.25% of the company's shares.  In these circumstances, his demand to receive 20% of the defendant's shares (which no longer exists) is also unclear.
8. The plaintiff, therefore, did not lift the burden and was unable to prove his claim that he was entitled to receive 20% of the defendant's shares.  In the absence of evidence to support this claim as well, and this is contrary to what is specified in the employment agreement that he signed. 

• Termination of the plaintiff's employment

1. In the vast majority of cases in which the employee-employer relationship ends without consent, this involves mental anguish.  The dismissal process is not a desirable or simple procedure in the vast majority of cases - when the dismissed employee finds himself in the circumstances of termination of employment, involuntarily, with a "sad soul", insult and fear of the future.
2. At the same time, these natural and clear feelings do not allow for the award of compensation for mental anguish, except in very rare cases.
3. The plaintiff bases his entitlement to this compensation on the grounds that he was unlawfully dismissed.  I have not found a factual basis for this claim, and in accordance with my opinion, the law of his claim is also rejected.
4. I found that the plaintiff was dismissed in the proceeding in accordance with the provisions of the law, and that the defendant acted out of reasonable considerations when he acted to terminate the plaintiff's employment with the defendant, all as will be detailed in detail below.

The events before the summons to the hearing

1. On May 27, 2021, [21] the plaintiff sent an email demanding payment of his full salary.  The email speaks for itself.  Until then, according to his testimony before us, the plaintiff had not raised these claims before the defendant.  The plaintiff contacted the defendant by email, about a month after he returned from a long stay with the defendant in one of the African countries, in order to promote a transaction.  Since the transaction did not reach maturity, the defendant remained to try to bring it to a conclusion.  The plaintiff sent the email to the defendant, before the latter returned to Israel.
2. Later on, the plaintiff approached the board of directors and the two employees, Tamar and Michal, while raising claims against the defendant and the defendant's actions, while the defendant was in Africa, as aforesaid, as part of the defendant's business, in order to "close a deal".  [22]
3. The defendant subsequently contacted the plaintiff on May 31, 2021, and instructed him not to contact the employees or the board of directors without his means.  He wrote : "You do not have permission to contact the staff or the board...  Any request, including consultation, on any subject will be made with my prior approval only." Despite these words, the plaintiff continued to address the employees and the board of directors, noting that the defendant had arrived .".  to the end under the existing conduct...", and informs the defendant that "...The team is currently considering its steps..." .[23]
4. The plaintiff also made it clear to Ms. Israeli in a conversation he had with her on June 4, 2021, which he did not deny, that he intended to lead a "recovery" process for the defendant, according to his plan, even without the defendant.  Under these circumstances, the defendant was forced to return to Israel, without the transaction being successful.
5. From the aforesaid it appears that there is a basis for the defendants' claim that the plaintiff tried to "take over" the defendant, while the defendant was abroad for the company's needs, and that in these circumstances it was decided to consider the plaintiff's dismissal.  The defendant tried to bring about the "recovery plan", without bringing this to the attention of the defendant, while addressing the facts without the defendant's knowledge, and this in parallel with the demand for payment of wages for a full-time position, from the defendant, in writing, for the first time since the beginning of his employment, according to him.  The plaintiff's statements from real time, as stated, speak for themselves.

The Dismissal Procedure

1. The plaintiff received a letter of summons to the hearing on June 8, 2021.[24] The hearing was held on June 15, 2021, and on June 20, 2021, the plaintiff was served with a reasoned dismissal letter announcing his immediate dismissal in the circumstances of the case.[25]
2. The additional reason, which was added in a separate email before the hearing, related to the company's lack of financial resources to continue employing the plaintiff.  It should be recalled that the plaintiff was the business manager and his attempt to "heal" the company "behind the defendant's" was due to the defendant's difficult financial situation.  At that time, even according to the plaintiff, the defendant was close to insolvency.  The plaintiff approached and asked to receive wages for a full-time position, according to his entitlement, so that this reason was also known to him, even if it was not detailed in the letter of summons to the hearing.
3. In general, the intervention of the court in the hearing (and its defects, if any) is mainly on the procedural level, for example: when the hearing was not held in accordance with the employer's regulations, the employee was not given sufficient time to prepare for the hearing, or the employee was not given the opportunity to argue his arguments.

When it becomes clear that the procedural requirements have been met, the scope of the tribunal's intervention in the decision will be limited.[26] "As a rule, the very fact that an employee is summoned to a hearing before termination of employment shows that the employer has a prima facie opinion as to the existence of grounds for terminating the employee's employment, and that he is examining this possibility."[27] "In order to determine that the hearing was prima facie, it is not enough to prove the formation of an alleged opinion during the hearing or to establish the prima facie opinion, but it is necessary to prove the closing of the opinion."[28] Even when there was a defect in the hearing, "the question of the outcome of a defect in the hearing depends on the totality of the circumstances of the case, including its intensity and weight."

1. In our case, the plaintiff was unable to prove that the defendant was determined to fire him before the hearing.  It is also evident from the plaintiff's words that he was determined not to continue working for the company, at least as long as he did not immediately receive a salary of ILS 28,000 and the wage differences that were not paid to him, according to him.  The plaintiff clarified this to the defendant in an email dated May 27, 2021.  [30] His words to Ms. Shani in his statements from those days reflect a complete lack of trust in the defendant, even beyond the issue of wages.[31]
2. As to Ms. Israeli's participation in the hearing, I was under the impression that her participation in the proceeding, even if only on the technical level, actually helped the plaintiff.  The plaintiff's arguments in this regard are not clear.  It is also evident that the alleged "mental anguish", insofar as it was caused to him, was not from the hearing proceedings itself, but from the fact that Nimrod and Mrs. Israeli "did not appreciate his work" and its scope.[32] In this, as stated, the plaintiff is no different from many employees who finish their jobs.
3. In these circumstances, I am of the opinion that the plaintiff was duly heard, when all the arguments that the defendant had considered terminating his employment before the date of the hearing, and in these circumstances there is no basis for his claim of unlawful dismissal.
4. In the margins, I will add that the compensation demanded by the plaintiff (ILS 128,230) far exceeds the customary compensation for breach of the duty to hear, so even if I had accepted his position, there would have been no reason to award him this significant sum, which is also inexplicable.
5. In light of the aforesaid, the plaintiff's claim for compensation for mental anguish due to the dismissal process is also rejected in the absence of evidence to support it. 

• Imposing Personal Liability on the Defendant - Lifting the Veil of Incorporation

1. Since all of the plaintiff's arguments were rejected, there is no need to discuss the defendant's liability.  At the same time, I have found it appropriate to address this claim of the plaintiff as well, for the sake of the completeness of the factual picture and in order for the plaintiff to have all the reasons for rejecting the claim.
2. According to the provisions of the law and case law, a company has a separate personality from its shareholders and therefore a company's debt should not be automatically attributed to its shareholders, unless the grounds set forth in Section 6 of the Companies Law, 5759-1999 are met, the shareholders in the company abuse the company's separate personality, and where it has been proven that it was "done in a manner that defrauds a person or deprives a company's creditor" or "in a manner that harms the purpose of the company while taking an unreasonable risk as to its ability to repay its debts provided that the shareholder was aware of such use, and taking into account his holdings and the fulfillment of his obligations to the company under sections 192 and 193 and taking into account the company's ability to repay its debts.[33]
3. The rule is that lifting the veil will be done with a clenched hand and sparingly, and only in exceptional extreme cases, "...If there was a mixture of assets between the company and its managers, violation of public policy, fraud, smuggling of assets, etc."[34]
4. The plaintiff did not bear the difficult burden, and failed to prove that the defendant acted in a manner that justified the "extreme remedy" of lifting the veil.  According to the case law as detailed above, even non-payment of cogent rights does not constitute grounds for lifting the veil.
5. There is no dispute that the defendant paid its debts in full in respect of the plaintiff's cogent rights, in accordance with the salary according to the employment agreement.  The defendant testified that he approached his wife's parents to receive money for the purpose of paying the rights and funds to the employees.  [35] In the circumstances of the case, the defendant paid the plaintiff's full rights and therefore there is no basis whatsoever for lifting the veil.  The plaintiff did not show that the defendant acted with the aim of depriving the plaintiff and/or the other employees.
6. Beyond what is required in these circumstances, I will note that the defendant operated under the supervision of a board of directors.  The member of the board of directors and the chairman of the board of directors testified before us, on behalf of the plaintiff.
7. Both Mr. Kaul and Mr. Afik testified that they were aware of the company's financial situation, they believed in the defendant, and although he did not have management skills, they did not believe that there was a problem with his conduct - in a manner that required his dismissal as CEO, in real time.  Among other things, they testified: that the board of directors met at least once, and when it did not convene, it was not in principle for them; that the defendant's work plans were presented and approved by them; and that they were aware of the defendant's financial situation and all of the defendant's actions."[36]
8. Mr. Kaul argued before me that he did not demand that the defendant be fired as CEO - when in his opinion it was his responsibility.  According to him, today, in retrospect, he has not fulfilled his duty as a director.  [37] He also testified that he did not resign, even though he did not receive compensation, and even though he had the full picture.  [38] Mr. Afik resigned only in June 2021, and he also testified, in response to the court's question, that he did not demand the defendant's dismissal.  Mr. Afik testified at the end of the day that both the plaintiff and the defendant were responsible for the company's situation.  He replied as follows:[39]

"Adv. Armoni: I understood then, for better or for worse, that everything that happened in the company during those years was no less responsible than Nimrod, so is your method as chairman of the board of directors.