Legal Updates

Non transfer of funds to a pension fund although deducted form the salary is grounds for obligating shareholders for debts to employees

July 29, 2020

A carpenter was employed by a company for about six months and then transferred to work in another company under similar control for another 4 years, while his social rights were calculated ignoring the period of his employment with the first company. The employee demanded his rights in respect of the period of employment in both companies, both from the two companies and from the shareholder, for the entire period as if he had worked in one place.
The Court held that these are two separate companies but because its was in fact the same work in the same place there is an employment continuum and that the shareholder is personally liable for the debt to the employee. In the case of a shareholder establishing a new company in order to evade the debts of the previous company, the transfer to the new company will be considered as if it were the same company. It was not the same employer, but in the matter of rights under protective labor law, the workplace is checked not only under the issue of ownership but also as a matter of rights, in a way that there is a continuity of rights and working conditions if the employee continued working in the same place even if ownership was changed. Thus, the employee is entitled to severance pay for the entire period of employment with the two companies. With regard to the shareholder's personal liability, the starting point is that the principle of the separate legal personality of the corporation must be honored, but in this case the employer deducted from the employee's salary payments to a pension fund without transferring the funds to their destination, which is sufficient grounds for piercing the corporate veil and creating a personal liability of the shareholder for the rights of the employee.