Legal Updates

In case of a senior employee who is not weakened or in need of protection an employment agreement is reviewed under the circumstances and business essence

July 31, 2021

A banker who worked independently in the field of private banking began discussions with a Swiss bank which sought to open a branch in Israel. After discussions, a customer referral agreement was first signed, followed by a consulting agreement in which the parties agreed to enter into a full employment agreement in the future, which will appoint the banker as head of the Israeli branch.

The Labor Court held that there was no employer-employee relationship between the parties. Labor law is intended to prevent the exploitation of the employee by the employer and prevent negotiations on the basic rights of the employee, all stemming from a recognition of the natural inequality in the bargaining power of the parties. However, in the case of a senior employee, who is not a weakened party in need of protection, the agreements is reviewed under the circumstances, the business essence of the engagement and the nature of the parties. In cases where the employer cannot, for legitimate reasons such as standards of employment or lack of permits, employ a person under an employer-employee relationship, and offers to contract him as an external contractor until he can be accepted as an employee, an employer-employee relationship should not apply. Here, there was no sign of an employment relationship in the contract between the parties. The banker was not defined as an employee, was not exposed to inside information of the bank, did not receive a car, office or business card from the bank and has served for years both as an employee and a contractor making him well aware of the difference between such. The contract as an independent contractor stemmed from legitimate considerations of lack of official approval for the establishment of the branch and lack of institutional infrastructure and the parties made it clear that an employment agreement would be signed in the future so that in the absence of such an agreement, there is no room to apply an employer-employee relationship between the parties.