An employer undertook in the employment agreement to provide a manager a management incentive that was limited to a ceiling of ILS 6,000 per month or ILS 72,000 per year, but in practice it paid commissions in a higher amount. Upon termination of the manager's employment, the employer refused to pay commission differentials for transactions that exceeded the ceiling set in the agreement.
The Labor Court accepted the employee's claim and held that the employer must pay the manager the difference in commissions because the parties have amended the employment agreement by their conduct and actions. The parties to an agreement are entitled to stipulate it and amend its provisions without being limited to a particular procedure or form. The formation of an agreement or an amendmend in one of its provisions can also be done by way of conduct. Here, the employment agreement set a monthly and annual cap on the amount of the incentive. The employment agreement also stipulated that the employer may change the compensation plan from time to time at its sole discretion. In practice, in the last three years of his employment the employer paid the manager remuneration that exceeds the ceiling set in the employment agreement in about 40% of all months. Therefore, the employer amended the compensation plan set in the employment agreement and removed the monthly and annual amount limit by its behavior. Thus, as the parties did not act in accordance with it, the terms of the agreement changed and the employer must pay the differences in the commissions that have not yet been paid, even though the amount is above the ceiling set in the agreement.