REMOTE WORK IN ISRAEL
Is your employee asking to work remotely from abroad? Technologies make it possible, but what are the legal implications?
Our Labor & Employement Practice Area Group shared their insights and experiences on topic of “workaction”, i.e work-from-anywhere in the different jurisdictions outlining the main issues that an employer should take into consideration. We have created a seven part series on this topic.
The final part VII explains Israeli position on this topic.
Is remote work from a foreign country controlled in Israel?
The topic of remote work has been widely discussed in recent years due to various reasons including technological developments allowing working from home, traffic congestion, transportation difficulties, accommodating working parents with young children and has intensified due to the Covid pandemic.
Currently in Israel, there are no legislated regulated guidelines regarding working from home and the law in Israel does not relate to remote work. In most of the labor laws in Israel there is no precise definition of ‘workplace’ although the understanding is that workplace is a dynamic, varying and flexible setting not given to rigid definitions.
Case Law in Israel does recognize that there are different models of employment, including remote work. These varying forms of employment are elements of a changing labor market, foremost the expansion of freelance employment – a structure that does not preclude the recognition of an employer-employee relationship.
The percentage of employees in Israel who work remotely is significantly lower than in the United States and the European Union countries, but is on the rise. Today the high-tech industry is considered a leader in this field. In 2014 it was estimated that 58% of high-tech companies facilitate remote work, and that 41% of their employees adopt this option.
According to the Ministry of Environmental Protection, in December 2018, approximately 22% of civil service employees in the public sector had the opportunity to work 15% of their standard hours from home on full working days, leading to savings of approximately 20 million Euros per year. A committee of experts recently published a report estimating that a heightened implementation of public sector remote work arrangement potentially increases the economic benefit to 300 million Euros per year. The general expectation in Israel is that the scope of remote work will increase and expand.
LEGAL POSITION IN ISRAEL
What is the applicable law?
Remote work is implemented on a voluntary basis only, that is: via agreement between employee and employer. Israeli labor law applies un a straight forward fashion when both employer and employee are Israeli.
in the case of an Israeli worker employed by a foreign company or the employment of foreign workers by a company registered in Israel, both parties can reach an agreement that the law of another jurisdiction would apply. However, as long as the worker is Israeli, certain Israeli ‘Protective Labor Laws’ will apply to worker’s employment. Examples of such ‘Protective Labor Laws’ are the laws regarding working and rest hours, annual leave, minimum wage, and severance pay. If a foreign employer employs an Israeli worker in Israel, the protective laws will apply. In addition, the Israeli labor courts tend to apply the labor protective laws even when an Israeli company employs a foreign employee.
Social security and insurance against accidents at work issues
An accident that occurred during or in relation to work at the employee’s home will be considered a work accident. The employee will be entitled to National Social Security benefits if he proves that the injury or illness are the result of working from home. The claim must be accompanied by an employer’s permission to work from home (which includes dates and hours of work). The National Social Security Institute does not recognize injuries as work accidents, if the injury is not related to actual performance of the work. In such a case, the employee has the right to file an appeal before the Labor Court.
The coverage for a work accident applies throughout the employee’s working time and regardless of his location. Therefore, even in the event of an accident while working at home – it will be recognized as such because an employee whose workplace is his private home for whom Social Security payments are allocated (whether by worker or employee) – is entitled to the same rights from the National Insurance Institute.
The status of a local worker who is sent for relocation abroad by an Israeli employer is the same as that of an employee working in Israel, therefore his social security payments and coverage would still apply. In case of a non-Israeli employer the situation may vary in different countries and in accordance with International Treaties with Israel.
Safety at the workplace and insurance
In some cases, the employee can sue the employer for damages caused to him as a result of the employer’s negligence or failure to comply with various laws and regulations – e.g., when working conditions are inadequate. It is the employer’s duty to take all reasonable means necessary to protect the employee and there is no recognised exception when the work is carried out from home.
The responsibility towards employees includes the responsibility for the employee’s safety. Allowing an employee to work from home does not detract from this responsibility. However, while the employer’s responsibility is broad and comprehensive regarding a workplace that is under employer’s control and management, some of these duties imposed on him will not apply when employee works from home. To substantiate a claim in the labor court the employee must satisfy several conditions. Among others he will be required to prove that the injury occurred during and due to the work. For example, there is a difference between a situation where the employee was injured while cleaning his house (in which case there is no direct connection between the injury and the employee’s work), and between a situation where the employee tripped and slipped while making a phone call with a customer.
The common protection utilized by employers is to obtain employer liability insurance to insure their tort liability towards their workers.
In various countries, the employer’s obligation to ensure the employee has a safe working environment, includes an obligation to send a safety inspector to the employee’s home in order to check the safety of his work environment. This obligation does not exist in Israel.
Immigration (for non-EU Citizens)
In Israel there are strict employment immigration laws Employing a non-Israeli worker requires special permits which are not easily obtained. There is still no clear decision by the courts as to whether a similar permit is required for an employee of an Israeli employer who resides outside of Israel. In actuality, many companies employ remote workers outside of Israel without arranging an employment permit for the worker and this situation is expected to endure barring a different judicial decision.
Tax risks for the company (Permanent Establishment)
Israel income taxes are based on residency. If the person is considered a “resident” of Israel, he will be taxed in Israel on all his worldwide income; a foreign resident might still be taxed in Israel as a worker on the income generated in Israel.
The definition “Resident of Israel” is generally based on the centre of one’s life determined by a number of parameters, such as, location of the permanent home, place of vital interests, place of residence of family members, place of membership in various organizations, country where considered a resident, location of his major assets, etc.