Reviewing an employment contract: what to look out for

Service page: Employment lawyer: dismissals, wages and severance pay.

Wages, bonuses and financial terms: what must you check before you sign?

Before you sign, check that the written wage does not breach the Minimum Wage Law, 5747-1987. Any clause that offers a wage below the minimum is void by its very nature. Also check whether the bonus is contractual (that is, committed in writing) or “discretionary”. In the second case, you have no enforceable right to it.

Working hours and vacation: is what the contract says even legal?

The Hours of Work and Rest Law, 5711-1951 sets a cap on hours, and overtime requires increased pay. If the contract includes a “global overtime” clause: a wage set as including payment for overtime counts as regular wage only, unless otherwise set in an approved collective agreement (section 5 of the Wage Protection Law, 5718-1958). So it is worth having the global payment appear as a separate component, and making sure it is not less than the payment actually owed.

Vacation days: the Annual Leave Law, 5711-1951 sets 16 vacation days for each of the first five years, and the number of days rises with seniority (section 3). If a contract offers less, that clause is void. Sick leave and leave for a sick child are also protected by law, and mourning days by the extension order for the framework agreement. They cannot be waived in the contract.

Confidentiality and non-compete clauses: check them carefully

Many contracts contain clauses such as: “The employee undertakes not to pass information entrusted to them to a third party” or “The employee undertakes to comply with management’s rules.” These look reasonable, but you should check whether they have full legal force. In employment law, every clause must be fair, and it must be worded in a way that does not restrict the employee to an unreasonable extent.

A danger clause: “The employee undertakes not to compete with the employer after the employment ends” or “The employee undertakes not to work for a competitor.” Chapter B of the Commercial Torts Law, 5759-1999 protects trade secrets and prohibits their misappropriation (section 6(a)). But a general, undefined “non-compete” clause can be unenforceable in court (see Non-compete agreements: when the court will enforce them).

A management role? These are the clauses that matter to you most

For employees in management roles: watch for clauses on “full availability” or “full commitment to the role”. If no specific hours are defined, the clause is vague and can create unreasonable expectations. A housing allowance (if given) should also be defined in the contract as a term that cannot be reduced unilaterally.

Also check whether there is a “compensation clause for managers” (golden parachute), and what its conditions are. This is not rare in senior executives’ contracts, and it has tax consequences.

Discriminatory clauses: what is automatically void, even after signing?

Check carefully: does the contract contain clauses that discriminate against employees on the basis of sex, race, religion or family status? The Employment (Equal Opportunities) Law, 5748-1988 (חוק שוויון ההזדמנויות בעבודה, התשמ״ח-1988) prohibits this by law. Any such clause is void by its very nature, even if it is written in the contract. In addition, if the contract requires a discriminatory background check, this can be problematic.

An illegal clause in the employment contract: is the whole contract void?

Usually not. A contract whose content is illegal or contrary to public policy is void (section 30 of the Contracts (General Part) Law, 5733-1973). But when the contract can be divided into parts and the defect concerns only one of them, the voidness applies to that part only (sections 19 and 31 of the same Law). The right under the law takes the place of the void clause. For example, the right to the minimum wage cannot be varied or waived (section 12 of the Minimum Wage Law), and the same applies to rights under personal provisions of a collective agreement (section 20 of the Collective Agreements Law, 5717-1957). The other terms of the contract, such as the agreed wage and the role, usually stay in force.

Dismissal and end of employment: what must be in the contract?

The Advance Notice of Dismissal and Resignation Law, 5761-2001 sets the minimum notice period, and it cannot be varied in the contract to the employee’s detriment. Also check: is there a “dismissal for cause” clause that tries to deny severance pay? Under the Severance Pay Law, 5723-1963, an employee dismissed after a year of employment is entitled to severance pay (section 1). Denying it is possible only in circumstances that justify it under a collective agreement or by a decision of the Labor Court (sections 16–17). A contract clause that tries to deny it is void.

Pay special attention to “for cause” clauses (dismissal “for cause”). If they are worded too broadly (such as “harm to the company’s image”), they can be used as an attempt to deny severance pay. Any such attempt is worth checking with a lawyer before signing.

Before you sign: three rules that save headaches

First: if you do not understand a clause, do not sign. “The boss said it’s standard” is not a legal defense. Second: also check the annexes and additions to the contract, because they are part of a binding agreement. Third: keep a signed copy. An employer must give the employee, within 30 days of the start of work, written notice of the terms of employment. A signed contract that includes all the required details fulfills this duty (sections 1 and 2(d) of the Notice to Employee and Job Candidate (Terms of Employment and Screening and Hiring Procedures) Law, 5762-2002).