By Amit Acco, Partner |

Pursuant to the Foreign Workers Law and the accompanying regulations, an employer is required to make a deposit on behalf of foreign workers. This deposit, comprised of the compensation component and the employer’s compensation component, is only to be received by the foreign worker upon their departure from Israel by the end of their permitted stay (henceforth referred to as “the effective date”).

A systematic reduction in the deposit comes into play if the foreign worker remains in Israel beyond the effective date. Essentially, if the worker leaves Israel six months or more after the effective date, the total amount of the accumulated deposit will be forfeited.

Two construction workers, whose deposits were seized due to their departure six months beyond the effective date, filed a petition arguing that the deduction system is unconstitutional and should therefore be abolished. They stated that this system violated their rights unjustifiably.

The High Court of Justice agreed, finding that the deduction mechanism indeed infringes on the property rights of foreign workers, who are often one of the most susceptible groups in society. The court recognized these deposits as the workers’ own property, being funds accrued in their favor as social contributions throughout their employment period.

The Court further ruled that the harm caused by this mechanism was disproportionate. The fact that an employee could lose all social payments made by the employer on their behalf, potentially amounting to thousands of shekels, after just a few months of delay, constitutes a highly detrimental and unconstitutional system.

Therefore, the High Court decided to grant the Knesset a six-month period to devise an alternative system. It was further stipulated that if no alternative system is developed within this period, the current deduction mechanism will be declared null and void.