Insurance aspects of employing illegal Palestinian workers
Mar 27, 2023
By: Itzik SimonWritten with the assistance of Adv. Maya Arieli, who specializes in advising on and handling claims involving Palestinian and foreign workers.
Illegal Foreign Workers – Is There Insurance Coverage?
Scope of the Phenomenon: There is no clear data regarding the number of illegal foreign nationals entering Israel each year. Estimates range between 40,000 and 80,000 workers. Naturally, not all are employed in the construction sector; some work in other fields such as industry, agriculture, or food and beverage services. At the same time, an unfortunate “black market” of intermediaries has developed, generating enormous sums estimated at approximately NIS 1.2 billion per year.
The implications of employing an illegal Palestinian worker who is present in Israel unlawfully are severe. First and foremost, this constitutes a criminal offense that may lead to the filing of an indictment against the employer. Law enforcement authorities view the employment of illegal workers with great severity, particularly due to security considerations and potential links to terrorism.
An employer may find themselves facing serious criminal charges, heavy fines amounting to substantial sums, and even imprisonment. In addition, the police are authorized to shut down a construction site upon the discovery of illegal workers, with penalties becoming increasingly severe in cases of repeat offenses.
By: Itzick Simon
Written with the assistance of: Attorney Maya Arieli, who advises and handles claims by Palestinian and foreign workers.
Shebachim – is there insurance?
Scope of the phenomenon : There is no clear information about the number of illegal residents who enter Israel each year. Estimates range from 40,000 to 80,000 workers. Of course, not all of them work in the construction industry, and some of them work in other fields such as industry, agriculture, or food and beverages. At the same time, a "black market" of brokers has unfortunately developed, raking in huge sums of about 1.2 billion shekels a year.
The implications of employing an illegal Palestinian worker who is residing in Israel illegally are dramatic. First, it is a criminal offense that may result in indictment against the employer. Law enforcement authorities view the employment of illegal residents very seriously, also from security aspects and involvement in terrorism.
The employer may find himself facing a serious indictment, huge fines, and even imprisonment behind bars. Similarly, the police may close the construction site for seizing bribes, and the penalties are harsher for repeated offenses.
Employer, it's important for you to know!
From an insurance perspective , it is important to know that defense expenses against criminal proceedings related to the employment of illegal workers are not covered by a contractor work insurance policy . In other words, the employer may find himself without insurance coverage and facing significant sanctions. In addition, if the illegal worker is injured on the construction site and there is no one to pay National Insurance for him, the employer is exposed to a personal injury claim that will be filed in huge amounts.
It is important to remember that in the event of a work accident on a construction site, if the employee is legally employed, the National Insurance Company pays benefits in accordance with the law, while the insurance company protects the employer - by virtue of the Employers' Liability Chapter - in an employee's claim for damages above the National Insurance Company's benefits . To the extent that the National Insurance Company is not involved, as happens in a construction site accident, the full amount may be placed at the contractor's expense.
Not only that, the perception in the tort regime in Israel regarding work accidents is that all employees are insured and the National Insurance Institute will look for someone to reimburse them . In other words, the National Insurance Institute can recognize the employee as a work injury victim, pay him compensation and file a compensation claim against the employer. The insurance company will not assist in these situations and these are claims that can easily escalate to extremely high amounts.
A worker employed by a subcontractor : Many workers enter construction sites through subcontractors and not by the main contractor. If the main contractor reports the employment of the subcontractor on Form 648 to the National Insurance Institute , he may receive a protective envelope that will help if the worker is injured on site. Beyond Form 648, the recommendation is unequivocal to draw up a neat contract of employment and a detailed employee registration (read more about the importance of the contract with subcontractors here).
From an insurance perspective, it is important to note that defense costs related to criminal proceedings concerning the employment of illegal workers (Shabachim, or undocumented workers) are not covered under a contractor’s all-risk insurance policy. This means that an employer may face significant sanctions without any insurance protection. Additionally, if an illegal worker is injured on a construction site and there is no National Insurance coverage for them, the employer is exposed to claims for bodily injury damages that can reach extremely high amounts.
It is important to remember that in the case of a worksite accident, if the worker is employed legally, the National Insurance Institute (Bituach Leumi) provides benefits according to the law, while the insurance company protects the employer under the Employers’ Liability section for claims exceeding the National Insurance benefits. However, if National Insurance is not involved—as in the case of an illegal worker injured on site—the full liability may fall on the contractor.
Moreover, under Israeli tort law, the assumption is that all workers are insured, and the National Insurance Institute will seek reimbursement from the employer. In other words, National Insurance can recognize an illegal worker as a work-related accident victim, pay benefits, and then file a compensation claim against the employer. The insurance company will not cover these situations, and the claims can easily reach very high amounts.
Illegal workers employed by subcontractors: Many illegal workers enter construction sites through subcontractors rather than the main contractor. If the main contractor reports the employment of the subcontractor under Form 648 to the National Insurance Institute, they may receive a protection framework that provides some coverage in the event of a worker injury on site. Beyond Form 648, the recommendation is clear: maintain a formal engagement contract and detailed employee registration. (Read more here about the importance of contracts with subcontractors.)
Not every illegal Palestinian worker is necessarily a BAH. A very common phenomenon is when workers enter Israel legally but exceed the work permit they were given. A permit that allows them to work only for a specific employer.
As with the Shabachim, even for those employed outside of a permit, the insurance policy is usually valid. The rule of thumb is that if the site was insured at the time of the incident, there will likely also be insurance coverage (depending on exceptional exceptions or conditions for coverage).
The National Insurance Institute does not necessarily scrutinize issues of work permits and entry laws into Israel. From the perspective of the National Insurance Institute, if full National Insurance payments have been made for the employee, it will fulfill its role in recognizing him as a work-related injury.
However, this is a defense with an asterisk , because the accident occurred at another employer who is not the registered employer (who pays the National Insurance contributions). For example, an employer who cannot issue a BAL 250 form for him to receive medical services in Israel. If the employee succeeds in proving an employee-employer relationship between him and the illegal employer, the latter may be exposed to a claim for damages due to the work accident.
An illegal Palestinian worker who works "without a work permit"
The problems arise when the worker who exceeds the work allowance is injured on an uninsured construction site. Profit failure, unfortunately. In this case, the employer who actually employed the injured worker may find himself facing a lawsuit when he does not have insurance coverage to pay the benefits beyond the MLL benefits. In addition, he is not covered against a parallel civil lawsuit with claims of negligence, a dangerous work environment, failure to adhere to safety rules, and the like.
Because the law does not allow for "double compensation," these claims are also filed against heads of damage that are not covered by the National Insurance Institute. For example, pain and suffering, loss of enjoyment, etc. Furthermore, the National Insurance Institute only pays benefits up to 75% of the employee's salary, and in the absence of insurance coverage, there is no insurance company that will make up the remaining 25%.
What happens if the employee was employed outside of a work permit at an uninsured site?
According to Israeli law, any Palestinian worker injured in Israel is entitled to receive initial treatment in a hospital emergency room free of charge. However, follow-up treatment is subject to payment by the employer or National Insurance.
If the employee was not insured by National Insurance, the employer will be required to pay for the treatment or sign a commitment that he is a guarantor for the treatment expenses. Including leaving credit card details . Sometimes there will be no escape from physically arriving at one of the only three branches of the National Insurance that treat Palestinian workers in Israel, which are located in Netanya, Jerusalem or Hadera.
Hospitalization and the challenge facing National Insurance
Employing a worker outside of the legal work permit granted to him is an offense that can lead to fines and indictment . Section 2 of the Foreign Workers Law stipulates numerous sanctions against an employer who " employs a foreign worker in violation of the provisions of Section 1M ."
The fine for an illegal resident currently (2023) is a maximum of 75,000 shekels and two years in prison. Similarly, the indictment often includes combined offenses that also involve transportation and/or lodging. In addition, there are aggravated offenses related to the field, such as using a vehicle that has been modified to transport illegal immigrants, seizing more than three illegal immigrants at the same time, employing a corporation, and more.
As noted above, the contractor's insurance policy will not assist in these cases , neither with the legal expenses of managing the procedure nor in providing insurance coverage for the financial sanctions that follow.
The criminal aspect
Employee claims
Beyond the insurance issues, there are also issues related to employing illegal Palestinian workers in terms of labor law. According to Israeli law and case law, employers can face employee lawsuits even when it comes to an Israeli citizen or an employee who was not registered under the employer's symbol.
This means that the employee plaintiff will be able to prove an employee-employer relationship in the Labor Court and demand various wage payments (including past ones) from whoever was his actual employer, even if the latter was not listed as his employer on the permit.
Beyond the insurance issues, there are also issues related to employing illegal Palestinian workers in terms of labor law. According to Israeli law and case law, employers can face employee lawsuits even when it comes to an Israeli citizen or an employee who was not registered under the employer's symbol.
This means that the employee plaintiff will be able to prove an employee-employer relationship in the Labor Court and demand various wage payments (including past ones) from whoever was his actual employer, even if the latter was not listed as his employer on the permit.
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