The employer is not allowed to interfere in the employee's choice of pension insurance plan.

Sep 6, 2018

An employee who had been employed by her employer for several years fell seriously ill and received disability benefits. When she went to claim the directors' insurance policy she had signed as part of her employment, the employee discovered that she did not have insurance for loss of work capacity. The employee filed a claim with the Labor Court, claiming that, according to the 2008 Economic Expansion Order, the employer is obligated to insure its employees with pension insurance that includes loss of work capacity. This case, similar to other cases, was brought before the National Labor Court, and within the framework of it, the court decided to join the proceedings with the Attorney General and various large organizations, including the Histadrut, in order to discuss a fundamental question regarding the employer's liability according to the expansion order and the employee's autonomy in choosing the insurance track.

The question of the employer's liability was examined, among other things, by the Attorney General, who believed that the employer's liability should be examined according to Section 20 of the Financial Services Supervision Law (Provident Funds), 5765-2005 , which expresses the employee's complete freedom of choice in choosing the fund and emphasizes that the employer cannot interfere in the employee's choice of the fund or pension product. Obliging the employer to purchase loss of work capacity against the employee's will may harm the employee's interests, especially since this coverage can be canceled without informing the employer, and hence the employer's obligation becomes redundant. An additional claim was presented on behalf of the various organizations that joined the employer liability examination process, claiming that the intention of the parties in signing the collective agreement for mandatory pension in the economy, which was expanded in the expansion order, was that every employee, regardless of the type of fund he chose, would have insurance coverage for old age, disability, and survivors. The Histadrut's position in this case is that an employee is not entitled to choose a pension arrangement that does not include coverage for death and disability, and this is contrary to the cogent provisions of the expansion order.

An employee who had been employed by her employer for several years fell seriously ill and received disability benefits. When she went to claim the directors' insurance policy she had signed as part of her employment, the employee discovered that she did not have insurance for loss of work capacity. The employee filed a claim with the Labor Court, claiming that, according to the 2008 Economic Expansion Order, the employer is obligated to insure its employees with pension insurance that includes loss of work capacity.

This case, similar to other cases, was brought before the National Labor Court, and within the framework of it, the court decided to join the proceedings with the Attorney General and various large organizations, including the Histadrut, in order to discuss a fundamental question regarding the employer's liability according to the expansion order and the employee's autonomy in choosing the insurance track.

The question of the employer's liability was examined, among other things, by the Attorney General, who believed that the employer's liability should be examined according to Section 20 of the Financial Services Supervision Law (Provident Funds), 5765-2005 , which expresses the employee's complete freedom of choice in choosing the fund and emphasizes that the employer cannot interfere in the employee's choice of the fund or pension product. Obliging the employer to purchase loss of work capacity against the employee's will may harm the employee's interests, especially since this coverage can be canceled without informing the employer, and hence the employer's obligation becomes redundant.

An additional claim was presented on behalf of the various organizations that joined the employer liability examination process, claiming that the intention of the parties in signing the collective agreement for mandatory pension in the economy, which was expanded in the expansion order, was that every employee, regardless of the type of fund he chose, would have insurance coverage for old age, disability, and survivors. The Histadrut's position in this case is that an employee is not entitled to choose a pension arrangement that does not include coverage for death and disability, and this is contrary to the cogent provisions of the expansion order.

The litigation in court

During the litigation, different positions were presented to the court by both the various bodies that joined the proceedings and the Attorney General regarding the examination of the employer's liability, but the National Court adhered to the observation of the Attorney General, who claimed that the employer's liability should be examined in accordance with Section 20 of the Supervision Law.

The National Labor Court ruled that an employer is prohibited from interfering in the employee's choice of pension product and determined that, according to pension law, the principle of freedom of choice given to the employee to determine the type of pension product, the company that will manage the funds for him, the investment path, etc. is a fundamental principle, and just as the employer does not check what the employee does with his salary, so too is he prohibited from interfering in everything related to the pension funds, which he transfers to the fund for that employee.

The court referred to the High Court ruling (6925/14 Israel Pension Savers Forum v. Minister of Finance) in which it was determined that the employee must choose the path in which the pension savings will be made and that it is up to him solely to decide whether to purchase insurance for loss of work capacity.
It was further emphasized that Section 20 of the Supervision Law was enacted before the extension order was issued, and therefore, the principle of the employee's freedom of choice prevails over the force of the collective agreement.

The court rejected the employee's claims for the reasons detailed above.

The National Labor Court ruled that an employer is prohibited from interfering in the employee's choice of pension product and determined that, according to pension law, the principle of freedom of choice given to the employee to determine the type of pension product, the company that will manage the funds for him, the investment path, etc. is a fundamental principle, and just as the employer does not check what the employee does with his salary, so too is he prohibited from interfering in everything related to the pension funds, which he transfers to the fund for that employee. The court referred to the High Court ruling (6925/14 Israel Pension Savers Forum v. Minister of Finance) in which it was determined that the employee must choose the path in which the pension savings will be made and that it is up to him solely to decide whether to purchase insurance for loss of work capacity. It was further emphasized that Section 20 of the Supervision Law was enacted before the extension order was issued, and therefore, the principle of the employee's freedom of choice prevails over the force of the collective agreement. The court rejected the employee's claims for the reasons detailed above.