Several months ago a deal was cut between the
government and Histadrut Labor Federation chairman Ofer Eini. One
element of the deal was to make delaying pay a criminal offense. This
week, the news media reported progress on drafting legislation to
implement the deal.
law in Israel
requires monthly pay to be paid by the ninth day of the
following month. When pay is delayed, the employer is subject to costly
fines, though there is a procedure for obtaining an exemption through
the Labor Court.
Making delayed wages a criminal offense would seem to be a
major change. Criminal offenses occupy a whole different legal world
than civil ones. On the one hand, the punishments are far more severe
and can include imprisonment; on the other hand, they are much harder
to prove in court. Criminal convictions usually must meet two hurdles:
proof of criminal intent and proof beyond a reasonable doubt.
On the face of it, the new legislation would face the same
cost-benefit analysis of criminalizing anything. It would deter, but
perhaps over-deter. It would make employers think twice before
employing workers without having any idea where the money is supposed
to come from, but would also deter some employers from hiring workers
out of fear that someday they would be unable to pay due to liquidity
problems and suddenly find themselves in criminal court.
That over-deterrence would spill over into the labor
market, increasing unemployment. (Like most initiatives supported by
the Histadrut, this legislation would improve the bargaining power of
workers well-ensconced in good jobs and make life more difficult for
the unemployed or marginally employed.)
We would then have to rely on the prosecution to use good
judgment in distinguishing between truly criminal cases and
carelessness, just as they show judgment in prosecuting check fraud.
More than 10,000 checks a month are bounced in Israel, and it is fair
to assume that a majority of the check writers had good reason to
suspect they wouldn't be able to cover their checks. But only a tiny
minority is ever indicted for check fraud; the prosecution rightly
considers most cases a mere nuisance that it would be counterproductive
However, based on newspaper reports of the
proposed law being drafted, it is not based on this logic but on a
different, more politicized one. Fines reportedly will be imposed at
the discretion of the industry, trade and labor minister, which seems
to be a glaring violation of due process. I can't think of any other
law where the punishment for violating it is at the discretion of a
Newspapers also report that the proposed law contemplates that
convictions and jail sentences will be handed out by labor courts.
Labor courts in Israel are highly praised for their work in arbitrating
labor disputes, but I don't think this is the right venue for criminal
prosecutions and jail sentences. Again, I don't see how due process
will be safeguarded.
Another perplexing twist is that criminal charges arise only
when the delay of pay has continued 90 days. This is exactly the
opposite of what logic dictates. After not getting paid for two months,
the worker who decides to continue probably has a pretty good idea that
the employer may not be able to make payroll the following month; if he
decides to go to work anyway, he has decided - like many creditors - to
take his chances.
Imagine if the laws against check fraud dictated that you could
only prosecute someone if he bounced three checks in a row to the same
recipient; we might question the judgment of the payee, but we would
certainly be reluctant to call him an unsuspecting victim.
The height of paradox is that the unchallenged champions of pay
delay, the local governments, which have in the recent past racked up
months and even years of missed paychecks, will be exempt from the law.
The details of the proposed change in the law that have been
reported point to an ill-conceived and highly politicized change to the
criminal code, one that has the potential to do real damage to the
labor market while doing little to rectify the genuine problem it is
supposed to address. Let us hope and presume that in the ongoing
drafting process, cooler heads and greater legal and economic logic
will ultimately prevail.
Asher Meir is research director at the Business Ethics Center
of Jerusalem, an independent institute in the Jerusalem College of
Technology (Machon Lev).