Ethics@Work: Delay criminalization of delayed pay

Proposed law would do little to promote a fair solution to a vexing problem.

asher meir 88 (photo credit: )
asher meir 88
(photo credit: )
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. Current 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 to prosecute. 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 professional politician. 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).