[email protected]: Delay criminalization of delayed pay

Several months ago a deal was cut between thegovernment and Histadrut Labor Federation chairman Ofer Eini. Oneelement of the deal was to make delaying pay a criminal offense. Thisweek, the news media reported progress on drafting legislation toimplement the deal.

Currentlaw in Israel requires monthly pay to be paid by the ninth day of thefollowing month. When pay is delayed, the employer is subject to costlyfines, though there is a procedure for obtaining an exemption throughthe Labor Court.

Making delayed wages a criminal offense would seem to be amajor change. Criminal offenses occupy a whole different legal worldthan civil ones. On the one hand, the punishments are far more severeand can include imprisonment; on the other hand, they are much harderto 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 samecost-benefit analysis of criminalizing anything. It would deter, butperhaps over-deter. It would make employers think twice beforeemploying workers without having any idea where the money is supposedto come from, but would also deter some employers from hiring workersout of fear that someday they would be unable to pay due to liquidityproblems and suddenly find themselves in criminal court.

That over-deterrence would spill over into the labormarket, increasing unemployment. (Like most initiatives supported bythe Histadrut, this legislation would improve the bargaining power ofworkers well-ensconced in good jobs and make life more difficult forthe unemployed or marginally employed.)

We would then have to rely on the prosecution to use goodjudgment in distinguishing between truly criminal cases andcarelessness, just as they show judgment in prosecuting check fraud.More than 10,000 checks a month are bounced in Israel, and it is fairto assume that a majority of the check writers had good reason tosuspect they wouldn't be able to cover their checks. But only a tinyminority is ever indicted for check fraud; the prosecution rightlyconsiders most cases a mere nuisance that it would be counterproductiveto prosecute.

However, based on newspaper reports of theproposed law being drafted, it is not based on this logic but on adifferent, more politicized one. Fines reportedly will be imposed atthe discretion of the industry, trade and labor minister, which seemsto be a glaring violation of due process. I can't think of any otherlaw where the punishment for violating it is at the discretion of aprofessional politician.

Newspapers also report that the proposed law contemplates thatconvictions and jail sentences will be handed out by labor courts.Labor courts in Israel are highly praised for their work in arbitratinglabor disputes, but I don't think this is the right venue for criminalprosecutions and jail sentences. Again, I don't see how due processwill be safeguarded.

Another perplexing twist is that criminal charges arise onlywhen the delay of pay has continued 90 days. This is exactly theopposite of what logic dictates. After not getting paid for two months,the worker who decides to continue probably has a pretty good idea thatthe employer may not be able to make payroll the following month; if hedecides to go to work anyway, he has decided - like many creditors - totake his chances.

Imagine if the laws against check fraud dictated that you couldonly prosecute someone if he bounced three checks in a row to the samerecipient; we might question the judgment of the payee, but we wouldcertainly be reluctant to call him an unsuspecting victim.

The height of paradox is that the unchallenged champions of paydelay, the local governments, which have in the recent past racked upmonths and even years of missed paychecks, will be exempt from the law.

The details of the proposed change in the law that have beenreported point to an ill-conceived and highly politicized change to thecriminal code, one that has the potential to do real damage to thelabor market while doing little to rectify the genuine problem it issupposed to address. Let us hope and presume that in the ongoingdrafting process, cooler heads and greater legal and economic logicwill ultimately prevail.

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Asher Meir is research director at the Business Ethics Centerof Jerusalem, an independent institute in the Jerusalem College ofTechnology (Machon Lev).