Former executives at Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), including former CEO Joseph Weiss and Nissim Hadas, former CEO of Elta Systems, an IAI subsidiary, are preparing to file a lawsuit against IAI's board of directors. Under the agreements with them when they were appointed to senior positions in the company, they were promised that they would be awarded extra severance pay amounting to hundreds of thousands of shekels when they finished their terms. The Government Companies Authority is now opposing these payments.
"I cannot believe that I am about to file suit against IAI, my home for decades, but they are driving my friends and me into a corner, so there is no avoiding it," a former IAI executive told "Globes."
Weiss and Hadas retired from IAI last year. Weiss was replaced by Maj. Gen. (res.) Nimrod Sheffer, and Hadas by Yoav Turgeman.
Weiss and Hadas's problem also affects several other executives who left IAI last year, including vice-presidents and division managers. "The number of executives finding themselves in this situation is growing. We believe that if we institute legal action against the company, there will be at least 20 people involved in it," a former IAI executive said.
When IAI executives are appointed to senior positions, they are no longer covered by a collective labor contract, and are hired under a personal labor contract. For four decades, the prevailing practice at IAI was to give senior executives enlarged severance pay when they left their jobs, subject to approval by the company board of directors.
"This procedure compensates these employees for the benefits given to all IAI employees under the collective labor agreement, which no longer apply to them after they were employed under personal contracts. Employees with personal contracts do not receive the pay increments enjoyed by employees covered by a collective labor agreement. They rely on the additional payment they receive when they finish their term," an IAI source told "Globes."
IAI's board of directors adhered to this practice for many years, but when the matter was brought to the Government Companies Authority for approval, it unexpectedly halted planned payments amounting to millions of shekels. It calculated the senior executives' eligibility for enhanced severance pay only according to the period of their employment as senior executives.
Company sources complained about the Government Companies Authority's stance, saying, "It changes the rules of the game in the middle of the game." They accused the Government Companies Authority of acting arbitrarily and discriminating against former executives who retired recently, in comparison with executives who retired previously from the company and received the extra severance pay promised to them
A source close to one of the former IAI executives considering joining the lawsuit severely criticized Sheffer and current IAI chairperson Harel Locker. The source told "Globes," "Locker and Sheffer are aware of this situation. It is clear that they could have resolved the situation, had they wished to. If something is important to IAI's management, it knows how to take care of it quickly, but this did not happen in this case."
Another senior source told "Globes" that the discrimination in payment of extra severance pay to employees who switched from a collective labor contract to a personal one was liable to give IAI employees a negative message when they are asked in the future to switch to a personal contract.
IAI management declined to respond to the allegations. The Government Companies Authority said, "The position of the Government Companies Authority in this matter is to approve enhanced severance pay only for the period in which the senior executives were employed in senior positions under personal contracts, not for other periods of their work at the company, insofar as there were any.
"The requested severance pay is in addition to the severance package payable by law, which includes severance pay and social rights. The Government Companies Authority offered a fair plan under which the employee would be given an amount for the period during which he or she was not a senior executive not less than the amount he or she would have received, had he or she continued his or her employment as a senior executive under the previous contract."
The Government Companies Authority gave an example of the former executives' demands, without giving their names, saying, "One executive employed for 35 years, including 24 years in a non-senior position, is asking for severance pay for the entire period of his or her employment at the company amounting to NIS 1.6 million, instead of NIS 550,000 for the period of his or her employment as a senior executive. In another case, an executive reaching retirement age after working 20 years in the company, including 14 years in a non-senior position, is asking for NIS 1.28 million in severance pay for the entire period of his or her employment, instead of NIS 400,000 for his or her employment as a senior executive."
Published by Globes, Israel business news - en.globes.co.il - on February 5, 2019
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