Quick Answer: When an Israeli business is sold as a going concern, Israeli labor law (developed through decades of National Labor Court precedent) treats the employment relationships as automatically transferring to the buyer. Your seniority, pension fund accruals, and working conditions carry over intact. The new employer cannot cut your pay, eliminate benefits, or reset your seniority clock without your agreement. If the transfer materially changes your role or workplace and you find those changes unacceptable, you may be entitled to treat it as a constructive dismissal and claim severance from the selling company. Foreign employees on B/1 work permits also need to transfer the permit to the new employer through PIBA.

Israel's startup ecosystem sees dozens of acquisitions every year. For the foreign nationals, expats, and diaspora professionals who work there, a company sale creates genuine uncertainty: Will my job survive? Do I have to renegotiate my package? What happens to my pension contributions? Can the buyer reset my seniority to zero?

All of those questions turn on a body of law that Israeli employment attorneys deal with constantly but that foreign workers rarely know exists — the doctrine of transfer of business (*haavarat avoda*, העברת עסק). This guide explains how it works, what protections apply in a share sale versus an asset sale, when you can refuse to transfer, and what to do the moment you find out your employer is being sold.

Unlike the UK (which has its TUPE regulations) or Germany (Section 613a of the Civil Code), Israel has no single statute governing employment continuity on a business transfer. Protection comes instead from several sources working together:

  • National Labor Court case law — the dominant source. The National Labor Court has developed, over several decades, a doctrine that treats employment relationships as automatically transferring when a business is sold as a functioning whole. The leading cases include Tzfira v. Taasuva (DA 300017/97) and numerous subsequent decisions of the National Labor Court affirming that a new employer who takes over an operating business steps into the shoes of the prior employer for all employment law purposes.
  • The Collective Agreements Law 5717-1957 (*Chok Haskamot Kibbutziyot*) — which provides that a successor employer who continues the same business activity remains bound by any registered collective agreements and extension orders that applied to the workforce before the transfer.
  • The Wage Protection Law 5718-1958 (*Chok Haganat HaSakhar*) — which prevents any employer from making unauthorized deductions or changes to wages, providing a basis for employees to resist post-transfer pay cuts.
  • The Severance Pay Law 5723-1963 (*Chok Pitzuyei Piturim*) — which defines how seniority is counted and when the seller's period of employment must be credited to the buyer for severance calculation purposes.
  • General contract law principles — an employment contract is personal and ordinarily cannot be assigned without the employee's consent. Courts balance this principle against the going-concern transfer doctrine when deciding disputed cases.

An employee at an Israeli company being acquired is not left without protection. The question is which parts of the doctrine apply — and that depends almost entirely on deal structure.

In Practice: The Employment Enforcement Authority (*Rashat Achinat Zchuyot Ha'Ovdim*) within the Ministry of Labor is the first point of contact for employees who believe a post-transfer employer has cut their wages, failed to transfer pension contributions, or improperly reset their seniority. Complaints can be filed by calling *3460 or visiting any regional Employment Enforcement office (Tel Aviv: 5 Bank of Israel Street; Jerusalem: 44 Kanfei Nesharim Street; Haifa: 15 Ha'Atzma'ut Road). The Authority can conduct an inspection and levy administrative fines of up to NIS 35,800 per violation against the new employer. Monetary claims — unpaid seniority, withheld pension, pay cuts — are litigated in the Regional Labor Court (*Beit Din Avodah Ezioni*) with a 7-year limitation period under the Prescription Law 5718-1958.

2. Share sale vs. asset sale: how deal structure affects your employment

Start here: the legal analysis is completely different depending on whether the buyer acquires the company's shares or its assets (sometimes called a going-concern sale). Most employees don't know which type of deal is happening — find out, because it changes everything.

Share sale

The buyer acquires ownership of the company, but the company as a legal entity stays the same. From an employment perspective, nothing changes: you are still employed by the same entity, on the same contract, with the same seniority, the same pension fund, and the same statutory rights. Different shareholders, same employer.

A share sale gives the buyer no right to unilaterally change your terms. Seniority cannot be reset. No new probation period can be imposed. Any changes must be negotiated with you.

Asset sale or going-concern sale

Here the seller transfers specific assets to a new entity: premises, customer contracts, intellectual property, equipment, the operating business. The seller's company may still exist afterward, just without the business it sold. This is where the transfer-of-business doctrine matters.

Israeli labor courts apply a "going concern" test: if what transfers is an integrated, functioning business unit capable of operating on its own (rather than just a pile of assets), the employment relationships are presumed to transfer to the buyer automatically. Courts look at whether operations continue at the same premises, whether the same customers are served, whether activity is uninterrupted, and whether the buyer actually uses the workforce the seller employed.

In Practice: Israeli courts have been asked to draw the line between a going-concern transfer (employment transfers automatically) and a bare-asset sale (employment does not transfer) in many cases. Key indicators that courts consider: (a) whether the buyer took over the seller's customer base and ongoing contracts; (b) whether operations continued without interruption at the same premises; (c) whether the majority of the workforce was retained; (d) whether the business retained its organizational identity. A software company acquiring only a patent portfolio, without staff or customer contracts, is typically a bare-asset sale. A company acquiring a functioning R&D division — premises, team, and product pipeline — is typically a going-concern transfer. When in doubt, treat the transaction as a going-concern transfer and assert your rights: the National Labor Court has consistently erred on the side of employee protection when the classification is ambiguous.

3. When employment transfers automatically to the new owner

When the going-concern test is satisfied, the National Labor Court's doctrine produces the following:

  • Automaticity: The transfer happens by operation of law, not by agreement. You do not need to sign a new employment contract to be employed by the buyer — the existing employment relationship transfers with the business. (Though the buyer will typically ask you to sign new documents — see section 8 below on how to handle this.)
  • Continuity of seniority: The buyer steps into the seller's shoes. Your seniority for all purposes — severance pay calculation, annual leave entitlement, sick day balance, pension vesting — runs from your original hire date with the seller, not from the transfer date.
  • Continuity of terms: The working conditions that applied before the transfer continue to apply after it. The buyer inherits your employment contract as it stood at the date of transfer.
  • Pension fund continuity: The buyer must continue contributing to your existing pension fund (*keren pensia* or *bituach menahalim*) at the same rates. The fund itself transfers with you — the buyer cannot require you to switch to a different pension product as a condition of the transfer.
  • No new probation period: The buyer cannot impose a new probationary period on transferred employees. You have the full protections of an employee with your accumulated seniority from day one at the buyer's entity.
In Practice: Pension continuity is one of the most commonly violated rights in Israeli business transfers. The buyer's HR department may tell you, incorrectly, that you need to "re-enroll" in a new pension scheme and that contributions start fresh. This is wrong. Under the Pension Expansion Order 2008 (*Tzav Harchavat Hitpashrut Pensia Kalal*) and the National Labor Court's transfer-of-business doctrine, your existing pension policy (the specific policy number, the accumulation, the employer and employee contribution rates) transfers intact. If the buyer's insurance broker or pension provider insists on a policy transfer, they must transfer the existing policy value to the new policy with zero loss of accruals and without resetting the vesting schedule. Keep a copy of your last pension statement before the transfer date as your baseline. Discrepancies of even NIS 200 per month in employer contribution rates compound significantly over years: a NIS 200/month shortfall over 5 years at 4% annual return equals approximately NIS 13,200 in lost accruals.

4. Your rights on transfer: what the buyer must preserve

The doctrine blocks the buyer from unilaterally cutting what you had. Specifically, the buyer inherits and is bound by:

  • Base salary and salary increments — the gross pay you were receiving, including any seniority-based raises that had accrued by the transfer date;
  • Bonus and commission structures — if your compensation included a bonus formula or commission plan written into your contract or agreed in writing, the buyer is bound by it. An acquiring company cannot simply abolish a bonus plan for transferred employees without their consent;
  • Benefits in kind — company car, phone allowance, meal vouchers (*shekim*), recreation pay (*dmei havraa*), and education fund (*keren hishtalmut*) contributions, to the extent they were contractual entitlements before the transfer;
  • Accumulated sick days and annual leave balance — any unused statutory sick days and annual leave days you had at the date of transfer must be honored by the buyer. The buyer cannot wipe the slate clean and start your leave balance at zero;
  • Restrictive covenants and IP agreements — the buyer also inherits any non-compete, confidentiality, or invention assignment clauses in your contract, for better or worse. If your contract limits certain activities, the buyer can enforce those limits too.

The buyer can change things beyond statutory minimums — but only with your agreement. Moving you to a different role, changing your reporting line, restructuring your bonus: those changes need your informed consent. A generic "you're now employed by Company B, please sign here" letter does not count as consent to specific changes unless those changes are spelled out clearly and you've had a real chance to review them.

In Practice: The Wage Protection Law 5718-1958, Section 5, makes it illegal for an employer to make deductions from wages or to pay a wage lower than what is contractually owed without the employee's written consent. An acquiring company that simply reduces your monthly gross salary by NIS 5,000 to "align with our salary bands" — without your agreement — is violating the Wage Protection Law and incurring personal criminal liability for the company's HR director. Enforce this right promptly: file a complaint with the Employment Enforcement Authority and simultaneously send a letter (via registered mail) to the buyer's CEO and HR director citing Section 5 of the Wage Protection Law and demanding restoration of your salary within 14 days. The Employment Enforcement Authority can impose fines of up to NIS 35,800 per month of violation.

5. The right to refuse the transfer — and what happens if you do

Employment contracts are personal in nature. You cannot be forced to work for an employer you haven't agreed to work for. In principle, you can refuse the transfer. What happens next depends on how you refuse and why.

If you refuse and the transfer is a going-concern transfer

The selling company — which is effectively ending your employment because it no longer operates the business — must treat your departure as a termination, not a resignation. That means:

  • You are entitled to full statutory notice pay under the Notice to Employee and to Employee Candidate Law 5762-2002 (one day per month for the first 6 months; after one year, the notice period scales up to 30 days);
  • You are entitled to severance pay under the Severance Pay Law 5723-1963 if you have at least one year of service — one month's salary per year of employment;
  • The seller must release your pension fund contributions (or, if a Section 14 arrangement applies, the accrued fund balance covers your severance obligation).

Constructive dismissal: when the transfer changes your conditions materially

Even if you don't formally refuse the transfer, you may still be entitled to treat it as a constructive dismissal (*piturim al reka*) if the buyer makes — or announces — a material worsening of your terms. Israeli courts have recognized constructive dismissal claims after business transfers where the buyer relocated the workplace to a significantly different location, changed the employee's role or seniority, or cut compensation.

If you think the transfer amounts to a constructive dismissal, don't just quit and then claim. The right sequence is:

  1. Put in writing to the seller (and the buyer) exactly which changes you object to and why they constitute a material worsening of your terms;
  2. Give the seller a reasonable opportunity (typically 14 to 30 days) to remedy the situation;
  3. If the situation is not remedied, resign, citing constructive dismissal, and immediately file a claim in the Regional Labor Court for severance pay, notice pay, and any differential owed.
In Practice: Constructive dismissal claims arising from business transfers are fact-intensive and the burden of proof lies with the employee. Document everything: the announcement letter from the seller, any communications from the buyer about your new role or location, a written account of any in-person discussions about changes to your terms, and a comparison of your pre- and post-transfer compensation. The Regional Labor Court (Beit Din Avodah Ezioni) has jurisdiction and typically hears constructive dismissal cases within 6 to 12 months. Filing fees for claims up to NIS 50,000 are under NIS 200; claims above that range carry a fee of approximately 1% of the claimed amount. The court routinely awards full severance — one month's salary per year of service — in proven constructive dismissal cases, plus interest and the linkage differential (*hafrshat hatsmedah*).

6. Collective agreements and extension orders after a business sale

Many Israeli sectors have industry-wide extension orders (*tzavei harchavah*) — ministerial orders that apply collective agreement terms to all employees in a sector, whether or not there is a union at the specific employer. These cover minimum wages for specific industries, recreation pay rates, keren hishtalmut contributions by sector, and more.

Under Section 19 of the Collective Agreements Law 5717-1957, a successor employer who acquires a business and continues its activities is bound by any registered collective agreement (*heskam kibbutzi rashum*) that applied to the seller's workforce, for the rest of the agreement's term. Extension orders bind the buyer automatically, since they are issued by ministerial order and apply to all employers in the covered sector regardless of who owns the business.

A buyer cannot escape sector-wide obligations by changing the employing entity. If the seller's workforce was covered by a General Histadrut collective agreement for the tech sector, the buyer — continuing that tech business — is bound by the same agreement. Changing those terms means negotiating with the relevant union or waiting for the agreement to expire.

7. Foreign workers and work permits in a business transfer

For foreign nationals on B/1 work permits (*vi'zat avodah*), a business transfer creates an additional layer of complexity because the B/1 permit names the sponsoring employer. When the employing entity changes — whether through an asset sale or, sometimes, through a corporate restructuring following a share acquisition — the permit must be transferred to the new employer.

Share sale

In a pure share sale, the legal employer does not change: the company keeps the same registration number (*mispar chevra*) with the Companies Registrar. PIBA does not typically require a permit amendment for a share sale alone, because the permit holder — the legal entity — remains the same. If the share sale leads to a corporate name change or registration number change, verify with an immigration attorney whether PIBA requires an amendment.

Asset sale or merger

When the legal employer changes — because you now work for the buyer entity, not the seller entity — the B/1 permit must be transferred. The buyer (new employer) applies to PIBA for a permit transfer. The process typically takes 2 to 4 weeks. Key points:

  • You can continue working during the pending transfer application provided the application is filed before the old employer-employee relationship formally ends;
  • The buyer pays the permit transfer fee (approximately NIS 390 per permit at the time of publication; verify current fees at piba.gov.il);
  • The permit sector code must match the work the buyer employs you to do — a permit issued for hi-tech R&D work cannot be transferred to a buyer in an unrelated sector without a fresh sector approval from the relevant government ministry;
  • B/1 permits are subject to a 5-year cumulative cap in most sectors. If your B/1 history is approaching that limit, the permit transfer may be refused or issued for a shorter residual period.
In Practice: The B/1 permit transfer process is initiated by the new employer, not the employee — which means your legal right to continue working in Israel after a business transfer depends on the buyer taking prompt administrative action. Before signing any transfer agreement or new employment contract, insist that the buyer's commitment to file the PIBA permit transfer application within 7 business days of the transfer closing date is written into your offer letter or employment agreement with the buyer. Ask for a written confirmation from the buyer's legal team that the permit transfer application has been filed, and keep a copy. If PIBA issues a temporary bridging permit while the transfer is processed, it will be for the same sector and same conditions as your original permit. Contact an Israeli immigration attorney if the buyer's sector is different from your current employer's sector — a sector change triggers a separate approval process through the Ministry of Labor that adds 4 to 8 weeks to the timeline.

8. Practical steps to protect yourself when your company is being sold

The moment you hear your employer is being sold — even through a rumor — start taking protective steps. Don't wait for the announcement. Here's what to do:

  • Gather your documents immediately. Download and save: your employment contract and all amendments; the last 24 months of pay slips; your pension fund policy number and the most recent annual statement; all written offers, bonus letters, and benefit confirmations; your B/1 permit and any PIBA correspondence. Secure copies outside the company's systems.
  • Identify the deal structure. Ask HR (or your manager, or your employment attorney) whether this is a share acquisition or an asset/business sale. The answer determines which set of protections applies.
  • Read the transfer letter carefully before signing. Buyers will typically circulate a "new employment offer" or "employment continuation letter." Read it line by line and compare it to your current contract. Any new term that differs from your current employment is a potential rights violation — do not sign without consulting an employment attorney if the changes are material.
  • Negotiate a guarantee letter. Ask the buyer, through your lawyer or directly, to issue a written guarantee stating that it assumes all obligations of the seller under your employment contract, preserves your full seniority from your original hire date, and will not change your compensation or benefits without your written consent. This is standard practice in sophisticated M&A transactions and a reasonable buyer will agree to it.
  • Verify pension continuity. Contact your pension fund provider and verify that the buyer has registered as your new employer for pension contribution purposes and that no gap in contributions has occurred around the transfer date. Any month in which contributions were not received is a violation of the Pension Expansion Order and actionable immediately.
  • Track your rights notice period. If the buyer makes unacceptable changes, Israeli courts require that you object promptly and give the employer a chance to remedy the situation before you can resign and claim constructive dismissal. Silent acquiescence for several months may be interpreted as acceptance of the new terms.
In Practice: In the Israeli startup ecosystem, acquisitions often come with a retention bonus — a cash payment conditional on staying with the acquirer for a defined period (typically 12 to 24 months) after closing. Accepting a retention bonus does not waive your statutory rights under Israeli labor law. The bonus is a separate contractual benefit; your minimum statutory entitlements (severance pay, seniority, pension continuity) are mandatory and cannot be waived in exchange for any payment. If the buyer asks you to sign a document waiving statutory rights as a condition of receiving the retention bonus, that waiver is void and unenforceable under Section 14 of the Employment Service Law 5719-1959 (*Chok Sherut Taasukat*). Sign the retention agreement; do not sign any severance or rights waiver attached to it without legal review.

Frequently Asked Questions

In a pure share acquisition, the legal employer does not change — the company you work for retains its registration number and legal identity. Your employment contract, seniority, pension fund, and all statutory rights are completely unaffected by the change in shareholders. You do not need to sign a new employment contract, and your seniority does not reset. The only action you should take is to read any "welcome" or "new employment" letter from the buyer carefully: if it contains terms different from your current contract, you are not obliged to sign it. If the buyer insists you sign a new contract with worse terms as a condition of continued employment, consult an employment attorney immediately.
No. Where the business was transferred as a going concern, the new employer inherits your full seniority from your original hire date. Your seniority cannot be reset, and this protection cannot be waived. It applies to severance pay calculation (one month's salary per full year of service under the Severance Pay Law 5723-1963), annual leave entitlement (which increases with seniority under the Annual Leave Law 5711-1951), and pension fund accruals. File a complaint with the Employment Enforcement Authority and, in parallel, demand a written acknowledgment of your seniority from the buyer. If they refuse, the Regional Labor Court can issue a declaratory order confirming your seniority from the original date.
Potentially, but a significant relocation can constitute a constructive dismissal if it materially worsens your working conditions. Israeli courts have found that relocating an employee's workplace by a distance that requires moving home, or that dramatically increases commuting time, can be a material change entitling the employee to resign and claim severance. The test is not purely geographic — courts also consider whether relocation costs are reimbursed, whether the role changes, and what commuting alternatives exist. If you are informed of a significant relocation and wish to object, put your objection in writing within 14 days of the announcement, citing the specific hardship, and request that the buyer offer either a relocation package or the option to work from the original location. Keep a copy of every written exchange.
If the acquisition was a share deal, your permit sponsor (the legal entity) has not changed, so PIBA does not require any amendment for the permit itself. If it was an asset or business-unit sale and you are now employed by a different legal entity, the new employer must apply to PIBA for a permit transfer within 7 business days of the transfer closing. You can continue working during the processing period. If the buyer's sector code or business activity differs from your current permit's sector, the buyer must also obtain sector approval from the relevant ministry, which adds time. Make sure the buyer's commitment to file the PIBA transfer application promptly is in writing before the deal closes.
Pension contribution arrears are recoverable. Under the Pension Expansion Order and the Wage Protection Law, both the seller and the buyer can bear liability for a contribution gap around the transfer date. First, contact your pension fund provider and get a statement confirming which months have missing contributions. Then file a complaint with the Employment Enforcement Authority citing the specific months and amounts. The Employment Enforcement Authority can require the employer to make good the arrears plus late penalties. You can also file a direct claim in the Regional Labor Court — there is a 7-year limitation period. The amount recoverable includes the missing principal, the linkage differential for the period, and interest at the statutory rate. Do not delay further, as the fund's lost investment returns over the gap period compound over time.

Related Guides

Severance Pay in Israel for Foreign Workers Employment Contracts in Israel for Foreign Workers Wrongful Termination in Israel Transferring a B/1 Work Permit to a New Employer Pre-Dismissal Hearing in Israel
Adv. Eli Shimony
Adv. Eli Shimony
Licensed Israeli Attorney · Founder, IsraelLaw.info

Eli Shimony Law Office · Editorial policy

Eli Shimony is a licensed Israeli attorney advising foreign nationals, overseas employers, and diaspora families on Israeli labor, employment, and civil law. He founded IsraelLaw.info to give English speakers accurate, practical guidance on navigating the Israeli legal system.