Can an employment contract for work performed in Israel be governed by foreign law?

Israeli labor statutes are drafted as minimum entitlements rather than as default terms, so a clause promising less than the statute is void to that extent and the statutory right applies in its place. This holds whether the employer is Israeli or foreign, and whether payroll is run from Tel Aviv or from abroad. Where a contract selects New York or English law, the Labor Court will generally apply the chosen law to matters the Israeli statutes do not reach, such as bonus formulas or contractual notice above the statutory minimum, while applying Israeli law to severance, overtime, leave, sick pay and pension. What the court looks at is where the work was actually performed, not the wording of the choice-of-law clause.

Foreign employers most often get caught on three items. Severance under the Severance Pay Law accrues at roughly one month’s salary for each year of service and is normally funded through a pension arrangement that a foreign-style contract simply omits. Mandatory pension and disability contributions begin within the first months of employment under the general extension order, and back-payment is expensive. Overtime must be paid at 125 percent and 150 percent under the Hours of Work and Rest Law unless the role genuinely qualifies as a position of trust. Claims can be brought years after the fact, and where the employer kept no attendance records the burden of proving hours shifts onto the employer.

From the full guide: Employment Contracts in Israel for Foreign Workers and Expats

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