Israel's High Court of Justice will not interfere with the executive salary law, which limits the salary of the highest paid employees in financial companies to 35 times that of the lowest paid in the company. This morning, the High Court of Justice convened with an extended panel of seven judges, headed by Supreme Court President Miriam Naor.
Naor began by saying that the High Court will not accept the petition of the Association of Banks in Israel and insurance companies' to void the provision limiting the ratio between the highest and lowest pay.
The petition has also dealt with the imposition of past rights on the limitations of the new law, which states that the maximum salary will be NIS 2.5 million. The High Court of Justice accepted the petition of banks and insurance companies to find a solution to this problem, according to which the salary limitation will not affect the pension rights that employees have accumulated so far.
The High Court is not content with the outline presented by Deputy Attorney General Avi Licht, which the state presented in its response to the petition. The judges requested that a more clear solution will be formulated, which will prevent the retirement of employees concerned that their retirements packages will be negatively affected as a result of the law.
During the hearing, Naor turned to the representatives of the state and said that Licht's outline includes many restrictions. "I can understand an employee saying that if this is the outline, he chooses to go home," she said.
The salary cap law, promoted by Minister of Finance Moshe Kahlon, limits the salary of financial system executives and is a more extreme version of the law Kahlon's predecessor Yair Lapid had tried to promote. Several months ago, the Knesset passed this law with a large majority.
According to the law, a salary higher than NIS 2.5 million will not be recognized for tax purposes. Moreover, salaries will not exceed 35 times the lowest salary in the company.
The petition had been filed after the banks claimed that the wording of the law will lead to salary restrictions also applying to employee's past rights, and that they are concerned over the retirement of over 200 executives who will prefer to leave their job before the law comes into effect, in order not to harm their retirement packages.
Published by Globes [online], Israel business news - www.globes-online.com - on September 7, 2016
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