cross border transactions

Posted By: Hadas Raccah

Do international companies have absolute discretion in determining employees’ benefits? This is what the international high -tech company Comverse had in mind. Unfortunately reality proved otherwise.

Today we will discover what precautions international employers must take when negotiating employment terms and how can they avoid or at least reduce, the prospects of litigation brought against them, based on gender discrimination. International companies often adopt equity plans designated to stimulate their employees’ active interest in the success of the company. These plans including the actual equity provided to each employee are often subject to the discretion of the board of directors (usually of the parent foreign company). Is that So?

A recent Israeli National Labor Court ruling in Iris Ben- Moshe v. Comverse Ltd. will make it harder for international companies to exercise their absolute discretion in such circumstances.

According to the National Labor Court ruling a female employee was discriminated on the basis of gender due to the fact she wasn’t granted options to purchase common stock of the parent company, Comverse Inc., although male employees, employed in managerial positions parallel to her position, were granted with such option.

This ruling is innovative in the sense that for the first time the National Labor Court ruled that options shall also be considered an integral part of the employees’ remuneration for the purpose of determining discrimination based on the Male and Female Workers Equal Pay Law 5756- 1996 (the Equal Pay Law). The Equal Pay Law determines that male and female employees, employed by the same employer in the same workplace, are entitled to equal remuneration for the same work, for essentially equal work or for equivalent work.

In examining the National Labor Court’s decision and whilst implementing the guidance on what constitutes “unlawful discrimination” and what constitutes the relevant “comparison group” in the framework of a lawsuit based on the Equal Pay Law, it appears that international employers must reassure their equity plans do not include provisions which may give rise to discrimination claims based on gender Also, it might be worthwhile to encourage the persons responsible of determining the employees’ equity compensation to bear in mind, that their discretion in determining so, is not absolute.

It should be further noted that the “comparison group” for the purpose of determining discrimination based on the equal pay law is not necessarily a clear cut decision. For instance, in this case, Comverse’s attempt to broaden the “comparison group” was rejected. It should also be noted that the question whether an employee performed “work of equal value” for the purpose of the Equal Pay Law, will be examined by in-depth analysis of the nature of the work – including, inter alia, the skills, effort and responsibility required for the position as well the environmental conditions in which the work is performed. In other words- the question whether employees performed “work of equal value” may not be concluded on the basis of their remuneration, since said assumption (as argued by Comverse) will necessarily lead to a situation whereby it would be impossible to establish an entitlement to equal pay under the Equal Pay Law, for the comparison group will always include those receiving the same remuneration.

This case is a reminder to employers to give the honest reasons for differing employment benefits (including options) and not allow discrimination between men and women performing work of equal value- solely on the basis of gender differences.

This entry was posted on Monday, February 22nd, 2010 at 8:26 pm and is filed under Emplyoment Aspects of International Transactions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.