Ending a senior executive’s employment: changed authority, remuneration and a separation agreement

When a manager is told that authority is being transferred to someone else, the first question is not always “How much severance pay am I owed?” Establish whether this is a proposal, a decision to change the role, removal from corporate office or termination of employment. The distinction may affect the hearing, notice, bonus and equity-based compensation.

An orderly departure starts by mapping decisions and dates. Establish what has happened, what remains open and when a response is required, without signing or resigning simply to accelerate a resolution. The aim is to understand the available options and their implications; not every dispute warrants proceedings, and not every negotiation ends in agreement.

Role, corporate office and employment differ

A senior employee may also be an office-holder, director or shareholder. Removal from corporate office can accompany dismissal, but a corporate decision does not alone answer every employment-law question. An internal change of authority is not necessarily a dismissal notice either.

Identify the engagement, the person’s status and the authorised decision-maker. The Companies Law addresses appointment and removal of chief executives and other office-holders, with distinctions based on company type and articles of association. The employment agreement and decision communicated require assessment alongside it. Do not assume every manager is an office-holder or every board decision automatically ends all engagements. Companies Law, Sections 250–251

What remains of the role in practice?

An unchanged title does not prove that the role was preserved. Transferring a team, removing a budget, changing reporting lines or withdrawing decision-making powers may matter without a pay reduction. Conversely, an organisational adjustment does not automatically create a compensation claim. Compare the agreement, work before the change and the new position, including the explanation given.

A hearing before a decision: beyond dismissal

A genuine opportunity to be heard is required before dismissal and before a decision on a material change in employment terms that may adversely affect an employee. In Hatama v Haputa, the National Labour Court expressly referred to changes of role and working scope, alongside the hearing’s purpose: presenting the employee’s position to someone still able to consider it. Judgment, paragraphs 55–58

Useful preparation focuses on reasons and alternatives: the proposed change, its factual basis, the effect on the employee and possible solutions. Presenting a reasoned position is not a commitment to consent. Holding a hearing does not itself authorise a contractual change or guarantee reversal of the decision.

Four questions to keep separate

First, was an opportunity to be heard provided before the decision? Second, is the change permissible under the applicable framework, and what does consent or objection mean? Third, does it constitute material deterioration or other circumstances within Section 11(a) of the Severance Pay Law? Fourth, if resignation is contemplated, are the conditions for severance entitlement met?

These are not different names for one test. A defective hearing does not alone establish material deterioration; objecting does not fulfil every condition for qualifying resignation. Assessment also considers the causal connection, entitlement conditions, warning and opportunity to remedy where required, and exceptions. Advance-notice obligations require separate examination. The full general explanation is in deterioration of employment terms.

A hypothetical example: unchanged pay, different authority

A manager continues to receive the same salary but loses responsibility for the business unit and involvement in decisions. Unchanged pay does not produce an automatic answer. Establish the extent of change, source of authority, commitments, reasons and process before considering a response. The example neither recommends resignation nor determines compensation entitlement.

Build a termination chronology

The notification date, final working day and employment termination date can differ. That may affect remuneration, availability, handover and the equity plan. Establish what the agreement provides and whether work during notice, an agreed transition or immediate termination with payment has been proposed.

Notice depends on legislation and the applicable arrangement; there is no single notice period for all senior employees. A contract may provide an additional employee right, but a special resignation-notice commitment needs separate reading. Payment relating to a period should not be assumed to continue every package component for every purpose. Advance Notice Law, Sections 2–7 and 12

Garden leave and release from duties

“Garden leave” may describe a contractual arrangement for continued paid employment without actual duties or with limited availability. Establish whether that is the arrangement agreed, when employment ends and which conditions continue. The English expression does not create a uniform Israeli legal institution or entitlement for every senior employee.

By contrast, immediate termination with payment in lieu of notice should not be assumed to continue employment throughout the period used to calculate payment. For vesting, bonuses, benefits and the ability to start another job, read the particular wording and law. No assurance follows that every paid period counts as service or continued service under a foreign plan.

Pay, bonuses and equity awards

Final accounting should distinguish accrued pay, conditional payments, bonuses for a performance period and an additional departure award. Entitlement to a bonus differs from inclusion in remuneration used to calculate severance pay. Examine targets, approval, discretion and any continued-employment condition.

For equity-based compensation, separate vested and unvested rights, and options from shares already allotted or RSUs. Examine the plan’s relevant termination date, exercise window and lapse or acceleration provisions. Dismissal does not automatically accelerate awards, and there is no single exercise period across plans.

Microsoft Israel v Grushka rejected a frustration claim on the facts examined. It does not remove good-faith obligations; another case may require examination of whether the employer prevented satisfaction of a condition. The executive compensation article explains how to review the particular compensation plan. Clarify any approaching lapse date promptly; negotiation or seeking advice does not itself suspend it.

Severance pay, contributions and associated rights

Severance entitlement depends on legislation and departure circumstances. Distinguish deposited severance funds from a possible employer top-up, and examine any Section 14 arrangement, covered remuneration and periods. “Executive terms” neither remove that enquiry nor promise a special departure award. Severance Pay Law, Sections 1, 11 and 14

Final salary, holiday, pension and relevant contractual benefits also require review, without treating money held in a fund as an immediately payable cash amount. Tax and withdrawal questions need suitable advice. Identify any special dismissal protection separately; senior status does not replace examining its applicability.

Separation agreements and releases

An agreement suitable for review identifies the components at issue, what will be paid in any event and additional consideration offered. For an executive, connect the release with commitments concerning bonuses, equity plans, transition restrictions and ending corporate roles. An employer’s undertaking does not necessarily bind a separate issuing company.

Review the release’s scope and the circumstances in which it was requested. Signature alone does not determine validity, and Section 29 of the Severance Pay Law has a specific requirement for writing and an express reference to severance pay. That does not validate every written waiver. For the general analysis, see termination agreements and releases.

Confidentiality, handover and the next step

Departure does not automatically erase confidentiality duties or valid transition commitments. Alongside handover and equipment return, read and assess non-compete and non-solicitation terms on their merits. Transferred authority does not permit copying information or retaining system access. Non-compete clauses and confidentiality

In a dispute, gather agreements, communicated decisions, lawfully held records of the role before and after change, and remuneration statements. Legal assessment can help choose a reasoned demand, negotiation or proceedings, including urgent relief where circumstances justify it. No result is guaranteed, and no single jurisdiction applies to every dispute involving an employee who also holds corporate office.

Before agreeing a departure or deciding to resign, Menahemov Shpigel & Co. can be approached to assess appropriate advice or representation. Initially identify the decision communicated and the response deadline. Document review will be arranged after an initial enquiry and conflict check.