Navigating NGO and Company Restructuring in Palestine: Practical Legal Guidance Under Article 41 of the Palestinian Employment Law
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Organizations may decide to restructure for an array of reasons; to improve performance, streamline operations, strengthen financial health, or, sometimes, out of necessity due to funding cuts. Palestinian NGOs and companies are no exception. But whenever an organization restructures, it must navigate strategic and financial questions as well as legal obligations, including those under Article 41 of the Palestinian Employment Law.
In recent months, these issues have become especially relevant. With donor aid shrinking, operating costs rising, and persistent political challenges, 2025 has brought new pressures. Matters further exacerbated with the recent U.S. government Executive Order 14169, which terminated a majority of humanitarian aid projects in Palestine, as well as projects within the private sector, causing a swift fallout for NGOs and companies. This development, which also conjures former U.S. and EU funding cuts, substantiates the importance of adequate planning, documentation, and understanding of legal requirements when considering restructuring.
To restructure responsibly, NGOs must understand their legal rights and duties, especially under Article 41. That’s where expert Legal Advisory for Non-Profits in Palestine becomes essential. In this article, we’ll dive into NGO and company restructuring in pertinence with Article 41 of the Palestinian Employment Law, outlining the law itself, best practices for restructuring, inspecting example cases and court rulings, and where Kurdi & Co. comes in.
What Article 41 Stipulates
Article 41 of the Palestinian Labour Law (Law No. 7 of 2000) allows employers to terminate employment contracts for technical reasons or as a result of financial losses that necessitate a reduction in the workforce. This law, however, sets out explicit conditions:
- The Ministry of Labour in Palestine must be notified in advance. This is to provide a formal and timely notice, not to seek approval, per se.
- Employees must receive prior notice in line with their contract terms, their contracts or statutory minimums.
- Evidence must exist for restructuring decisions. This could include audited financial statements, internal restructuring plans, or letters confirming termination of donor funding.
Equally as important, employers are expected to act in good faith. Article 41 is not meant to be used to justify unlawful dismissals. When applied responsibly, it helps organizations in restructuring and managing change while preserving employee rights.
Donor Withdrawals and Article 41: Lessons from the Field
How Palestinian Courts Interpret Article 41
When it comes to dismissals under Article 41 of the Palestinian Employment Law, courts in Palestine maintain a careful and thorough approach. As aforementioned, employers must be able to prove that the decision to terminate staff was both justified and carried out properly. Let’s explore how courts handled the restructuring cases historically until present:
- Case No. 686/2013: The employer claimed they were experiencing financial difficulties but no evidence of losses were provided. The employer had also continued to hire new staff right after the dismissals. The court saw this as a contradiction and ruled the termination invalid.
- Case No. 994/2014: Here, the employer handled things correctly. Donor cuts were well-documented, affected projects were paused, and the Ministry was informed. Due to credible evidence and proper procedures the court ruled the restructuring as lawful.
- Case No. 303/2017: In this case, the employer had failed to inform the Ministry of Labour and wasn’t able to present evidence of either financial loss or technical restructuring. The court ruled the dismissal unlawful.
- Case No. 902/2019: This case was more complex. Although there was little time between notifying the Ministry of Labour and proceeding with terminations, the court accepted the decision. The ruling highlighted that while Ministry approval isn’t required, the notification must take place in advance and be backed by real evidence. The court also stressed that technical restructuring must reflect actual organizational needs.
If the above rulings send a message, it’s that restructuring procedures must abide by and align with Article 41. Otherwise, employers may risk having the terminations overturned.
Understanding Legal Duties When Restructuring: What Article 41 Means in Practice
To safeguard employee rights during termination and restructuring processes, Palestinian Employment Law requires employers to abide by the following responsibilities:
- Employees are entitled to their full end-of-service benefits. That’s a baseline obligation.
- While not required, offering a chance to reassign employees to other roles is a good-faith gesture. It demonstrates fairness and can reduce future liability.
- Palestinian courts look at both the reason for the termination and how it was handled. Employers must maintain proper records to show terminations were fair, documented, and consistent.
If a Court Finds the Termination Was Unjustified
- For open-ended contracts, courts may award up to two months of salary for every year of service.
- For fixed-term contracts, the employee might be entitled to the full value of what remains on their contract.
Common Questions About Article 41:
Is restructuring a valid reason for termination?
Yes, as long as it’s backed by documents and the Ministry of Labour is notified in advance.
When can a company legally terminate an employee in Palestine?
Legal reasons include the end of the contract, serious misconduct, financial or technical restructuring, or closure of the business/organization. The employer must follow the proper steps, including advance notice and compensation.
What happens if a dismissal is ruled unfair?
In open-ended contracts, courts may award up to two months’ salary for each year worked. For fixed-term contracts, the employee may receive the full remaining value of the contract.
Does the Ministry of Labour need to approve a termination under Article 41?
No. The law only requires that the Ministry be notified in advance. It’s not an approval process.
What’s the difference between technical and financial restructuring
Technical restructuring refers to operational changes such as merging roles or closing a department. Financial restructuring pertains to economic difficulty, which needs to be supported with audited financial documents or donor withdrawal letters.
What are common mistakes employers make with Article 41?
Not informing the Ministry, rehiring right after dismissals, not keeping evidence, or using Article 41 as a cover for unrelated terminations.
Can a company rehire after dismissing employees under Article 41?
Yes, but only if the new hires don’t contradict the reason given.
- Consistent example: Closing a department due to restructuring, then hiring in another unaffected area.
- Inconsistent example: Claiming financial hardship, then posting job ads for the same roles that were just cut.
What documents can help prove a case in court?
Advance Ministry notice, financial statements, donor letters, internal memos, and board decisions can all demonstrate lawful termination.
What’s the difference between fixed-term and open-ended contracts in termination cases?
With fixed-term contracts, if the employer ends the contract early without cause, they may owe the rest of the contract’s value. With open-ended contracts, courts may award compensation of up to two months’ salary per year of service if the dismissal wasn’t justified.
How Kurdi & Co. Support Clients During Restructuring
Kurdi & Co. has worked alongside numerous NGOs and Companies in Palestine during periods of restructuring or transition. Here’s how our experts can support employers:
- We guide decision-makers through the legal process, whether the reason is financial hardship or technical change.
- We prepare and file Article 41 notices with the Ministry of Labour properly and on time.
- When needed, we represent our clients in labour disputes to defend their decisions.
Our team is here to answer any of your questions. Contact us to learn more about how Kurdi & Co. can support your NGO or company through restructuring. You can reach us at info@kurdilaw.ps or call us at +970 (0)2-2425460.
This Article was researched and written on June 30, 2025 by Amer Kurdi.
