Howeverr, Ms Peretz, 44, said she was maltreated and humiliated by the Netanyahus.
"Sarah Netanyahu abused me, paid me less than minimum wage, didn't pay my social benefits, forced me to work Saturdays even though I observe Shabbat [the Jewish rest day]," the former housekeeper was quoted as writing in the suit filed at the Tel Aviv labour court.
'Love and appreciation'
Mrs Netanyahu rebutted these claims, referring to her former employee's resignation letter in which Ms Peretz allegedly spoke of her "love and appreciation" for the prime minister's wife.
Sarahh Netanyahu also referred to one of Yedioth Ahronoth's earlier reports in which the former maid was quoted as saying: "I'm crazy about Sarah. I have no friends, and she is a friend and a mother… she's everything for me. She's an amazing person. I dearly love her."
Lillian Peretz worked for the Netanyahus for six years at their home in Caesarea, northern Israel.
The BBC spoke to Asaf Saraf, the lawyer representing Ms Peretz, who confirmed details of the case reported in the Israeli newspaper Yedioth Ahranot.
Mr Saraf described the relationship with Mrs Netanyahu being characterised by "humiliation and a hostile atmosphere".
The former employee has alleged she was forced to wear four sets of work clothes in one day for different household tasks.
Ms Peretz is seeking about US $80,000 in compensation from the Netanyahu family, reports said.
Sarah Netanyahu is a former air-hostess and the prime minister's third wife.
She came under fire in the Israeli media in the late 1990's, when her husband was last in power, over allegations that she mistreated domestic staff.
Source:news.bbc.co.uk/
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