Article 75 of the Saudi Labor Law: Conditions and Rights for Terminating Contracts and Compensation

Article 75 is considered one of the most important provisions in the Saudi Labor Law as it regulates the relationship between the employer and the employee. This article outlines the rules and conditions to be followed by both parties in the event that one of them wishes to terminate an indefinite employment contract. In this article, provided by Al Othman Lawyers and Consultants, we will present an overview of the Saudi Labor Law, the full text of Article 75, a detailed explanation of its key clauses, and its scope and practical application.

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Overview of the Saudi Labor Law:

The Saudi Labor Law was issued on August 23, 1426 AH (September 27, 2005) and published on September 25, 1426 AH (October 28, 2005). It is one of the most significant legislative frameworks, designed to regulate the relationship between employers and workers, achieve balance between both parties, and clarify the rights and responsibilities of each. This ensures the development of the labor market and contributes to national economic growth.

The law covers several areas, including:

• Definitions and general provisions
• Employment regulations
• Employment of non-Saudis
• Training and qualification
• Employment relations
• Working conditions and terms
• Part-time work
• Workplace safety and prevention of major accidents, occupational injuries, and health and social services
• Employment of women
• Employment of minors
• Maritime employment contracts
• Work in mines and quarries
• Labor inspections
• Labor dispute resolution bodies
• Penalties
• Final Provisions

read also Article 70 of the Saudi Labor Law: Regulating Disciplinary Penalties and Protecting Worker Rights

Text of Article 75 (According to the Latest Amendments):

If the contract is of indefinite duration and the wage is paid monthly, either party may terminate it for a legitimate reason, as follows:

1. If the termination is initiated by the worker:
   The worker must provide a written notice to the employer at least thirty (30) days prior to the termination date.
2. If the termination is initiated by the employer:
   The employer must provide a written notice to the worker at least sixty (60) days prior to the termination date.
3. If the contract is of indefinite duration and the wage is not paid monthly:
   The party wishing to terminate the contract (whether the worker or the employer) must provide a written notice to the other party at least thirty (30) days prior to the termination date, provided the termination is for a legitimate reason.

Purpose of Article 75:

The aim of Article 75 is to establish clear guidelines for terminating indefinite employment contracts and to clarify the responsibilities of each party when seeking to terminate such contracts. This ensures the protection of both employer and employee rights, preventing employers from being negatively impacted by sudden resignations and safeguarding employees from being dismissed without prior notice.

read also: Article 109 of the Saudi Labor Law: Rights to Paid Annual Leave and Employer Obligations

What Does Article 75 Cover?

Explanation of the Article:

Article 75 focuses on regulating indefinite employment contracts, which, as the name suggests, have no fixed time frame. It outlines procedures for terminating such contracts to prevent harm to either party—whether it’s the employer suddenly dismissing the employee or the employee resigning without notice.

Key Provisions:

1. For Contracts with Monthly Wages:
   • If the wage is paid monthly, either party may terminate the contract for a legitimate reason by giving written notice:
     • Employee: Must notify the employer at least 30 days before the intended termination date.
     • Employer: Must notify the employee at least 60 days before the intended termination date.
2. For Contracts Without Monthly Wages (e.g., task-based pay):
   • The party wishing to terminate the contract must provide written notice at least 30 days in advance, based on a legitimate reason.

Main Points of Article 75:

• Advance Notice: The party wishing to terminate the contract must provide prior written notice.
• Legitimate Reasons for Termination: Includes economic factors (e.g., downsizing), worker negligence, or better job opportunities for the employee.
• Right to Compensation: If either party fails to adhere to the legal notice period, the affected party may claim compensation.
• Scope of Termination: The article applies to scenarios where termination occurs for legitimate reasons to ensure fairness.

Examples of Sudden Termination:

• An employer dismisses an employee without prior written notice or a clear legal reason.
• An employee resigns without providing advance written notice.

read also: Article 83 of the Saudi Labor Law: A Detailed Guide on Non-Compete Clauses and Protection of Trade Secrets

What are the rights of employers and workers when terminating a contract?

Worker Rights in Case of Contract Termination

According to Article 81 of the Saudi Labor Law, a worker may leave their job without notice while retaining all their statutory rights in any of the following situations:

1. If the employer fails to fulfill their contractual or statutory obligations toward the worker.
2. If the employer or their representative deceived the worker during the hiring process regarding the terms or conditions of employment.
3. If the employer assigns the worker, without their consent, to a task fundamentally different from the agreed work, contrary to Article 60 of the Labor Law.
4. If the employer, a family member, or a manager assaults the worker with violence or behaves immorally toward them or their family.
5. If the employer or manager treats the worker with cruelty, oppression, or insult.
6. If the workplace poses a serious danger to the worker’s safety or health, and the employer, despite knowing about it, fails to address the issue.
7. If the employer’s actions, particularly unjust treatment or contract violations, force the worker to appear as if they voluntarily ended the contract.

Filing a Complaint:

• The worker can file a complaint with the Labor Office seeking compensation for unlawful or arbitrary dismissal.
• This process involves applying Article 77 regarding unfair dismissal.

Employer Rights in Case of Contract Termination

According to Article 80, the employer may terminate the contract without notice if the worker:

1. Commits an assault on the employer, manager, or supervisor during or due to work.
2. Fails to perform essential duties under the employment contract or refuses lawful instructions or safety-related rules after a written warning.
3. Displays misconduct or dishonesty.
4. Causes deliberate financial loss to the employer, provided the incident is reported within 24 hours.
5. Engages in forgery to obtain employment.
6. Is still in the probationary period.
7. Is absent without valid reason for more than 20 days in a year or 10 consecutive days, with prior written warnings after 10 days or 5 days of absence, respectively.
8. Misuses their position for personal gains.
9. Discloses industrial or commercial secrets related to the workplace.

Right to Appeal:
The worker retains the right to contest the termination through legal channels.

Practical Tips for Employers and Workers:

1. For Employers:
   • Ensure the employment contract is drafted legally by experienced professionals, such as a labor lawyer specializing in legal consultations and labor dispute resolution.
2. For Both Parties:
   • Adhere to the written notice requirements as stipulated by law to avoid disputes.
3. For Workers:
   • Avoid actions or behaviors that may give the employer legal grounds to terminate the contract without notice, which would result in losing the right to compensation.
4. For Employers:
   • Avoid behaviors or practices that could provide workers with a legitimate reason to resign under legal grounds, ensuring a harmonious workplace.

Frequently Asked Questions:

Sources:

• The Bureau of Experts at the Council of Ministers (Labor Law)
• Ministry of Human Resources and Social Development