Throughout history, the relationship between employers and workers has often been marked by imbalance, with workers facing injustices such as long hours or low pay. To address these issues, labor laws were established, ensuring fair employment terms and equality.
Saudi Arabia introduced its Labor Law in 1426 AH (2005 AD), later refining it to enhance employer-worker contracts. This article focuses on Article 74, detailing the legal grounds for contract termination and its implications for labor rights and workplace dynamics.
if you need any help contact a labor law attorney in Saudi Arabia
Contents
- 1 Article 74 of the Saudi Labor Law, According to the Latest Amendments:
- 2 Mutual Agreement (Clause 1 of Article 74):
- 3 Expiration of Contract Duration (Clause 2 of Article 74):
- 4 Termination by One Party’s Will (Clause 3 of Article 74):
- 5 Resignation (Clause 3 Repeated of Article 74):
- 6 Retirement Age (Clause 4 of Article 74):
- 7 Force Majeure (Clause 5 of Article 74):
- 8 Closure of the Establishment (Clause 6 of Article 74):
- 9 Termination of Activity (Clause 7 of Article 74):
- 10 Court Ruling (Clause 7 Repeated of Article 74):
- 11 faqs
- 12 Sources:
Article 74 of the Saudi Labor Law, According to the Latest Amendments:
- Mutual Agreement: The contract can be terminated if both parties agree, provided the worker’s consent is documented in writing.
- End of Contract Duration: If the agreed term of the contract expires, unless explicitly renewed under this law.
- Termination by One Party: In open-ended contracts, either party may terminate as per Article 75, following proper notice and valid reasons.
- Resignation: Workers may resign under the provisions outlined in the law.
- Retirement Age: Termination occurs when the worker reaches the retirement age as stipulated by social insurance regulations unless both parties agree to continue employment.
- Force Majeure: The contract ends in cases of unavoidable and unforeseen events, such as natural disasters or emergencies.
- Closure of Establishment: Termination is valid if the business shuts down permanently.
- Termination of Activity: If the specific activity the worker is employed for ceases, the contract is terminated unless agreed otherwise.
- Court Ruling: The contract ends upon a final court ruling under bankruptcy procedures governed by the Bankruptcy Law.
- Other Legal Provisions: Any additional cases specified by other laws.
Article 81 of the Saudi Labor Law: Key Provisions and Dispute Resolution
Mutual Agreement (Clause 1 of Article 74):
The first clause of Article 74 outlines that an employment contract can be terminated through mutual agreement between the employer and the worker. However, it is required that the worker’s consent be documented in writing to validate the agreement.
This ensures the worker’s voluntary participation in the decision. Any form of coercion or pressure invalidates the agreement, thereby strengthening the worker’s position and ensuring fairness in the termination process.
Expiration of Contract Duration (Clause 2 of Article 74):
The second clause of Article 74 states that an employment contract ends once the agreed duration specified within the contract expires. However, if the contract is explicitly renewed following the provisions of the Saudi Labor Law, it remains valid until the new term’s completion.
Renewal can occur through clear mutual agreement or specific clauses in the contract, such as automatic renewal unless objected to by either party. This provision ensures clarity and structure in employment relationships, reducing potential disputes over contract validity.
For any assistance with labor disputes or issues with your employer, our labor law specialists offer expert advice and support in resolving employment conflicts.
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Termination by One Party’s Will (Clause 3 of Article 74):
The third clause of Article 74 allows for the termination of an employment contract based on the will of either party. This is applicable exclusively to open-ended contracts, as specified in Article 75 of the Saudi Labor Law.
For open-ended contracts:
- If the worker is paid monthly, either party may terminate the contract, provided there is a legitimate reason.
- If the worker is not paid monthly, the terminating party must provide a written notice to the other party at least 30 days before ending the contract.
This clause ensures that contract termination respects both parties’ rights while maintaining fairness and proper communication.
Resignation (Clause 3 Repeated of Article 74):
The repeated Clause 3 of Article 74 specifies that an employment contract can be terminated by the worker through resignation. The Saudi Labor Law includes provisions that regulate the resignation process, notably Article 85, which ensures that resignation is carried out in accordance with the established rules and guidelines.
This provision empowers workers with the right to leave their employment while adhering to legal and procedural requirements.
Retirement Age (Clause 4 of Article 74):
Clause 4 of Article 74 states that an employment contract is terminated when the worker reaches the retirement age as defined by the Social Insurance Law: 60 years for men and 55 years for women.
However, the relationship can continue if both the employer and the worker agree to extend the employment beyond this age.
This clause balances legal requirements with flexibility, allowing workers and employers to mutually decide on extending the working relationship after retirement age.
Force Majeure (Clause 5 of Article 74):
Clause 5 of Article 74 provides that an employment contract can be terminated in the event of force majeure—unforeseen circumstances that make it impossible to fulfill the contract. Examples include natural disasters or wars.
For termination under this clause, the event must:
- Be beyond the scope of the agreed nature of work.
- Be unexpected and unavoidable.
This clause ensures that both parties are protected when extraordinary events disrupt the employment relationship.
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Closure of the Establishment (Clause 6 of Article 74):
Clause 6 of Article 74 specifies that an employment contract is terminated if the establishment where the worker is employed is permanently closed. The closure makes it impossible to continue the contract, as the essential basis of the agreement (the workplace) ceases to exist.
This clause safeguards both parties by addressing situations where business operations are no longer viable.
Termination of Activity (Clause 7 of Article 74):
Clause 7 of Article 74 states that an employment contract is terminated if the specific activity the worker is employed for ceases. For example, if a profession or service becomes obsolete due to technological advancements and the employer decides to discontinue that activity, the contract is considered terminated.
However, if the parties agree to an alternative arrangement, the contract may continue under the new terms.
Court Ruling (Clause 7 Repeated of Article 74):
Clause 7 (Repeated) of Article 74 specifies that an employment contract is terminated if a final decision or ruling is issued by a competent court to end the contract. This typically occurs within bankruptcy procedures as outlined in the Saudi Bankruptcy Law.
faqs
What is article 74 of the Saudi labour law?
provides clear guidelines for terminating employment contracts under specific conditions to protect both employers and employees.
Contracts can end through mutual agreement, provided the worker’s consent is documented in writing. They also terminate automatically if the specified contract duration expires, unless the contract is explicitly renewed under the law.
