Unfair Dismissal

What is unfair dismissal?

Unfair dismissal is the termination of an employment contract by an employer without a valid legal reason or without following the prescribed legal procedures. Cases of unfair dismissal constitute a violation of the employee’s rights and run counter to the principles of justice and fairness protected by law.

Under Saudi law, as defined by the provisions of the Labor Law, unfair dismissal is the termination of an employee’s employment contract by the employer for unlawful and unjustified reasons.

Cases of Unfair Dismissal

The Saudi Labor Law lists numerous grounds for unfair dismissal, including the following:

• Without a logical reason or without providing an explanation.
• Dismissal based on discrimination, whether religious, gender-based, or ethnic.
• Termination of the employment contract due to the employee’s opinions or political or social affiliations.
• Failure to follow the specified legal procedures.
• Dismissal for filing a complaint regarding working conditions or the employer, or for asserting the employee’s legal rights.
• Termination of an employment contract due to an employee’s injury or illness, or a female employee’s pregnancy or taking maternity leave.

Can an employee be terminated without cause?

An employer is not permitted to terminate an employee without a legitimate and justified reason. Article 74 of the Saudi Labor Law specifies the circumstances under which an employment contract may be terminated, and the Civil Service Law in the government sector sets forth specific cases for the termination of employees.

However, Article 80 of the Saudi Labor Law allows an employer to dismiss an employee without severance pay, compensation, or prior notice in the following cases:

• Assaulting the employer, a manager, or a supervisor while on the job; such incidents must be reported to the appropriate authorities.
• Poor performance of required job duties, or failure to perform them, after receiving a written warning to improve performance.
• Committing offensive or disgraceful acts that violate professional integrity and honor.
• Intentionally causing harm to the company, provided that the employer notifies the competent authorities of the damage within twenty-four hours of becoming aware of the incident.
• Falsifying the papers or supporting documents on the basis of which the employee was hired.
• An employee unlawfully exploiting his or her position to obtain financial or personal gain.Disclosing industrial or commercial secrets.
• Unexcused absence for a period exceeding thirty days during the year on an intermittent basis, or more than fifteen days consecutively; the employer must issue a written warning to the employee after twenty days of absence in the first case, and ten days of absence in the second case.
• Dismissal of an employee during the probationary period, provided that the employment contract includes a clause specifying this.

What are an employee’s rights in the event of wrongful termination under Saudi law?

The Saudi Labor Law guarantees an employee’s rights in the event of unfair dismissal and provides legal avenues for filing a grievance and obtaining the compensation due, with the aim of striking a balance between the rights of employees and employers and promoting a fair work environment in the Kingdom of Saudi Arabia. The rights of an employee who has been unfairly dismissed include:

• Financial Rights: These include the employee’s right to receive any remaining wages, cash compensation for unused or accrued leave, the right to notice pay related to the termination of the employment contract—which the employer was required to provide—as well as end-of-service benefits and compensation for wrongful termination.
• Personal Rights: These include the right to receive a certificate of employment and to recover all documents and tools that were handed over to the employer.
• Right to File a Grievance: Any employee who has been unfairly dismissed from their job has the right to file a complaint against the company with the Labor Office to address the issue of their dismissal or the non-payment of their financial entitlements. If no agreement is reached within 21 days, the case is referred to the Labor Court, and the necessary procedures are taken in accordance with the Labor Law. The employee may also file a complaint directly with the labor courts to prove that the termination was unjust and to claim their rights arising from the unjust dismissal.

How are compensation payments for wrongful termination calculated?

Compensation for wrongful termination in the Kingdom of Saudi Arabia is provided in accordance with the applicable laws and regulations governing the relationship between the employer and the employee, and the employee’s entitlements are calculated as follows:

Compensation for Unfair Dismissal

Pursuant to Article 77 of the Saudi Labor Law, an employee who is unfairly dismissed is entitled to compensation calculated based on their previous salary plus their length of service, provided that the contract does not specify compensation for termination by either party for an unlawful reason. The compensation is calculated as follows:

• Fifteen days’ pay for each year of service, if the contract is indefinite.
• Wages for the remaining term of the contract, if the contract is for a fixed term.

The compensation shall not be less than two months’ wages as a minimum, and shall not exceed half a month’s wages for each year of service.

Notice of Termination

In accordance with Articles 75 and 76 of the Saudi Labor Law, the employer must notify the employee in writing of their intention to terminate the contract. If such notice is not provided, the employer is obligated to pay an amount equal to the employee’s wages for the notice period, unless the parties agree on a higher amount.

Severance Pay in the Case of Unfair Dismissal

Article 84 of the Saudi Labor Law stipulates that an employee who is unfairly dismissed is entitled to an end-of-service benefit. This benefit is calculated based on half a month’s wages for each of the first five years, and one month’s wages for each of the subsequent years, provided that the final wage serves as the basis for calculating the severance pay. The employee is entitled to severance pay for partial years in proportion to the time spent working during that period.

Remaining Financial Entitlements

Pursuant to Article 88 of the Labor Law, in the event of termination of the employment contract, the employer must pay all financial entitlements to the employee and settle the employee’s rights within a period not exceeding one week from the date of termination. Financial entitlements include outstanding wages, vacation pay, and any other compensation due. The employer may deduct any debts owed to the employer arising from the employment from the amounts due to the employee.