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Termination of employment contracts
In general, an employer may terminate a definite-term contract prior to expiration only for a valid reason.
Article 80 of the Labour Law lists the circumstances in which an employer may terminate an employment contract without notice or an end-of-service indemnity. These are as follows:
• If, during or by reason of the work, the worker assaults the employer, the manager in-charge or any of his superiors.
• If the worker fails to perform his essential obligations arising from the work contract, or to obey legitimate orders, or if, in spite of written warnings, he/she deliberately fails to observe instructions related to the safety of work and workers as may be posted by the employer in a prominent place.
• If it is established that the worker has committed misconduct or an act infringing on honesty or integrity.
• If the worker deliberately commits any act or default with intent to cause material loss to the employer. (The employer must report this incident to the appropriate authorities within 24 hours of being aware of it.)
• If the worker resorts to forgery in order to obtain his job.
• If the worker is on probation.
• If the worker is absent without valid reason for more than 20 days in a year or for more than 10 consecutive days, provided that the dismissal is preceded by a written warning from the employer to the worker if he/she is absent for 10 days in the first case and for five days in the second.
• If the worker unlawfully takes advantage of his position for personal gain.
• If the worker discloses industrial or commercial secrets related to his work.
These contracts may also be terminated in accordance with Article 75 of the Labour Law, which says that an indefinite-term contract can be terminated by either party for a 'valid reason'. This reason is to be specified in a written notice to be presented to the other party at least 30 days prior to the termination date if the employee is paid monthly, and not less than 15 days in other cases.
A 'valid reason' is not defined by the Labour Law, and whether a valid cause for termination exists will be determined on a case-by-case basis.
If the employment contract is terminated for reasons other than those mentioned in Articles 75 or 80, the employee is entitled to claim compensation from the employer. The compensation will be assessed by the Labour Disputes Settlement Board after considering the material, moral and potential damages the employee has suffered, as well as the conditions in which the termination of employment occurred.
End-of-service benefits
The Labour Law sets out provisions concerning end-of-service benefits, to which most employees are entitled in principle unless they are dismissed for cause.
Article 84 says that when a fixed-term employment agreement comes to an end, or when an employer terminates an indefinite-term agreement other than for cause, the employee is entitled to half of one month's wages for each of the first five years of employment and a full month's wages for each year of employment thereafter, in both cases pro-rated for part of a year's service.
An employee who resigns during the term of a contract receives no end-of-service award for the first two years of employment.
This article is part of MEED magazine's Doing Business in Saudi Arabia Guide, for more information please visit MEED.com
