Introduction
The issue of unlawful termination carries particular significance considering the Saudi Labor Law’s emphasis on balancing workers’ rights and employers’ obligations.
Unlawful termination undermines employee stability and erodes trust in the workplace, while also imposing legal burdens on the enterprise. Therefore, it is essential to understand the concept of unlawful termination, define it accurately, and examine the guarantees provided by the Saudi legal system to protect employees, as well as the legal, psychological, and financial consequences that may arise.
Unlawful termination refers to the termination of an employment contract by the employer without a legitimate legal reason or without following the prescribed procedures, which violates labor law provisions and triggers rights for the employee. Experts define it as termination “for illegitimate and unjustified reasons”, meaning without any legally recognized motive.
Its severity lies in the fact that it constitutes a violation of employee rights and establishes the employer’s liability for compensation.
Definition of Unlawful Termination under the Saudi Labor Law
According to the Saudi Labor Law, unlawful termination occurs when an employer terminates an employment contract without a legitimate reason and without adhering to any of the lawful termination grounds stipulated in the law.
>The preamble of the Labor Law stipulates that the termination of an employment contract must comply with specific provisions; thus, any termination outside these provisions is considered unlawful. Accordingly, unlawful termination constitutes a violation of the employee’s rights and breaches the principle of fairness enshrined in the law governing employment relationships.
Conditions That Render Termination Unlawful
Unlawful termination arises primarily when the employer terminates a contract outside the scope of legitimate reasons and procedures. The Labor Law enumerates acceptable termination cases exclusively in specific provisions
(e.g., Article 74 concerning contract expiry or mutual consent,
Article 80 allowing termination without compensation in certain ethical or serious performance cases,
And Article 81 granting the employee the right to terminate for specific reasons without compensation).
Accordingly, if the termination is not based on any of these legal cases, but rather executed unilaterally by the employer without legitimate cause, it is considered unlawful. Additionally, any termination that violates the contract duration or notice period (Articles 75 and 76) is deemed unlawful if the agreed notice period is not respected.
In short, termination is considered unlawful if it does not rely on a reason documented in the law or in the contract provisions (even if the contract cannot contravene the law). In such cases, the law obliges the employer to pay compensation to the employee.
Employee Protection Against Unlawful Termination (Relevant Provisions)
The Saudi Labor Law explicitly protects employees from unlawful termination through several provisions:
- Article 77 of the Labor Law: provides the right to compensation for the affected party (whether the employee or employer) if the contract is terminated “for an illegitimate reason.”
Accordingly, the employer must pay financial compensation to an employee who has been unlawfully terminated.
- Article 64 of the Labor Law: obliges the employer to provide the employee with a service certificate upon the termination of employment, detailing the start and end dates and the last salary, without including any offensive or defamatory remarks.
The law also requires the return of all documents or certificates provided by the employee upon termination.
- Right to legal appeal: the law allows the affected employee to file a complaint with the Ministry of Human Resources or the Labor Office promptly, and if amicable resolution fails, the case can be referred to the Labor Court.
This provides a legal framework for challenging unlawful termination and claiming entitlements, thereby safeguarding employee rights.
- Other statutory entitlements: the law preserves all financial rights of employees terminated unlawfully, such as unpaid wages, unused vacation allowances, and other statutory benefits (Articles 75–76, 88, etc.).
The law requires that all employee entitlements be settled within one week from the termination date.
Compensation and Labor Procedures
In the event of unlawful termination, the legal consequences are clear:
- Financial compensation: the employer is obliged to pay financial compensation to the unlawfully terminated employee based on their last wage and length of service.
According to Article 77, compensation is calculated as follows: “fifteen days’ wage for each year of service for indefinite-term contracts, or the wage for the remaining period of the contract for fixed-term contracts.
Provided that the total compensation does not fall below two months’ salary.”
This legal framework ensures the employee receives compensation proportional to the harm suffered from the termination.
- Notice period compensation: if the employer terminates the contract without prior notice or before the agreed notice period expires.
They must compensate the employee an amount equivalent to the remaining notice period.
- End-of-service benefits: the employee retains all financial entitlements, such as end-of-service benefits and earned wages for completed workdays in the event of unlawful termination.
The employee remains entitled to full end-of-service benefits according to Article 84.
- Litigation procedures: the affected employee must document the termination (e.g., termination letter or email from the employer) and submit a complaint to the Labor Office within two weeks of termination.
The Labor Office investigates and attempts reconciliation; if unsuccessful within 21 days, the case is referred to the Labor Court,
which examines the legality of the termination and calculates the compensation due.
In light of the above, unlawful termination triggers financial compensation for the employee in addition to other entitlements, such as wages for completed workdays and remaining leave.
The law also reminds employers to issue a service certificate without prejudice to the employee, and the employee benefits from social protection through the “SANED” unemployment insurance system (for Saudi employees), mitigating the impact of involuntary job loss.
Negative Impact on the Employee – Psychological and Financial
Psychological impact: unlawful termination imposes significant psychological stress on the employee, often causing shock, anxiety, and fear of the future.
The abrupt loss of employment undermines income stability and professional security, potentially leading to decreased self-confidence, depression, and chronic stress.
Especially if alternatives are not readily available or if the employee loses the opportunity to continue after demonstrating competence.
Financial impact: unlawful termination creates immediate financial challenges for the employee and their family, as they lose steady income and face financial obligations (loans, rent, family responsibilities).
They also incur additional costs searching for new employment, and their competitiveness in the labor market may decline due to the employment gap.
Consequently, unlawful termination undermines professional and social stability and can adversely affect the employee’s physical health due to living pressures.
Associated effects: moreover, employees may feel wronged and frustrated when terminated without committing any serious misconduct. This state of frustration diminishes morale and may spill over into family life (e.g., household tension due to lost income).
Highlighting the importance of clear legal provisions that facilitate proof of unjust termination and timely compensation.
Negative Impact on the Employer – Reputation and Legal Liability
Employers also bear legal and financial consequences arising from unlawful termination. Legally, they may face substantial compensation payments, lawsuits, and negotiation or settlement costs.
Recurrent or widespread unlawful terminations within an organization undermine its professional reputation.
Making it harder to attract or retain skilled employees.
Unlawful termination may also affect the company’s classification in Saudization programs if Saudi employees are involved,
increasing legal and social responsibility.
It negatively affects internal work environments, as remaining employees may feel insecure and dissatisfied,
potentially reducing productivity due to fear for their positions.
By bypassing legal procedures, the employer exposes the organization to reputational damage before the public.
And relevant authorities, potentially incurring fines or obligations to rectify violations.
In addition to wasting costs associated with hiring and training replacements for unlawfully terminated employees.
Importance of Documenting Contracts and HR Policies
The Labor Law emphasizes documenting employment relationships in writing to prove rights and obligations. Article 51 requires the employment contract to be issued in duplicate, with each party retaining a copy, containing essential clauses.
If the contract is not written, the law preserves the employee’s right to prove the contract and all entitlements through evidence (emails, attendance records, etc.).
Employers are advised to establish clear internal policies (shifts, discipline, termination procedures)
to ensure any termination is justified and documented (written warnings, performance reports).
A well-documented HR policy and internal regulations help prevent disputes and provide certainty when applying procedures. Ultimately, documenting contracts and preventive policies is a key tool for proving rights in case of a dispute over termination.
Practical Recommendations
For employees:
- Ensure signing a documented (written) employment contract and keep a copy, paying attention to termination and benefits clauses.
- Record any communications or warnings regarding performance or interactions with management, as these are crucial evidence for proving termination.
- If you believe your termination was unlawful, consult HR and official authorities promptly.
The legal window to file a complaint with the Labor Office is short.
- Request a service certificate upon contract termination and review it carefully to ensure no statements negatively affect your reputation.
For employers:
- Always adhere to lawful reasons for termination outlined in the Labor Law (Articles 74, 80, 81).
- Do not terminate except in authorized cases, and document them in writing (e.g., written warnings, urgent reports of violations).
- Comply with notice period procedures under Articles 75–76, and pay notice compensation if unable to provide notice, in addition to termination compensation if applicable.
- Develop clear policies (welcome letters, job requirements) and communicate them to employees,
including safety and conduct rules. This prevents disputes over “seriousness” of violations and ensures a safe work environment.
- Consult a legal or administrative advisor before terminating any employee unlawfully,
as neglecting this may result in substantial compensation costs and harm the organization’s reputation.
By following these procedures and strictly adhering to the Saudi Labor Law, disputes related to termination can be minimized, ensuring a fair.
Conclusion
Ultimately, adherence to the law and protection of employees from unlawful termination are key factors in ensuring the stability
ِِAnd success of the work environment, while mitigating legal and financial risks for employers.
Here, the pivotal role of Al-Mashora Law Firm emerges, as it provides comprehensive legal expertise,
including drafting and reviewing employment contracts, implementing HR policies.
And managing labor disputes to safeguard employee rights while protecting the interests of the enterprise, whether before labor courts or various arbitration authorities.
Rely on Al-Mashora to ensure the management of employment contracts and workplace relationships is clear, fair, and secure.
Fostering success and stability in the thriving Saudi business environment.