Part I: The labour dispute process in the Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia (KSA) has developed a detailed and structured process for addressing labour disputes, ensuring fair treatment and resolution for both employers and employees.

This article is part of a series examining the labour dispute framework in the KSA. Part I focuses on the framework for processing labour disputes, Part II explores class action mechanisms, and Part III delves into the use of arbitration clauses within the employment framework. 

This article provides an in-depth look at the various stages of the labour dispute process in KSA, from initial settlement efforts through to court proceedings and appeals. 

Ministry of Human Resources settlement stage

Before a labour dispute can escalate to the courts, it must first be addressed by the Ministry of Human Resources and Social Development (MHRSD). This initial step is designed to resolve conflicts through mediation and negotiation:

• Filing a claim: The employee must file their claim electronically via the MHRSD's online portal. The claim is filed with the local office that has jurisdiction over the area where the workplace is located. For instance, if the workplace is in Riyadh, the claim should be filed with the Riyadh Labour Office.
• Amicable settlement department: Once the claim is filed, the Amicable Settlement Department schedules two sessions within 21 working days from the date of the first session. The goal of these sessions is to mediate between the employer and the employee to reach a mutually agreeable solution. 
• Outcome of settlement sessions: If the dispute cannot be resolved amicably within these sessions, the case is referred to the Labour Court for formal adjudication.

Referral to the Labour Court

Labour Courts in KSA were established following Royal Decree No. 20712/1439 dated 29 Rabi al Thani 1439H (16 January 2018) and became operational on 29 Safar 1440H (29 October 2018). These courts are a specialised branch of the Court of First Instance and are dedicated to handling various types of labour disputes. According to the Ministry of Justice, there are seven Labour Courts across major cities, including Riyadh, Dammam, Makkah, Jeddah, Buraydah, Madinah, and Abha, supplemented by 27 Labour Circuits in other regions and nine Appeal Circuits within six Appeal Courts.

The Labour Courts have jurisdiction over disputes such as:

• Employment contracts, wages, and associated rights
• Work injuries and compensation claims
• Disciplinary measures imposed by employers
• Termination of employment
• Complaints related to decisions by the General Organisation for Social Insurance
• Disputes under the Labour Law and Social Insurance Law

Timeframe for filing claims

Employment disputes must first be filed at the local labour office within 12 months of termination. Complaints about breaches of the Labour Law, regulations, or decisions must also be filed within 12 months of the violation. However, in practice, employees can file claims within 12 months of termination for violations that occurred during their employment.

Requirement for a Power of Attorney 

In KSA, legal proceedings often require the formal appointment of a representative through a Power of Attorney (PoA). This document must be notarised and comply with specific legal standards to be valid in court. The PoA authorises the representative to act on behalf of the individual, ensuring that legal and procedural requirements are effectively met.

Employers need an appropriate PoA for their lawyers to represent them at hearings. The Labour Courts enforce strict rules requiring a valid PoA for legal representation in labour claims. Given the international operations of many businesses, obtaining a PoA from foreign parties can take up to four weeks.

To avoid delays and ensure readiness for potential labour disputes, employers should review and update their PoAs regularly. This ensures legal representatives are authorised and prepared for any proceedings.

Labour Court proceedings

Labour Court proceedings involve several key stages and considerations:

• Language: All legal proceedings are conducted in Arabic.
• Written memos: Both the plaintiff and the defendant must submit written statements detailing their claims, defences, and supporting evidence. These documents are critical as they form the basis of the court's understanding of the dispute.
• Hearings: The court schedules hearings where both parties can present their case. Only individuals with a right of audience, such as legal representatives or the parties themselves, are allowed to attend. The hearings provide an opportunity for oral arguments and further evidence presentation.
• Rights of audience: Legal representation is not mandatory, but it is highly recommended to ensure that the case is presented effectively. The parties themselves, their lawyers, or any authorised representatives can attend and participate in the hearings.
• Duration: The Ministry of Justice mandates that labour disputes should be resolved promptly with the aim of achieving swift resolution.
• Court fees: Employees are exempt from paying court fees. Employers, however, are required to pay these fees if they initiate and lose a case, or if they lose as defendants. The court fees amount to 5 per cent of the claim, with a maximum cap of SAR 1,000,000. Filing an appeal to the Court of Appeal costs employers SAR 5,000, which is refundable if they win the appeal. Appealing to the Supreme Court costs SAR 7,000, and this fee must be paid within 30 days of filing the appeal; otherwise, the appeal will be automatically rejected. The fee is refundable if the appeal is successful. Filing a petition for reconsideration costs the employer SAR 10,000. This fee must be paid within 30 days of filing the petition; otherwise, the petition will be automatically rejected. If the employer wins the petition, the fee is refundable. 
• Costs: Where a party is successful they could apply to the Court for a costs order. Such applications are not tightly regulated and the Courts’ practice in this regard varies. 

Judgment and failure to comply

Once the Labour Court issues a final judgment, it is binding and must be complied with by the parties involved. Failure to comply with the court's judgment can result in enforcement actions. These actions may include fines, penalties, or other legal measures to ensure compliance. It is crucial for both employers and employees to adhere to the court's decisions to avoid further legal complications.

Appeal

If a party is dissatisfied with the judgment of the Labour Court, they have the right to appeal to the Court of Appeal within 30 days of the judgment being issued. The appeal process includes:

• Submission of appeal: A written brief outlining the grounds for appeal must be submitted to the court that rendered the judgment through the Court Portal, Najiz. This brief should include details about the judgment being appealed, the reasons for objection, and the appellant's claims.
• Review by Court: Upon receiving the appeal, the original court may reconsider its judgment based on the grounds for appeal. If the court decides to amend the judgment, it will notify the parties. If the court affirms its original judgment, the case is referred to the Court of Appeal.
• Finality of small claims: Certain small claims, such as those not exceeding SAR 50,000, service certificate claims, and objections to penalties imposed by the employer (except for dismissal), are considered final and cannot be appealed.

Methods of Objection to Judgments

Beyond appealing, there are other methods for objecting to judgments in KSA:

• Petition for reconsideration: Parties can request a reconsideration of a final judgment based on new evidence, fraud, or procedural errors. The petition must be filed within 30 days of discovering the grounds for reconsideration.
• Cassation: Parties can apply to the Supreme Court for a reversal of judgments and decisions rendered or affirmed by the Courts of Appeal within 30 days of the judgment being issued by the Court of Appeal. Grounds for cassation include violations of Sharia law, improper court formation, incompetence of the court, or errors in the case description.

Tips to improve chances of success

To enhance the likelihood of a favourable outcome in labour disputes, consider the following tips:

1. Draft well-written employment contracts: Ensure that employment contracts are detailed, clear, and compliant with Saudi labour laws. Well-drafted contracts can prevent misunderstandings and disputes.
2. Seek legal advice early: Engage legal counsel if it is reasonably expected that a dispute will arise or, at the latest, as soon as a dispute arises. Having little time to prepare can materially prejudice a parties’ ability to devise an appropriate strategy and successfully navigate the complexities of the legal process. Early legal intervention can help in formulating a strong case or defence.
3. Prioritise the proceedings: Whilst we appreciate that in-house human resource (HR) and legal functions are busy, it is imperative that employers prioritise the defence of the legal proceeding by providing all documents and information requested by legal counsel as soon as quickly as possible.
4. Maintain thorough documentation: Keep comprehensive records of all employment-related documents, communications, and transactions. Proper documentation can serve as critical evidence in court.
5.  Adhere to legal procedures and deadlines: Strictly follow all prescribed legal procedures and meet deadlines to avoid technical dismissals of claims or defences. This includes timely filing of claims, appeals, and other legal documents.

Conclusion

The labour dispute process in KSA is designed to facilitate fair and timely resolution of employment conflicts. By understanding and adhering to the legal requirements and procedures, and preparing thoroughly, employers will give themselves the best chance of achieving a successful outcome.