Saudi Arabia: The New Implementing Regulations To The Saudi Arabian Labor Law

By way of Ministerial Decision No. 1982 dated 6 April 2016,¹ the Saudi Arabian Ministry of Labor issued new implementing regulations (the "New Implementing Regulations") to the Labor Law.² The New Implementing Regulations became enforceable immediately upon their publication in the 22 April 2016 Official Gazette³ and superseded the implementing regulations that had been issued pursuant to Ministerial Resolutions No. 1/693 dated 19 March 2007 and No. 1998/1/1 dated 1 June 2011.

The provisions of the New Implementing Regulations introduce valuable clarifications to the Labor Law, as well as new rules and a more elaborate framework governing labor relations. This Article describes the main highlights of the reform.

1. INCIDENTAL AND TEMPORARY WORKERS

The Labor Law subjects incidental and temporary contracts only to some provisions governing regular full-time contracts. The New Implementing Regulations state that any incidental or temporary employment relationship would be considered as a regular employment agreement if it continues beyond 90 days. This characterization may entitle incidental or temporary workers employed for more than 90 days to such things as end-of-service benefits.

2. INTERNAL WORK POLICY

The Labor Law requires employers to have in place an internal work policy governing all work-related matters.  This policy must set out the rights and obligations of employees, including the disciplinary sanctions applicable for breach of their obligations. The Labor Law requires the Ministry of Labor to prepare a model internal work policy containing the content that must be included.

The New Implementing Regulations are accompanied with such a model. Employers are required to ensure compliance with the model policy and adapt their existing internal work policies to it by no later than 16 October 2016 (i.e., the date falling six Hijri months from the publication of the New Implementing Regulations in the Official Gazette). Employers must ensure that revisions to existing policies do not affect previously extended worker rights.

3. ON SITE REGISTERS

The New Implementing Regulations now require employers to keep various registers on site, including:

• A register listing all workers, their job titles, ages, nationalities and identification card numbers;
• A register specifying the salaries of all workers, disbursement dates and any applicable deductions;
• A register specifying sanctions applied against workers and describing the context surrounding each incident;
• A register specifying the time of arrival to, and departure from, work;
• A register specifying all training extended to Saudi nationals;
• A register containing the medical examination results for workers working in hazardous environments; and
• A file for each employee containing a copy of his employment contract and all copies of certificates and information presented to the employer.

4. PASSPORT CUSTODY

The New Implementing Regulations prohibit employers from retaining the passports of their workers, except at their own request and subject to the signing of a passport receipt form in Arabic and in the worker's language.

5. GOVERNMENT-RUN AND PRIVATE-RUN RECRUITMENT CENTERS

The Ministry of Labor committed in the New Implementing Regulations to cooperate with the Human Resources Development Fund in order to improve the employability of Saudi nationals. To achieve this, government-run recruitment centers – tasked with the recruitment and training of Saudi nationals to  replace expatriates – will be set up.

As for private-run recruitment centers, the New Implementing Regulations have incorporated prerequisites and rules for the provision of professional recruitment services.

6. DISABLED WORKERS

The Labor Law requires employers with 25 or more workers to employ a number of disabled workers equivalent to 4% or more of the total workforce. The Labor Law however did not define what constitutes a disability for the purposes of that requirement. The New Implementing Regulations now defines disabled persons as any person holding a certificate to this effect from a local governmental hospital or from the Ministry of Social Affairs.

The New Implementing Regulations set out measures that employers must implement for the employment of workers with specific types of disabilities (e.g., movement-related, visual and/or auditory impairments, mental handicaps). These include, for instance, the obligation to  adapt building access and facilities in compliance with relevant architectural requirements set out in the Saudi Building Code.⁴ .

7. SAUDIZATION AND SAUDIZED POSITIONS

The New Implementing Regulations re-emphasize the importance of Saudization. They have, for instance, elaborated on the methods that employers should employ to strengthen the capabilities of their Saudi workforce so as to gradually reduce dependency on foreign workers. As required by the Labor Law, employers with 50 workers or more must train a number of Saudi workers equivalent to 12% or more of their total workforce. The New Implementing Regulations require employers to put in place a register of training programs offered to Saudi workers, as well as a register of Saudi workers who have taken over positions previously-occupied by expatriates. An annual report must also be submitted to the Labor office.

The New Implementing Regulations enumerate cases where employers would be allowed to recover from workers the cost of the training they received. These cases include the premature termination of the training program by the worker, the termination by the employer of the employment contract for grave cause prior to the period agreed-upon with the worker, the resignation of the worker without grave cause prior to the period agreed upon with the employer.

The New Implementing Regulations have listed 18 positions that may only be occupied by Saudi nationals. These are as follows:

The New Implementing Regulations also requires that:

• female make-up and accessories stores only be employed by Saudi females; and
• workers engaged in the sale, repair of mobile telephones and mobile telephone accessories consist only of Saudi nationals.

8. EXPATRIATE WORKERS

The Labor Law and the Residency Law prohibit expatriate workers from working for anyone other than their sponsoring employer. The New Implementing Regulations restate and emphasize this.

The New Implementing Regulations clarify that employment contracts made with non-Saudis must always specify a term.  If unspecified, the term of a contract made with a non-Saudi will be deemed to be equivalent to the duration of the worker's work license.

Further, the New Implementing Regulations state that, subject to any rule to the contrary under the 'Nitaqat' Saudization program⁵, the possibility to transfer the sponsorship of a non-Saudi worker to another employer is not tied to the duration of the worker's service with the previous employer. Likewise, the sponsorship of non-Saudi workers cannot be transferred to employers who employ any non-Saudi workers with expired work and/or residency permits or to employers who are late in the payment of wages or those who have engaged in cover-up arrangements in violation of the Foreign Investment Law.⁶

The New Implementing Regulations also allow the transfer of the sponsorship of a non-Saudi employee without the approval of his current sponsor/employer if, amongst other events:

• the employer has failed to renew the worker's residency permit;
• the worker's wages have not been paid for three consecutive months and at any time during the Hijri year that follows the due date of the third month of delay; or
• the worker has denounced a commercial cover-up activity involving the employer, with evidence to this effect and without involvement on his part.

The Minister of Labor may also authorize such a transfer in the event of a dispute between the worker and his sponsor/employer before judicial authorities and: (a) it is revealed that the employer (but not the employee) is unduly attempting to prolong such dispute. Indicators of such an intention include the unjustified absence of the employer (or his representative) at two or more hearings before the same judicial level, or (b) the judicial authority recommends the sponsorship transfer in order to avoid that the worker suffers any harm.

9. EMPLOYMENT CONTRACTS

The New Implementing Regulations include a standard form employment contract and have marked those principles in it that are compulsory and must be replicated in any employment contract.

10. OVERTIME WORK

The New Implementing Regulations state that, generally, workers cannot be required to work overtime in excess of 720 hours per year, except with their consent.

In respect of janitors, the New Implementing Regulations restricts their employment for periods exceeding six continuous hours. It is not possible to employ janitors or guards (excluding civil guards) for more than 12 hours a day or 48 hours a week. Work hours during Ramadan are reduced to 10 hours a day or 36 hours a week.

For those with intermittent work duties such as mechanics, technicians, freight workers and gas station workers, their daily working hours are limited to 10 (eight during Ramadan) while their weekly work hours are limited to 48 (36 during Ramadan). Workers with intermittent work duties shall be entitled to at least 10 hours of continuous rest during any 24-hour periods.

It is possible to require workers to perform up to 15 minutes of preparatory work and another 15 minutes of supplemental work a day without having to count such time within the limitations on daily work hours.

11. HOLIDAYS AND VACATIONS

The New Implementing Regulations stipulate that the holidays to which workers are entitled by law are as follows:

• Eid Al Fitr Holiday: 4 days starting from the day which follows the 29th of Ramadan (as per the Umm AL Qura calendar);
• Eid Al Adha: 4 days starting from the day of Arafat; and
• The national day, which falls on the first day of the Al Mizan horoscope (as per the Umm AL Qura calendar). Where the national day coincides with either the Eid Al Fitr or the Eid Al-Adha holiday, workers shall not be entitled to an additional day of holiday.

Should the above holidays coincide with a weekend or an annual vacation, workers are entitled to recover the days which coincided.

The Labor Law allowed workers to take unpaid leave with the employer's approval. If her/his unpaid leave exceeds 20 days, the employment contract would be deemed suspended. The New Implementing Regulations now clarify that if unpaid leave is taken in the context of a fixed term employment contract, the term of the contract is extended by the number of days of unpaid leave taken.

The New Implementing Regulations also provide that, if a worker's sick vacation coincides with her/his annual vacation, her/his annual vacation shall be suspended until the completion of that worker's sick vacation. Weekends however cannot be compensated if a worker falls ill during them.

12. PART-TIME WORK

The New Implementing Regulations require that part-time work contracts be made in writing. They must mention the number of work hours, which must not exceed half the employer's regular work-hours.

13. WORK SAFETY

The New Implementing Regulations sets out the process through which the Labor Office must be notified of work injuries. It also explains that the Labor Office will determine the compensation that is owed to the worker based on a medical report specifying the degree of invalidity.

As required by the Labor Law, the New Implementing Regulations specify the minimum content to be contained in medical first-aid kits.

14. REMOTE LOCATIONS

The Labor Law stipulated certain obligations binding employers operating in remote locations but left it for the New Implementing Regulations to define what characterizes as location as 'remote'.

The New Implementing Regulations complete the Labor Law by defining remote areas as:

• regions which are located 50 kilometers from populated areas, in case of the existence of a connecting roadway;
• regions which are located 25 kilometers from populated areas, in case of the inexistence of a connecting roadway; or
• populated areas with no infrastructure or services.

Amongst other obligations applicable in remote locations are the obligations to provide stores for the sale of clothing and food and the provision of entertainment facilities (e.g., sports facilities), schools for workers' children if neighboring schooling facilities are insufficient, and prayer areas.

15. EMPLOYMENT OF YOUTH

The New Implementing Regulations prohibit the employment of youth between 15 and 18 years of age in fields that expose their health, safety, or even behavioral manners to harm, such as:

• Work in mines, quarries, or the extraction of metallic materials from the ground;
• Industries posing health hazards;
• Strenuous activities; or
• Activities which involve bodily risks, such as those involving sharp cutting equipment.

The New Implementing Regulations prohibit the employment of youth under 15 years of age, except within the context of authorized and closely supervised educational or training programs. These programs, of course, must not involve any of the above-mentioned hazards, and they must also be adapted to each child or teenager and must be disseminated with gradually increasing difficulty levels.

The New Implementing Regulations authorize the employment of youth during night time in any of the following circumstances:

• the work establishment is confined to family members;
• the work is performed in the context of professional schools or training centers;
• the work is performed in bakeries, except during the period running between 9pm and 4am; or
• The work is incidentally performed due to force majeure events or emergency.

16. VIOLATIONS AND SANCTIONS

The New Implementing Regulations require the creation of a Committee for the Imposition of Sanctions for Work Violations in each administrative region. The Committee must adhere to the schedule of sanctions issued by Ministerial Decision No. 4786 dated 11 October 2015. Violations that are subject to severe sanctions must be referred to the competent court.

The New Implementing Regulations order the formation of another committee for the assessment of appeals against, or requests for the settlement of, administrative decisions relating to the violation of the Labor Law. Appeals, or "objections", against administrative decisions can be made within 60 days of the date on which the administrative decision was notified to the individual concerned. However, appeals do not suspend the enforceability of the administrative decision.

Settlement requests may also be presented, provided that:

• The penalties applied are in excess of SR 100,000;
• An order was made for the closure of the establishment;
• The violation was not repeated more than three times over the course of the two years preceding the imposition of the sanction, and provided further that no settlement was concluded in respect of the previous violations;
• No objection was previously made against the administrative decision in question (or otherwise against the court decision);
• The request is submitted within 5 days of the date on which the administrative decision (or otherwise the court decision) was notified to the individual concerned;
• The person against whom the decision is made must demonstrate that she or he has taken steps towards the remediation of the situation in respect of which the sanction applies.

If a settlement is reached, a proposal is made to the Minister of Labor for his decision. In case that settlement proposal is approved, the settlement must be implemented by the person concerned within 15 days, otherwise the settlement shall be considered as void.

Fines must be paid within 15 days of the date on their notification. The Minister of Labor may interrupt services extended to employers for failure to pay fines on time (e.g., the recruitment or the renewal of the work permits of expatriate workers).

17. CONCLUSION

The New Implementing Regulations come as a welcomed step towards the development and elucidation of the legal framework governing work relationships. It is not expected that employers and workers will confront difficulties in ensuring compliance with them.

Footnotes

^{1 See http://portal.mol.gov.sa/ar/MolLists/Pages/default.aspx?m=3}

^{2 Enacted pursuant to Royal Decree No. M/51 dated 27 September 2005, as amended pursuant to Royal Decree No. M/24 dated 24 March 2013, and as amended pursuant to Royal Decree No. M/46 dated 25 March 2015.}

^{3 Edition 4615/Year 95, pp. 10-32.}

^{4 See http://www.sbc.gov.sa/books.php}

^{5 See http://www.emol.gov.sa/nitaqat/nitaqat.pdf}

^{6 See the Foreign Investment Law, issued by way of Royal Decree No. M/1 dated 10 April 2000. See also the Anti-Cover-Up Law, issued by way of Royal Decree No. M/22 dated 22 June 2004.}

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