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COVID-19 Saudi Labor Law and Implications

April 22,2020

As Novel Coronavirus (COVID-19) continues to spread across the globe, businesses are facing disruption to workplace operations and economic uncertainty. Saudi Arabia has taken unprecedented measures to prevent the spread of the disease including mandatory work from home instructions, business shutdowns, and implementation of a 24-hour curfew in various cities and governorates throughout the Kingdom.

Following expressions of uncertainty as to what steps an employer can take to help halt the spread of COVID-19 and mitigate the economic impact of the fight against the virus while still protecting the rights of the workforce during this unprecedented time, the Ministry of Labor issued several directives, including (and perhaps most importantly) the addition of Article 41 to the Executive Regulations of the Kingdom’s Labor Law. This new article allows employers to cut the wages and hours of workers during this emergency.

Private sector companies affected by the economic impact of COVID-19 may, with the consent of their employees, cut their employees’ wages and working hours without being in violation of the law, or breach of the applicable employment contracts. This includes the reduction of the number of working hours to the number of hours actually worked, rather than the number of hours required under the terms of employment; the granting of leaves of absence equal to the current accrued (prorated) annual leave days prior to the employees’ agreed-upon vacation period; and, providing employees with unpaid leave for a period calculated as per Article 116.

Also included in the Ministry’s directives, employers that benefit from governmental support during this crisis cannot terminate employment contracts. However, workers will continue to have the right to terminate their individual contracts of employment if so desired. 

The Ministry also addressed any fears that may exist among private-sector employees, both Saudi nationals and Expats, that some immoral employers might attempt to take advantage of the COVID-19 crisis at the expense of some or all of their workforce. The Ministry states that a key purpose underlying the issuance of these directives is to maintain the rights of employees: Employees must first agree to cuts in hours and pay temporary suspensions and discharges. The expectation is that employers and employees will work together and arrive at fair deals wherein they mutually shoulder the economic burdens created by this temporary crisis. In the event they feel employers have violated their rights, employees can report any grievances stemming from such alleged abuse electronically through the Ministry's website and social media channels.

In wrongful terminations cases heard by the Labor Courts, the burden will be on the employer to show sufficient evidence that the employer exercised the options mandated in Article 41 but that such remedial measures were rejected by the employee, leaving no economically feasible option other than termination.

Other directives announced by the government to stabilize the economy in the wake of the impact of COVID-19 are:

  • The Human Resources Development Fund (HRDF) program to subsidize salaries. This program permits private sector employers to apply to the HRDF for support to pay up to 50% of the cost of salaries for their Saudi national workforce, subject to lower and upper limits on salary and with conditions applying.

  • Additional leave granted to high-risk employees such as those with autoimmune disease, cancer, respiratory illness, chronic illnesses and pregnant women or breastfeeding women, as well as employees aged 55 years and over.

  • Employees outside of the Kingdom and unable to return due to the temporary suspension of commercial flights shall be regarded as being on official leave, even if this exceeds the time of leave mandated by Saudi Labor Law.

  • Quarantined Employees (even if self-imposed) shall be regarded as being on official leave, even if this exceeds the time of leave mandated by Saudi Labor Law.

  • Unemployment program for Saudi nationals. The employer can apply to the General Organization for Social Insurance (GOSI) to cover 60% of its Saudi national employees' salaries up to a maximum of SAR 9,000 (monthly?) per employee through the SANAD program. 

  • The HDRF will allocate SAR 5.3 billion to support the private sector to employ and train Saudi nationals.

  • Exemption from the Expat Levy for those employees whose residence permit expires prior to 30 June 2020.  Their residence permits will be extended for a period of three months without charge.

  • Refund of fees for new visas that have been unused during the ban.

  • Employers may extend the Exit / Re-entry Visas that have not been used during the ban.

  • Suspension of recruitment fines during this period.

  • Temporary suspension of the wage protection system.

  • Allowing KSA nationals to immediately count towards Nitiqat.

  • Widening of the Ajeer system to apply to all sectors, enabling employees to work for other employers.

  • Any infected individual (national or foreign – including illegal residents) will be entitled to receive free medical treatment for COVID-19 at government hospitals.

From these new directives, pre-existing Labor Law and the present trend of interpretation expressed by officials tasked with enforcement, we draw the following analysis:

An employee is required to comply with employer’s reasonable instructions such as attending the workplace during the employee’s working hours and unless there is a valid basis for refusing to attend the workplace, such a refusal would likely constitute an unauthorized absence and amount to a breach of contract. Employers should take reasonable measures to provide for the health and safety of their employees. In the absence of a failure to do so or any specific health-related grounds for refusing to attend the workplace, an employer should, legally, be able to require an employee to attend the workplace (provided there is work for such employee to do). General concerns about the presence of the COVID-19 in Saudi Arabia, for example, do not seem likely to be sufficient grounds for refusing to report to one’s workplace. 

On the other hand, if the employee has a legitimate and concrete concern which directly relates to the safety of the work environment (for example, a plausibly-suspected COVID-19 case), something more specific than the general national circumstances, then an employee should expect that his or her refusal to attend the workplace can be made without incurring any consequences negatively affecting his or her employment.

If an employee contracts COVID-19 then the matter of compensation can be handled in the same manner as any other absence due to sickness. Saudi Labor Law provides that an employee is entitled to 120 calendar days of sick leave in any 12-month period. The employer must pay the employee at full pay during the first 30 days of such absence and at a rate of three-quarters pay for the following 60 days.  If the illness giving rise to the absence continues, the employee can continue to be away for up to an additional 30 days of unpaid leave.

While its more along the lines of a social observation concerning public health, rather than a legal analysis, in addition to government regulations concerning the maximum percentage of the workforce permitted to physically attend the workplace and guidelines on working remotely from home, employers may wish to err on the side of mitigating the spread of COVID-19 and deal gently with employees who want to stay at home to avoid being infected, especially if the nature of their job description permits them to work remotely and/ or if COVID-19 poses a heightened level of risk to them because of a pre-existing medical condition.

Back to the legal side of things, if the employer did not take reasonable measures to provide a safe working environment, then it is possible for an employee to claim compensation for his or her injury (illness) on this basis. However, usually, any compensation for a workplace injury is governed by regulations from the General Organization for Social Insurance (GOSI) and covered by the employer's monthly subscription or payment of contributions to cover workplace injury compensation. It remains to be seen how any claim regarding compensation for contracting COVID-19 at work would be dealt with by GOSI. 

The Saudi Labor Law (Section 8) and separate resolutions on health and safety issued by the Ministry of HR and Social Development put an obligation on an employer to provide a safe working environment. In practice, this means assessing the risks to health at the workplace taking into account the nature of an employee's role and working environment, and whether there are particular or specific hazards to the sector or operations. Considering the same, employers should take whatever measures are reasonable to mitigate the spread of the disease and keep its employees safe. They are also required to follow instructions from the competent authorities.

If an employer closes its business/work premises outright in Saudi Arabia, the employer remains obliged to continue complying with their contractual obligations to their employees even though the workplace is closed. This is because the non-performance of duties would not, in such a circumstance, be attributable to the employees. Also, there is no right to lay off employees without pay in these circumstances, and (as previously stated) any period of unpaid leave or reduction in salary would need to be agreed upon with the employees.

As the situation is evolving, the government’s guidance to employers may change. We will continue to monitor government action and provide updates. In the meantime, should you have any questions or require assistance on employment law, please feel free to contact us. We can be reached at our email info@khazindarlaw.com

The above information is for general guidance only and does not constitute legal advice.   The Law Firm of Khalil Khazindar will not be held liable or otherwise responsible for actions taken on the basis – in whole or in part – of this article.  Employers are encouraged to seek specialist legal advice.