A European technology company with a regional office in Riyadh faced a serious risk. A senior expatriate employee had been dismissed without a compliant termination procedure. The former employee filed a claim before the Saudi labour courts – and the employer had fewer than thirty days to respond before a default judgment could be entered against it.
Resolving an employment dispute in Saudi Arabia involves filing before the Mahkamah al-Umaliyyah (Labour Court). Observing mandatory conciliation steps under Saudi labour legislation. Additionally, preparing documentary evidence of compliance with dismissal notice and social security obligations. The process typically runs from three to nine months depending on complexity and whether the matter settles at the conciliation stage.
This case study traces the matter from initial claim filing through to resolution, identifying the strategic choices made, the complications encountered, and three transferable lessons for businesses managing cross-border employment disputes in the Kingdom.
Client profile and the challenge
The client was a mid-sized European technology business operating under a Saudi commercial licence. It employed a mixed workforce of Saudi nationals and expatriates across two cities.
The dispute arose from the dismissal of a senior expatriate whose employment contract had been drafted under the law of an EU member state. The contract contained no explicit reference to Saudi employment legislation. When the company terminated the relationship on performance grounds, it did not issue a compliant dismissal notice under Saudi labour law. It also failed to correctly calculate the end-of-service gratuity owed under Saudi legislation – a mandatory benefit that operates independently of any contractual terms.
The former employee claimed wrongful dismissal, unpaid gratuity, and additional compensation. The financial exposure was material. Without a coherent defence strategy. The company risked both an adverse labour court judgment and reputational damage that could affect its Nitaqat (Saudi Saudisation compliance) rating. a classification that directly governs its ability to sponsor work visas for expatriate staff.
For a full overview of the regulatory conditions governing employer obligations in the Kingdom, see our service page on employment law in Saudi Arabia.
Legal strategy: rationale and key milestones
The immediate priority was to assess the documentary record. Saudi labour legislation places the burden of proving a lawful dismissal firmly on the employer. The team conducted a rapid audit of the employment contract, internal communications, performance records, and payroll documentation.
The audit revealed three distinct problems. First, the employment contract was governed by foreign law – but Saudi courts apply Saudi labour legislation to employment relationships performed on Saudi territory, regardless of any contractual choice-of-law clause. Second, the dismissal notice period had not been observed. Third, end-of-service gratuity had been calculated on base salary alone, omitting allowances that Saudi courts routinely include in the computation.
The team adopted a two-track approach. On the first track, it prepared a formal response to the Labour Court documenting the performance grounds for dismissal. This was supported by written warnings, performance review records, and evidence that the employee had been given an opportunity to respond before the decision was taken. On the second track, the team initiated direct settlement discussions with the former employee's representative, recognising that a negotiated resolution would reduce both financial exposure and procedural delay.
The conciliation stage before the Maktab al-Amal (Labour Office) is a mandatory step under Saudi labour legislation before a case proceeds to a full court hearing. The team prepared a conciliation brief setting out a revised gratuity calculation and a partial acknowledgment of the notice period shortfall. This posture – accepting a defined financial liability while contesting the wrongful dismissal characterisation – gave the client a credible negotiating position.
A parallel corporate compliance review was conducted to address the social security registration status of the dismissed employee. Gaps in GOSI (General Organisation for Social Insurance) contributions, if identified by the court, would have added a separate administrative liability. The review confirmed that contributions had been correctly remitted, removing that exposure from the dispute.
For matters where employment disputes intersect with corporate licensing and commercial registration obligations in Saudi Arabia, our team also advises on corporate law in Saudi Arabia.
Complications and how they were addressed
Three complications arose during the process.
The first was jurisdictional. The employment contract designated a European court as the competent forum. Saudi labour courts declined to acknowledge this clause. The court applied Saudi labour legislation as the mandatory applicable law – a position consistent with how courts in high-growth markets across the region handle territorially performed employment relationships. The lesson here is that a foreign-law clause in an employment contract does not operate as a shield in Saudi proceedings.
The second complication was evidentiary. Several key performance documents existed only in English. Saudi courts conduct proceedings in Arabic. The team arranged certified translation of all documents and ensured that translated versions were filed within the court's prescribed deadlines. Delays in translation are among the most common procedural errors in cross-border employment disputes – and they can result in documents being excluded from the record entirely.
The third complication involved the collective agreement question. The former employee's representatives argued that an internal company policy document – distributed to staff globally – constituted a form of collective agreement imposing enhanced termination obligations. Saudi labour legislation does not recognise collective agreements in the same manner as most European systems. However, the policy document had been incorporated by reference into the Saudi employment contract. The court considered it as a contractual term rather than a collective instrument – an outcome that narrowed but did not eliminate its relevance.
Matters of this nature that involve parallel proceedings in more than one jurisdiction benefit from coordinated cross-border strategy. A comparable resolution approach in a neighbouring jurisdiction is illustrated in our employment dispute case study for the UAE.
To receive an expert assessment of your employment dispute exposure in Saudi Arabia, contact us at info@ferrazwhitmore.com.
Transferable lessons for cross-border employment matters
Three lessons from this matter apply directly to businesses managing employment relationships across the region.
Draft employment contracts with Saudi mandatory provisions in mind. Any employment relationship performed in Saudi Arabia is governed by Saudi labour legislation – including dismissal notice periods, end-of-service gratuity, and social security contributions. A contract drafted under foreign law will be supplemented or overridden by Saudi mandatory rules. Employers who discover this only at the point of a claim face both financial and procedural disadvantage. Contracts should be reviewed and localised before employment begins, not after it ends.
Maintain contemporaneous performance documentation. Saudi labour courts require the employer to demonstrate that a dismissal was justified at the time it was made. Retrospective justifications – assembled after a claim is filed – carry significantly less weight than records created during the employment relationship. Written warnings, documented performance reviews, and evidence of the employee's right of response are the core components of a defensible dismissal record.
Address social security and gratuity calculations proactively. GOSI contribution gaps and incorrect gratuity calculations are frequent sources of additional liability in Saudi employment disputes. Both are verifiable from payroll records. An internal audit conducted before any termination – or at the earliest stage of a dispute – can identify and correct these exposures before they are raised by the opposing party or the court. Acting early narrows the financial risk and strengthens the employer's overall position in any settlement discussion.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in employment law, corporate compliance, and dispute resolution. Our employment law practice covers matters across the Middle East, Asia-Pacific, and CIS regions, supported by a network of local counsel with direct experience before labour courts and regulatory bodies in those jurisdictions. We work with international companies, institutional investors, and in-house legal teams who require results-oriented counsel when employment disputes arise across multiple legal systems. The firm's Lisbon base provides direct access to EU regulatory standards, while our common law expertise supports enforcement and strategy in English-speaking and common-law-influenced jurisdictions. To discuss your employment matter in Saudi Arabia or across the region, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.