Job offer and compensation: A Saudi court ruling settles the debate
The Saudi Arabian Labor Court of Appeal issued a final ruling affirming a key legal principle in labor relations. The court upheld a lower court's decision to dismiss a compensation claim filed by a job candidate against a private company that had reneged on a job offer. The ruling definitively settles the debate surrounding the legal nature of a "job offer," confirming that it does not constitute a binding employment contract unless accompanied by the actual commencement of job duties.
The case stems from a lawsuit filed by an individual against a private company, seeking financial compensation based on Article 77 of the Saudi Labor Law, which governs compensation in cases of wrongful termination of employment. The plaintiff stated that the company nominated him for a position as a "Human Resources and Public Relations Specialist" and offered him a job, but then terminated the relationship before he actually began working. His claims included compensation for termination, in addition to payment for his accrued annual leave.
The legal framework for contractual relationships in the Saudi labor system
The court, at both the primary and appellate levels, based its ruling on the incompleteness of the essential elements of a legally binding contractual relationship between the two parties. Under Saudi labor law, an employment contract is defined as an agreement between an employer and an employee, whereby the employee undertakes to work under the employer's management or supervision in exchange for wages. This relationship requires three fundamental elements: work, wages, and subordination (supervision). In this case, the plaintiff failed to demonstrate that he had performed any actual work for the company, thus negating the essential element upon which the employment relationship is based. This renders the job offer merely a preliminary step that does not create full contractual obligations.
The importance of governance and its impact on the labor market
This ruling is of paramount importance as it establishes a legal precedent clarifying the fundamental difference between the negotiation and nomination phase and the actual contractual phase. Domestically, this decision protects employers from compensation claims that may arise from withdrawing job offers for various reasons before the contract is signed and the employee begins work. Conversely, it sends a message to job seekers, emphasizing the importance of not relying on verbal promises or initial offers, and ensuring that a formal employment contract is signed and that the employee begins work to guarantee their full legal rights.
This judicial approach aligns with the reforms underway in the Kingdom's legislative environment as part of Vision 2030, which aims to enhance transparency and stability in the labor market and attract investment. Regionally and internationally, this ruling provides a clear picture for foreign investors and expatriate workers regarding legal practices in Saudi Arabia, thereby strengthening confidence in the judicial system and making the business environment more predictable. This is consistent with global best practices that differentiate between a job offer and a binding contract.
In conclusion, the court ruled that a job offer does not confer upon the candidate the status of “employee” nor does it create any disciplinary rights such as end-of-service benefits or vacation pay, as long as the employment relationship has not yet commenced. The plaintiff’s objection was accepted in form but rejected on its merits, thus affirming the validity of the initial ruling and the soundness of the reasoning upon which it was based.
