In a landmark ruling that reinforces the legal principles governing the Saudi labor market, the Labor Court of Appeal issued a final judgment upholding the lower court's decision to dismiss a compensation claim filed by a job applicant against a private company. The applicant had filed the claim after the company reneged on its promise to hire him despite having presented him with a job offer. The ruling affirmed that a contractual relationship is not established merely by a job offer, but is only complete when the employee actually begins performing his duties.
The case stems from a lawsuit filed by an individual against a private sector company, seeking financial compensation after the company reneged on its decision to hire him as a "Human Resources and Public Relations Specialist." The plaintiff based his claim on the existence of a job offer and a fixed-term contract, arguing that the company's reversal constituted an unlawful termination of the contractual relationship. He sought compensation under Article (77) of the Saudi Labor Law, in addition to compensation for his accrued vacation days.
Legal context: The difference between a promise to contract and a binding contract
This ruling comes within the framework of Saudi Arabia's efforts to regulate the labor market and clarify the rights and obligations of both employers and employees, in line with the goals of Vision 2030. The Saudi labor system has undergone successive updates to ensure transparency and fairness. Labor courts, which officially began operating in 2018, are a cornerstone of this framework, specializing in adjudicating all disputes related to employment contracts, wages, and the rights of both parties.
The system clearly distinguishes between the negotiation and contractual promise phase (represented by the job offer) and a fully-fledged contract. The job offer is a preliminary step expressing the employer's intention to hire, but it does not constitute a legally binding contract that creates all legal obligations, which only begin when the employee starts working and is registered with relevant government systems such as social security.
The importance of governance and its impact on the labor market
This court ruling carries significant weight locally, as it sets a clear precedent for similar disputes and provides a distinct legal framework. For employers, the ruling affirms their right to withdraw from hiring during the preliminary stage without incurring financial penalties, as long as the actual employment relationship has not yet commenced. For job seekers, it serves as a reminder of the importance of not making critical decisions, such as resigning from a current job, before signing a final contract and officially starting work.
At the regional and international levels, this ruling enhances the transparency of the Kingdom's labor market regulations, thereby increasing its attractiveness to foreign investment and global talent. The clarity of legal rules gives international investors and companies greater confidence in engaging with the Saudi labor market. The court based its decision on the incompleteness of the contractual relationship, as the plaintiff failed to provide any evidence of his actual work performance, thus negating his right to claim any compensation related to termination of service or allowances stipulated in the legally valid and enforceable contracts. Accordingly, the plaintiff's objection was accepted in form but rejected on its merits, upholding the initial ruling that dismissed the case.
