KSA Ministry of Human Resources & Social Development issues Explanatory Note for Force Majeure Measures taken in response to the Coronavirus pandemic
As part of its role to provide support for the efforts of the Kingdom of Saudi Arabia’s government to control the implications of the new Coronavirus, the Ministry of Human Resources and Social Development has issued a decision to regulate the contractual relationship between employees and employers in these special circumstances.
According to the decision, once the government has taken measures to tackle a certain case or circumstance necessitating reducing the working hours, or taking precautionary measures to limit the aggravation of that case or situation, described as "force majeure", in paragraph 5 of Article 74 of the labour law, the Ministry allows the employer to, first of all, agree with the employee, within the six months following the start of the enforcement of these procedures, on either reducing the employee’s wage to adjust with the actual work hours, or granting the employee a local leave to be deducted from his/her deserved annual vacation, or granting him/her an exceptional leave, according to Article 116 of the labour law. However, following this, the termination of his/her work contract is not legitimate once it became evident that the employer has benefited from any government subsidy to deal with this situation. In addition to that, the employee will have the right to terminate his/her work contract.
The Ministry also allows a temporary benefit from the services of off-labour-market expatriates through the "Ajeer" portal as an alternative to recruiting from abroad, as the Ministry aims through this decision to protect workers during such circumstances from being terminated or losing their contractual benefits. The portal will soon offer the businesses to publish names of their excess workers.
Article 41 -Applicability
Article 41 has been introduced with the intention of dealing with the impact of the coronavirus pandemic but its application is much wider in scope and can be invoked whenever there are exceptional circumstances that may be described as a force majeure event. The Explanatory Note defines a force majeure event as any event that can neither be predictable or escapable in response to which the state adopts procedures that require minimising working hours or where it takes precautionary measures to limit the exacerbation of the force majeure event. Article 41 will apply and be effective for as long as the force majeure event exists. Employers will, therefore, be able to apply the measures set out in Article 41 (as explained further below) within a six-month period following the measures taken by the state to deal with the force majeure event. When it ceases to exist then Article 41 and any measures taken in reliance upon it will also cease and the parties to the employment contract will return to their positions that existed prior to the force majeure event.
What measures an employer can take?
1 - Wage reduction
Paragraph 1 A of Article 41 stipulates that employers can reduce the wages of employees commensurate to a reduction in their working hours. The Explanatory Note clarifies that employers can unilaterally impose a wage reduction without an employee’s consent provided that such wage reduction does not exceed 40 per cent (and any reduction must be in line with a corresponding reduction in working hours).
2 - Setting annual leave
Paragraph 1 B of Article 41 stipulates that employers have the right to grant annual leave to employees. The Explanatory Note clarifies that employees cannot refuse to take leave once leave dates are set by the employer. Further, annual leave must be paid at the rate of the employee’s actual wage before any reductions were applied in response to the force majeure event.
3 - Granting unpaid leave
Paragraph 1 C of Article 41 stipulates that an employer may agree a period of unpaid leave with the employee. The Explanatory Note describes this as exceptional leave and, unlike with the measures relating to reduction in wages or taking of annual leave, states that the employee must agree to take a period of unpaid leave in accordance with Article 116 of the Labour Law
Terminating for Force Majeure reasons
The Explanatory Note now clarifies that the employer has a right to terminate employment in a force majeure case if it satisfies the following three conditions:
1 - A period of six months should have lapsed following the actions taken to counter the force majeure event that resulted in a reduction in working hours or a cessation of work for a period.
2 - The employer should have applied one or more of the measures available under Article 41 such as reducing wages, imposing annual leave or granting unpaid leave; and
3 - The employer should not benefit from any state subsidy provided to counter the force majeure event.
If an employer fails to comply with the requirements of Article 41!
Although this article has strengthened the hand of employers to impose measures on employees but with some limitations. However, it has not dispelled all of the questions that arose following the introduction of Article 41 and there is still no certainty as to what extent employers are restrained from terminating employment where they have received state support for the force majeure event. A failure to comply with the requirements of Article 41 will expose employers to a penalty fine of SAR 10,000 per violation and employees, and risk claims being brought in the Labour Court.
Composed By : Sheher Bano