Tala Al-Hejailan and Ashleigh Robertson, legal consultants, DLA Piper Middle East Employment, comment on the impact of the Kingdom of Saudi Arabia’s new stricter employment laws, which have been enforced since November 3 and which further increase the need for hoteliers to prioritise Saudisation
As hotel owners and operators in the Kingdom of Saudi Arabia will be aware, in order for an expatriate employee to lawfully work in the KSA they must have an Iqama (residency permit) and a work permit issued through a sponsoring entity.
It is unlawful for an individual to work for anyone other than his sponsor, a requirement that was introduced to prevent foreigners from obtaining a work visa under one sponsor and then leaving to work for another KSA employer without transferring sponsorships first.
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In March and April 2013, the Ministry of Labour (MOL) launched a series of surprise labour inspections designed to root out unlawful working practices. The aim of these inspections was to identify companies and individuals who were employing those sponsored by other companies and thereby employing people unlawfully.
The scale of the irregularities discovered led to the declaration of an ‘amnesty’. All employers and individuals were required to correct the status of their employees or their individual status respectively (as applicable) by the expiry of the amnesty, by either ensuring that the correct sponsorship is put in place or by arranging for the individuals to be deported from the country.
The amnesty ended on November 3, 2013, after which new stricter laws are being rigorously enforced in KSA. Expatriate employees are not permitted to work part-time with another sponsor now the amnesty period is over.
However, if the paperwork of an expatriate employee was received by the last day of the amnesty but the authorities did not have time to process the paperwork, then the expatriate employee will still enjoy the amnesty period privilege.
Stricter Laws
The stricter laws include the active enforcement of amended Article 39 of the KSA Labour Law which now states:
- Employers cannot, without following the statutory rules and regulations, let a (foreign) employee go out and work for others.
- Employees cannot engage in work for another employer.
- Employers cannot employ workers who are under the sponsorship of others.
- MOL shall inspect firms and investigate the violations discovered by its inspectors, and then forward them to the MOI to take penal actions against them.
- Employers cannot let their employee engage in work for his/her own benefit and employees are not permitted to work on his/her own account.
- MOI shall arrest, deport and take punitive measures against those violators who are working for their own benefit in the streets and public squares and against those who run away (from their sponsors) as well as the employers, benefactors of such violators, those covering up on violators and transporting them, in addition to any person playing a role in such violation.
In addition, the penalties for breach of Article 39 are now incorporated in a draft law that was approved by the Shura Council ‘The Rules for Dealing with Expatriates in Violation of the Laws’ (The Rules). The Rules contain 14 articles categorising the competent authority for enforcing the penalties and the employer’s obligations. The MOI is responsible for arresting and deporting violators. Examples of violations include:
- Hiring illegal immigrants;
- Leaving the employer’s workers to work for their own account or for someone else;
- Hiring workers of others without following the statutory rules and procedures.
Passing Inspections
With the amnesty finished, the authorities have resumed company inspections without notice to check that the immigration status of the employees is correct and up to date.
The potential consequences are serious, and costly, as any employer found in violation of the labour and immigration laws will be subject to a fine of SAR 10,000 per employee employed unlawfully, and a potential jail sentence of at least two years (the maximum being five years) applies to the director / GM or whoever is found to be in charge of ensuring the employees are transferred and under the correct sponsor.
In addition, employers who have been charged with a violation of the rules may be prohibited from recruiting any further foreign employees for a maximum period of up to five years.
By imposing such severe penalties, the KSA authorities are hopeful that employers will have all of their records in order by November 3 and will continue to do so going forward.
We would suggest that all businesses who have not done so carry out routine audits of their workplace practices and compliance to ensure that on any subsequent inspection they are not at risk of sanctions being imposed on the company and its employees and officers.
For more information on the Amnesty or any other aspect of KSA Labour Law, please email tala-al-hejailan@dlapiper.com/ashleigh.robertson@dlapiper.com
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