Article 18 Saudi Labor Law is a key provision designed to safeguard employees’ rights during major business transitions such as mergers, acquisitions, or changes in legal structure. It guarantees that employment contracts remain valid and uninterrupted even when company ownership changes, ensuring workers do not lose their tenure or benefits.
By clearly defining the responsibilities of both the former and new employer, Article 18 builds trust and stability in the labor market, protects employee entitlements, and creates a transparent framework for business restructuring and ownership transfer in Saudi Arabia.
المحتويات
- 1 What Is The Article 18 Saudi Labor Law?
- 2 What is The Importance of Article 18 Saudi Labor Law?
- 3 Conclusion
- 4 FAQ:
- 4.1 What is Article 18 of the Saudi Labor Law?
- 4.2 How does Article 18 apply to employment contracts?
- 4.3 What are the main provisions covered under Article 18?
- 4.4 Does Article 18 deal with employee transfers or seniority rights?
- 4.5 How does Article 18 affect end of service benefits in Saudi Arabia?
- 4.6 Is Article 18 applicable to both Saudi and expatriate employees?
- 4.7 How is Article 18 interpreted in labor disputes?
- 4.8 What is the relationship between Article 18 and other provisions of the Saudi Labor Law?
- 4.9 Has Article 18 been amended in recent updates to the Labor Law?
What Is The Article 18 Saudi Labor Law?
In the event that the ownership of an establishment is transferred to a new owner or its legal form changes whether through merger, division, or any similar procedure all employment contracts shall remain valid and enforceable, and the employees’ service shall be deemed continuous without interruption.
All employee rights accrued prior to the transfer of ownership, such as unpaid wages, end-of-service benefits, and other financial entitlements, shall remain a joint and several liability of both the previous and the new owner. Employees may claim these rights from either party.
In the case of transferring the ownership of sole proprietorships for any reason, the previous and new owner may agree to transfer all existing employee rights to the new owner, provided that the employee gives explicit written consent. If the employee refuses to consent, they shall have the right to terminate the employment contract and claim all dues directly from the previous owner.
Read also: A Complete Guide to Article 107 Saudi Labor Law
What is The Importance of Article 18 Saudi Labor Law?
Protecting Employee Rights During Ownership Transfer
Article 18 ensures that employees’ acquired rights — such as unpaid wages, accrued leave, and end-of-service benefits — remain protected if a company is sold, merged, or undergoes legal restructuring. Both the previous and new owners remain jointly liable for these obligations.
Preserving Service Continuity and Seniority
It states that an employee’s service is considered continuous after ownership transfer or legal form change, ensuring accurate calculation of promotions, compensation, and end-of-service awards.
Enhancing Job Stability
By keeping employment contracts valid and uninterrupted, Article 18 reduces the risk of job loss and creates a more secure work environment during mergers or acquisitions.
Reducing Employer Disputes
Clearly defining the responsibilities of the previous and new owners helps minimize legal conflicts and simplifies business transfers or restructuring processes.
Building Trust Between Employers and Employees
This article reassures employees that a change in ownership will not harm their career or benefits, while giving employers and investors a clear legal framework that promotes workforce stability.
Check out: Saudi Labor Law Resignation Guide 2025 – Etqan Law Firm
Conclusion
Article 18 Saudi Labor Law is essential for protecting employees’ rights and ensuring fair treatment during business ownership transfers or legal restructuring. For companies and employees who need clear guidance or legal support in applying Article 18 of the Saudi Labor Law, Etqan Law Firm provides expert consultation and representation to ensure compliance, protect rights, and achieve smooth transitions in line with Saudi labor regulations.
The Etqan Al Mutamayza Law Firm can provide the necessary support. You can contact their team
through the following mobile numbers: 056113776, 0541110440, 504315333
Alternatively, you can visit our branches:
- Jeddah: Al-Aziziyah District–Mohammed bin Abdulaziz Street (Tahlia)
- Riyadh: King Abdulaziz Street – In front of Kingdom
- Dammam: Al-Ashri’a Street, Al-Badeea, Dammam 32415.
FAQ:
What is Article 18 of the Saudi Labor Law?
Article 18 governs situations where the ownership of a firm is transferred or its legal form changes (through merger, partition, restructuring, etc.). It ensures that existing employment contracts remain in force and that employee service is treated as continuous.
How does Article 18 apply to employment contracts?
When a transfer of ownership or change in legal form occurs, employment contracts are not nullified or restarted—they continue under the new owner. The worker’s tenure (service) is treated as uninterrupted.
What are the main provisions covered under Article 18?
Continuity of employment contracts post-transfer
Joint liability of predecessor and successor for accrued rights (wages, end-of-service, etc.)
In individual firm transfers, the possibility to transfer rights via written agreement with the worker
If worker refuses such transfer, right to terminate and claim dues from prior owner
Does Article 18 deal with employee transfers or seniority rights?
Yes, implicitly. It governs the transfer of employees legally by operation of law due to ownership change. It also safeguards seniority (continuous service), meaning the employee does not lose their years of service.
How does Article 18 affect end of service benefits in Saudi Arabia?
Accrued rights, including unpaid wages and unrealized end-of-service awards up to the date of the transfer, remain payable. Both former and new owners are jointly liable for those benefits.
Is Article 18 applicable to both Saudi and expatriate employees?
Yes — the legislation does not distinguish nationality in Article 18. It applies to all employees under the Saudi Labor Law framework, whether Saudi citizens or expatriates.
How is Article 18 interpreted in labor disputes?
Courts and labor committees interpret it to preserve rights for employees across ownership changes. If a worker disputes a claim by a new owner to avoid liability, they may use Article 18 to assert their accrued rights. Disputes often hinge on proving that rights existed prior to transfer and that the change triggers joint liability.
What is the relationship between Article 18 and other provisions of the Saudi Labor Law?
Article 18 interacts closely with clauses on termination, employer obligations, and liability (e.g. Article 19 on privileged debts). It complements provisions ensuring that rights are enforceable even when a business is restructured.
Has Article 18 been amended in recent updates to the Labor Law?
As of the latest available text, no specific amendment to Article 18 has been highlighted in the recent 2024 amendments summary. The focus of recent changes has been more on Saudization, training obligations, etc. 10. Where can I find the official text of Article 18 Saudi Labor Law?
The official text is available in the Saudi Ministry of Human Resources & Social Development’s publication of the Labor Law (PDF). Also, unofficial English translations (for reference) are accessible via .clearinghouse repositories