29 Nov 2025

Between Duress and Documentation: How the Court Resolved a Labor Settlement Dispute

Documenting everything arising from an employment contract protects both employers and employees from later claims of coercion. It creates a clear legal record between worker and employer that prevents future disputes, and it shields companies from paying excessive compensation claims.
In this article, Al-Salamah Law Firm explains how proper documentation of an employment relationship decided a labor settlement case in favor of the employer.

Facts Between the Employee and the Employer

On July 4, 2024, the company found it necessary to terminate the plaintiff’s contract. The defendant company informed him, and termination occurred by mutual agreement, which he approved.

After the employment ended, the plaintiff filed a claim before the Labor Court, demanding several entitlements he believed were owed to him, summarized as follows:

Compensation for contract termination: Since his contract was fixed-term with 6 months remaining, he claimed SAR 43,000 under Article 77 of the Labor Law.
Unpaid wages: 15 days from January 2024, amounting to SAR 11,000.
Deducted amounts: SAR 1,400 on the termination date.
Compensation for accrued leave: 30 days in 2024, SAR 6,000.
Service certificate: For his full employment period.
Clearance letter: For his documents held by the company.
End-of-service benefits: For his long years of service, a large sum of SAR 209,000.

The plaintiff thus brought his lawsuit, demanding these entitlements.

The Company’s Response: Agreement and Settlement

The company’s lawyer did not deny the entitlements entirely. Instead, he confirmed much of the plaintiff’s claim regarding start date, job title, and wages. However, he built a strong defense on two main points:

Termination by mutual consent: The company asserted that the contract was terminated “by the will of both parties” under a signed mutual termination memorandum.
Settlement and payment schedule: Crucially, after termination, both parties agreed to a full settlement of SAR 269,000. More importantly, the plaintiff signed a payment schedule agreement, acknowledging receipt of part of the amount, with SAR 236,000 remaining, payable in monthly installments.

Accordingly, the company requested dismissal of the plaintiff’s lawsuit, affirming that it had already paid the first installment under the schedule.

Key Dispute: Alleged Duress

Here lay the core dispute. The plaintiff admitted the remaining entitlement was indeed SAR 236,000, as the company stated, and admitted signing the payment schedule. However, he raised a surprise claim:

“I signed under duress! I was in urgent need of money, I had rent and a large enforcement order to pay. The company told me I would not receive any payment unless I signed the schedule.”

The company’s lawyer strongly countered:

“This alleged duress is false. The schedule was signed two months after termination, when the employment relationship had ended. My client had no authority over him. He could have gone directly to court, and the settlement agreement itself could have been used in his favor.”

The Ruling: Settlement Withstands the Duress Claim

After hearing both sides and reviewing the documents, the court issued its ruling:

Dismissal of the plaintiff’s main claims:
- Compensation for remaining term, unpaid wages, deducted amounts, accrued leave pay, and end-of-service benefits.
Company required to issue a service certificate:
Stating employment dates, termination date, job title, and last salary (with correction of job title from Secretary to Executive Director’s Office Manager), duly stamped and verified.
Rejection of the clearance certificate claim:
Due to lack of proof of the company’s obligation under law.

Legal Reasoning

The Labor Court based its ruling on:

Settlement is binding: The court viewed the settlement and payment schedule as a binding conciliation contract. Under the Civil Transactions Law, a valid conciliation agreement is final and may not be revoked except by mutual consent or legal provision.
Definition of duress: Referring to Articles 64 and 65 of the Civil Transactions Law, duress is defined as:“A threat unlawfully made, using material or moral means, to frighten a person and compel him to act.”
The threat must involve “serious imminent harm” to life, honor, or property.
No legal duress: The plaintiff’s circumstances did not amount to legal duress for the following reasons:
- No proven fear in the legal sense.
- No direct unlawful threat of serious harm.
- The employment relationship had already ended two months earlier; the company no longer had authority over him. He could have gone directly to court.
- He held a signed settlement document confirming the amount, which he could have presented in court.

Therefore, the court rejected the duress claim and upheld the binding nature of the signed schedule.

Legal Takeaways for Employers and Companies

Documentation and agreements matter: This case highlights the importance of documenting every agreement between employer and employee employment contracts, termination agreements, and financial settlements. Signed, written agreements are the cornerstone in any dispute.
Settlement agreements are binding: Once concluded, they cannot be easily revoked.
Understanding duress legally: Financial need or pressure is not “duress” unless tied to an unlawful, serious threat. Genuine need alone does not invalidate contracts.
Right to a service certificate: Employees are entitled to accurate service certificates reflecting their employment details.

Al-Salamah Law Firm’s View

From our perspective, this case is a legal illustration of the importance of accurately understanding legal concepts, especially “duress in employment contract termination.” While we sympathize with individuals’ personal hardships, the law applies strict standards for determining when consent is defective.

The company and its lawyer acted wisely in documenting the mutual termination agreement, followed by a written, signed settlement and schedule. These official records were the cornerstone of their defense.

The critical mistake on the employee’s side was signing the schedule despite dissatisfaction, only to later claim duress. A better approach would have been to refuse signing and go straight to court to claim the full amount upfront especially since his employment had ended and the company no longer had authority over him.

This case sends a clear message to employers and companies: properly documented contracts and agreements are your shield, and understanding your rights and claims procedures is the key to justice.

Read More : Electronic Signatures Under Saudi Law