Labor Proposals Included in the Draft of the Law of Humanitarian Support to Fight the Sanitary Crisis from COVID-19

On April 16, 2020, the President of the Republic presented before the National Assembly the Draft of the Organic Law on Humanitarian Support to Fight the Sanitary Crisis from COVID-19, which includes the following measures to support the sustainability of employment:

  • The Employers and Employees may agree to modify the conditions of the employment relationship.

  • Before signing an agreement, the Employers shall present the complete financial statements of the company.

  • For the time of the duration of the agreements, companies will not be able to distribute dividends or fire employees; moreover, they cannot use company resources for unnecessary expenses nor reduce the capital of the company.

  • The agreements shall be approved by the majority of employees. These agreements will be mandatory for employers and employees who do not subscribe it.

  • The agreements may be opposable to third parties.

  • The agreement must be notified to the employee.

  • The agreement must be reported to the Ministry of Labor, which must supervise their compliance.

  • The only applicable cause for impugnation of the agreement can be fraud on detriment of one or more creditors.

  • Penalty for breach of the agreement in an equivalent to a minimum of three and up to a maximum of twenty wages or salaries.

  • The agreements will be considered executive titles.

  • In case of lack of agreement and when this is essential for the company, the employer can:

    • Begin the process of liquidation of the company.
    • Start a mediation process. The union of employees and employers can be classified before the Ministry of Labor as a mediation center exclusively to mediate labor disputes.

  • The improper use of company resources in favor of its shareholders or administrators, will be the cause of fraudulent bankruptcy, subject to criminal sanction.

  • Special Emergency Contract:

    • Objective: To hire new personnel for new investment projects, increasing production or to fulfill pending obligations.
    • Nature and term: These contracts can be agreed for a defined term. The maximum term of these contracts may be 2 years, renewable for a similar term. Once this term ends, it becomes indefinite.
    • Working day: It can be partial or ordinary, with a minimum of 20 and a maximum of 40 hours per week, distributed over a maximum of 6 days a week and not exceeding 8 hours a day.
    • Remuneration and Benefits of Law: Proportional to the agreed working day.
    • Benefits at the termination of the employment relationship: Pending wages, compensation of “desahucio”,1 and other benefits of law.

  • Emergency Reduction of the Working Day:

    • In cases of force majeure or fortuitous case, duly justified, the employer may request the reduction of the working hours/day.
    • Wage Payment and contribution to the IESS2 will be based on the reduced working hours.
    • It can be applied for up to 2 years, renewable once, for the same term.
    • During the implementation of the reduced working hours day, dividends cannot be distributed and employees cannot be fired.
    • In case an employee gets fired, the employer must pay them a compensation equivalent to 3 salaries plus other compensations provided by Law. For this purpose, the basis for the payment will be the last salary received by the employee before the reduction of the working hours.

  • Vacations:

    • For 2 years from the publication of the law, employers may notify the employee with the obligation to enjoy earned or anticipated vacations. It is only possible to anticipate 2 years vacation.

  • Unemployment Insurance:

    • Applicable to employees who have lost their jobs due to causes beyond their control, during the months of April, May, June or July of 2020.
    • Requirements:
    • Have 24 accumulated contributions, 6 at least continuous and prior to the Emergency State;
    • Be unemployed for a period of not less than 7 days;
    • Submit the application from the 8th to the 45th day after the unemployment situation; and,
    • Not be retired.

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1 25% of the last salary per the number of years that the employee has worked for the employer.
2 Ecuadorian Institute of Social Security.

Disclaimer: This document is informative and does not, and is not intended to, constitute legal advice.