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Ecuador

January 15, 2021

By Fabián Jaramillo Terán and Fabián Esteban Jaramillo Intriago

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KEY DEVELOPMENTS FOR 2021


 

Ministerial Agreement issued to regulate teleworking

In August 2016, Ministerial Agreement MDT‑2016‑190 was issued that created and regulated telework contract in Ecuador. Even with its novelty, teleworking was not adopted by private companies, and it was obligatorily applied in the public sector for a minimum of workers in the oil sector. It is with the COVID‑19 pandemic that the interest and real need for telework is born. Partly as a result of this need, the Organic Law of Humanitarian Support was issued on 22 June 2020, which amended the Labour Code and formally included in its text the institution of teleworking. This was the first eminently legal provision that contemplated teleworking in detail and has since been adopted in a variety of companies and productive sectors nationwide whose capabilities and nature of the labour done allow so. It is likely that this trend will continue and increase in the coming year.


 

New Labour contracts

In recent years Ecuador has maintained an approximate 60% of its population in underemployment and unemployment. This percentage has only increased because of the COVID‑19 pandemic, which is why the Organic Law of Humanitarian Support was published as well as several agreements from the Ministry of Labour that created new contracts that sought to promote hiring opportunities that, until then, were almost inexistent. Among the ones incorporated by the Humanitarian Support Law are the agreement for the preservation of sources of work, the special emergency contract, and the emergency reduction of working hours. Although these present new contractual opportunities for the worker and employer, they have the limitation that all these figures have a maximum duration of one year, extendable for a single additional year. For their part, the ministerial agreements presented new forms of contracting in the form of the youth contract, entrepreneurship contract, contract for the productive sector and contract for the tourist, cultural, and recreational areas. These contracts present incentives for employers, entrepreneurs, and workers from different fields to generate new job opportunities without the costs involved in the indefinite time contract that has been the general rule present in the Labour Code. The only deficiency of these figures is that they have been created by Ministerial Agreements and not by a Law, which generates uncertainty about their prolonged presence within the Ecuadorian legal system. Nonetheless, this new contracts are due to be implemented in 2021.


 

Humanitarian Law's interpretative provision regarding force majeure

With the publication of the Organic Law of Humanitarian Support, an interpretative provision was included to article 169, numeral 6 of the Labour Code. This article contemplated the possibility of terminating labour contracts due to force majeure (i.e. events like fires, earthquakes, and any extraordinary event that was not foreseeable or resistible that made work impossible, like the COVID‑19 pandemic). This provision has been used during the pandemic to terminate a large number of labour contracts. Nonetheless, this interpretative provision of the Organic Law of Humanitarian Support, which applies backwards in the time of its publication on 22 June added an additional requirement to be able to apply force majeure as a cause for termination of an employment contract. The requirement was that the impossibility of carrying out the work due to unforeseeable circumstances or force majeure must be linked to the total and definitive cessation of the economic activity of the employer. This provision generated new doubts about an article that existed since the publication of the Labour Code in 1938, doubts that were reflected in several claims of unconstitutionality of this provision as well as consultations to the Constitutional Court raised by Labour Judges who already received cases based on force majeure, both which have not yet been resolved. Thus, the trend or jurisprudential expectation for 2021 depends on the resolution taken by the Constitutional Court on this issue, a decision that will mark an accentuated jurisprudential line on the decisions of Labour Judges regarding force majeure in the case of the pandemic for the termination of labour contracts.

With thanks to Fabián Jaramillo Terán and Fabián Esteban Jaramillo Intriago of Jaramillo Dávila Abogados for their invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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