As well as affecting people’s health, Coronavirus (“COVID-19”) can have significant legal and business impacts. Companies around the world have taken important steps to avoid negative effects. On example is Apple, who decided to close its shops and offices in China.[1]
In Ecuador, the outbreak of COVID-19 could impact: (i) the performance of contracts, (ii) employment relationships, (iii) existing litigations, (iv) possible restrictions on the movement of people and (v) mandatory regulations.
Contract Performance
Local and international contracting is regularly threatened by unforeseeable or unpreventable risks (acts of God or force majeure) which can affect contract performance. In general, Ecuadorian law permits that if one of the parties cannot perform their obligation due to an act of God or force majeure, the other party is justified in not performing its own obligation.
Force majeure refers to legal issues such as bans imposed by the government authorities to restrict certain activities which could pose a risk to the population. This could be the case, for example, of bans on importing goods from Asia or Europe. Epidemics, or even pandemics, could be included as events of force majeure, especially in supply contracts for certain markets. In any case, acts of God or events of force majeure must be analyzed on a case by case basis.
Additionally, if due to unforeseeable circumstances, the obligations of one of the parties becomes economically burdensome (e.g. need for more costly and further transport to avoid affected areas), it is possible to renegotiate the contract or, as a last resort, terminate it. Depending on the case, COVID-19 could fall within this scenario, so the specific cases should be analyzed individually.
Employment Relationships
The outbreak of COVID-19 could also impact employment relationships between employers and their employees. According to labor laws, the employer has an obligation to: (i) take necessary measures to prevent risks which could affect employees’ health and wellbeing in the workplace, and (ii) provide information about risk prevention to the company’s staff.
What can employers do in the face of COVID-19?
The obligation for prevention could mean that employees are assessed by occupational doctors in the event of showing any symptoms. The occupational doctor will send the case to a specialist for analysis. If the company does not have an occupational doctor, employees with symptoms are advised to consult a medical professional for assessment and for the necessary measures to be taken. Any decision by the company regarding protocols, procedures or measures must be approved by a medical professional.
In the case of COVID-19 an excellent option for employers is telework which does not require a physical presence for the provision of services. The employee can work outside the employer’s facilities by using IT and communication technology. It is possible for the employer and employee to sign a temporary teleworking agreement while a health risk exists and until working conditions return to normal once the risk has passed.
Existing Litigation
COVID-19 could cause the court or arbitration authorities to suspend their activities, and consequently judicial and arbitration proceedings would have to be rescheduled.
Possible Restrictions of the Movement of People
The effects of COVID-19 could in extreme cases cause the government to declare a “state of exception”.
If a declaration of this magnitude is made, the State could restrict certain rights of citizens. As an example, these could include freedom of movement, freedom of association and assembly, freedom of information. During a “state of exception” there could be an element of censorship of the information distributed by the media, as well as the closure of ports, airports and borders.
Mandatory Regulations
Lastly, it is important to be aware of the regulatory provisions issued by the authorities. This is to avoid non-compliance and fines in connection with the safety measures which could be issued.
[1] See El País, Apple cierra sus tiendas y oficinas en China at: https://cincodias.elpais.com/cincodias/2020/02/01/companias/1580567245_859948.html
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