The Covid-19 Humanitarian Support Bill aims to “sustain jobs and sources of employment, guaranteeing the rights of workers”, and sets out the following main labor and social security proposals:
Labor:
General agreements for job preservation: The Bill will authorize general agreements between employees and employers to change the terms of employment contracts. The Bill does not specify which aspects may be negotiated. To enter into these general agreements, the following must be taken into consideration:
- Employers will demonstrate their financial reality to all employees to justify the need to take these measures.
- The agreements must be reported to the Ministry of Labor.
- While the general agreements are in effect, companies cannot distribute dividends or fire employees.
- Challenges to these general agreements are only authorized if there are suspected acts of fraud against creditors.
- Employers cannot use their funds for luxury or unnecessary expenses, or to reduce the company’s capital while the general agreements are in effect.
- General agreements will be approved by a majority of employees and will be effective for the whole workforce.
- General agreements will be considered automatically enforceable documents and it will be possible to bring collection actions through the expedited enforcement action.
- If the execution of the general agreement is essential to keep the company afloat and the employees have not given their acceptance, the company may begin the liquidation process.
- The diversion of funds or improper use in favor of shareholders and managers or to the detriment of the employees will be considered fraudulent bankruptcy.
- Mediation centers can be used to negotiate the agreements.
- The Ministry will summarily authorize the workers’ or employers’ associations to act as mediation centers for labor disputes.
- In case of breach of the general agreement by any of the parties, the Ministry of Labor can impose fines of up to 20 consolidated basic salaries (US$ 8,000 in 2020).
Special Emergency Contract: A new type of fixed-term emergency contract is proposed with the following characteristics:
- Maximum duration of two years, can be renewed once.
- Upon termination, severance will be paid. This corresponds to 25% of the final salary, for each full year of service.
- If the term expires and the contract continues, it will become an indefinite contract.
- It can be implemented by (i) new companies; (ii) existing companies that open new lines of business; broaden, expand or change their course of business; increase the supply of goods or service or that require these for their sustainability and to preserve sources of income.
- Work shifts can be partial or ordinary, ranging from 20 to 40 hours per week.
- Working hours can be distributed over a maximum of six days per week, and no more than eight hours per day.
- The lawful remuneration and benefits will be in proportion to the agreed working hours.
Emergency reduction in working hours: For events of force majeure, it is proposed that the employer can ask the Ministry of Work to authorize reduced working hours. This will be subject to the following conditions:
- The Ministry must consult both parties before issuing its authorization.
- This measure may last for a maximum of two years and can be renewed once.
- The remuneration and social security contributions will be based on the reduced working hours. Currently, employers under this system must pay contributions on the full remuneration.
- Remuneration will be calculated based on the number of hours effectively worked using the value/hour of the previous salary.
- As long as the reduced working hours are in effect, the company cannot distribute dividends or fire employees.
- If employees are dismissed, they will receive compensation of three salaries in addition to the compensation set out in the Work Code and other laws.
Use of vacation time: It is proposed that during the two years after the law comes into effect, employers can immediately notify their employees of the obligation to use vacation time which has been accrued and/or bring it forward.
Social Security:
IESS payment facilities: It is proposed that microenterprise and small companies which have been unable to pay social security contributions in March, April, May and June 2020 can do so free of interest, fines or employer liability, in accordance with the regulations issued by IESS. We remind you that employer liability[1] implies that if the company fails to pay or is in default with its IESS obligations, it will bear the cost of the benefits the IESS provides to the company’s employees.
Extension of social security coverage to unemployed insureds: It is proposed that in April, May, June and July, the IESS should extend health benefits for 60 days for unemployed insureds. So those who become unemployed now will have four months of protection as of the notice of disaffiliation from the IESS program.
Unemployment Insurance: It is proposed that unemployment insurance guarantees the insured an income for up to five months once he/she has become unemployed due to severance in April, May, June and July 2020, with the following considerations:
- If the employee has at least 24 non-concurrent contributions, the last six must be continuous and immediately prior to the contingency.
- The insured has been unemployed for at least seven days. Previously, the insured had to be unemployed for 60 days.
- Apply for the benefit as of day eight of unemployment and up to day 45.
- Not a retiree.
Other important proposals:
Public assistance for job security: The Bill establishes a special account to provide humanitarian assistance and restart the economy. The idea is to use this account to deliver public assistance to companies in the sectors most affected by the health emergency, provided that these companies do not fire their employees.
The Bill was presented by the President of the Republic to the National Assembly on April 16, 2020 as an urgent economic Bill. Therefore, the National Assembly must approve, amend or reject it within 30 days of receipt. If the Assembly fails to make a decision in this timeframe, the President of the Republic can promulgate it automatically as a decree law[2].
[1] https://www.pbplaw.com/es/nuevo-reglamento-responsabilidad-patronal-iess/
[2] https://www.pbplaw.com/es/infografia-como-crean-leyes-ecuador/
Editorial Board
