Recent Reforms To The Ecuadorian Labor Regime 

May, 2015 - Josemaria Bustamante, Alejandro Pérez Arellano

Since 2 years ago Ecuador is going through a deep actualization process of its legal regulations. The Criminal Code, the Companies Act has been reformed and the Civil Code reforms, as well as procedural rules reforms of trials are in the final step of approbation. One of the most important reforms performed in the last days are the ones related with the Labor Code, which regulates labor relationship between employers and employees.Ecuador has a very strong tradition related with employee’s protection. It’s one of the few countries who recognized a 15% of the company profits for its employees, also establishes two additional annual remunerations. 

In April 20th of 2015, was published in the Official Gazette the Labor Justice and Recognition of the Domestic Work Law, which substantially reformed the Labor Code in force since 1938. Among the most important changes are: The elimination of the Fixed- term contract, which had a maximum duration of two years. Now the standard employment contract is indefinite period, this means that all employees have a warranty of time stability. It was stipulated that the termination to a woman who is in pregnancy condition or associated with a maternity or gestation status is consider as inefficient. Also is inefficient the termination to Trade Unionist. Regarding the profits that employees receive, established a limit of 24 Basic Unified Salaries (SBU). 

Furthermore a limit to the wage gap was determined, the Ministry of Labor is authorized to establish the maximum compensation that senior management could receive in reference to the minimum compensation that is earn in the same company. The Basic Unified Salaries are set every year by the Labor and Wages National Council, in absence of general agreement of this organization then the Ministry of Labor has the power to establish it.Allowed that the additional remunerations that were paid cumulatively at different times, such as the 13th remuneration that must be paid until 24th of December, meanwhile the 14th remuneration that must be paid until 15th of August, may be paid monthly. It has been given to the Ministry of Labor the authority to determine ex officio the unification of the profits to related companies that are in the same value chain. 

Furthermore, provides that related companies the natural persons, the moral persons, trusts and other associative modality recognized by law, that are domiciled in Ecuador, in which one owns at least 25% of the equity of another undertaking to have subsidiary liability between them for social security and labor obligations with the employees. This liability is not limited only up to the amount of their equity interests, until the proportion of their share in the equity. Finally, the required authorization by the Ministry of Labor for foreign workers it’s been eliminated.



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