Become a member of The Cuenca Dispatch and access exclusive weekly reports on Ecuador's economy, politics, crime and more that you will not find published anywhere else on the web.

Ecuador's Original English Language Newspaper

The five major differences between the Law of Opportunities and the current Labor Code

Published on October 05, 2021

If you find this article informative…

Members receive weekly reports on Ecuador’s economics, politics, crime and more. Plus, NO ADS.

Start your subscription today for just $1 for the first month.

(Regular subscription options $4.99/month or $42/year/)

Click here to subscribe.

The two regulations differ, for example, in the elimination of employer retirement and the approval for the termination of an employment contract.

One of the main changes proposed by the draft Law for the Creation of Opportunities, delivered by the Government to the Assembly, is the special and alternative labor system that differs from the current Labor Code.

The idea of ​​the President is that the two normative bodies coexist. The new system, according to President Guillermo Lasso, is voluntary and will apply only to people who are currently unemployed.

But politicians and social organizations maintain that workers will be divided due to the differences between the new law and the Labor Code.

“Having two labor codes will create legal insecurity, both for companies and for workers. It will create two types of employees, some with greater rights than others,” said Marjorie Chávez, a PSC assembly member, of Hora 25.

In reality there are five major differences between the two regulations. Among them, the increase in working hours without surcharge, the elimination of employer retirement and the approval of the termination of an employment contract. As well as the trial period that in the special and alternative labor regime is up to five months.

Here is an explanation of those differences:

1.Job stability

The Labor Code establishes that the typical modality of labor contracting is the indefinite individual employment contract that has a trial period of a maximum of ninety days.

In the case of contracts for domestic service or paid work from home, the trial period is up to 15 days.

And no more than one trial period can be established between an employer and a worker.

Instead, the new bill proposes a type of employment contract for a defined time that can be between six months and four years. Eventually that agreement can become an indefinite contract.

Current labor regulations also hold that workers who have worked 25 years or more in the same company have the right to employer retirement, a life pension that the employer must pay.

The labor reform does not contemplate employer retirement. The Minister of Labor, Patricio Donoso, has justified the elimination of this lifetime pension because it encouraged layoffs. “The employer’s retirement became a dismissal for seniority,” he said.

2. Working hours

In the Labor Code, the maximum working day is eight hours a day and up to 40 hours a week. The excess work is considered additional hours, which are classified as night, supplementary or extraordinary, which have a surcharge.

With the current labor law, the compulsory working hours cannot exceed five days a week and 40 hours a week. Saturdays, Sundays, and holidays are considered mandatory rest days.

The Creation of Opportunities Law states that the maximum working day is 12 hours and that a week they cannot exceed 40 working hours.

If a worker must complete a 12-hour shift, the work will be divided into two parts, of at least six hours each, with the rest time agreed by the parties.

In addition, the working day can be distributed over six days a week , that is, Saturday and Sunday are not seen as mandatory rest days.

The new labor system also opens up the possibility of reducing the working day and the worker’s remuneration up to a maximum of 50%. The contribution to social security and labor benefits will be paid based on this reduced remuneration.

The working day may be reduced as long as:

  • For six consecutive months the employer registers a decrease in his monthly income of more than 25%.
  • Due to force majeure or fortuitous event, the normal performance of the business is impaired.
  • The parties agree.

The reduction of the working day may last until the reasons that led to it are overcome.

3. Vacation

The Labor Code establishes that workers have the right to 15 days of uninterrupted rest per year, which is an inalienable right that cannot be compensated with its value in money.

The employer will let the worker know, three months in advance, the period in which the vacation will be granted.

And those who have worked for more than five years with the same employer will be given a vacation day for each of the additional years, with a maximum limit of 15 years.

If the workers do not receive the additional vacation days, they must be compensated with the payment of the same.

The new labor system states that workers have the right to a continuous or discontinuous period of 15 days of vacation per year.

The employer will have the power to determine the period in which the worker will take his vacation, provided that the employer notifies the worker at least one month in advance.

If a person works more than five years in the same company, they may enjoy an additional day of vacation for each of the excess years or they may be paid for these days, as provided by the employer. The days of additional vacation shall not exceed five.

4. Additional payments

The Labor Code maintains that the additional hours or the night shift must be remunerated in the following way:

  • Additional hours – They may not exceed four a day and 12 a week. The employer will pay the corresponding remuneration for each of the additional hours with a 50% surcharge.
  • Overtime – These are the additional hours that take place between 24:00 and 6:00, have a 100% surcharge. The work that is done on Saturday and Sunday is remunerated with a 100% surcharge.
  • Night shift – It is understood as work between 19:00 and 6:00. Those who work during these hours are entitled to their remuneration plus 25% of it.                                                                                         Instead, the Opportunity Creation Law maintains that additional hours to the 12-hour shift must be paid as follows:
  • Additional hours – They have a 25% surcharge.
  • Overtime – They have a 50% surcharge.
  • Night shift: Not contemplated.

5. Termination of the contract

Under current law, if the employment relationship ends by eviction, the employer must pay the worker 25% of the equivalent of the last full monthly salary for each year of service, according to the Labor Code.

In the event that a worker, who has up to three years of service, is untimely dismissed, the employer must pay him three months’ compensation. If the worker has more than three years of work, the compensation is equivalent to one month of remuneration for each year of service, without exceeding 25 months of wages.

The employer can terminate a contract covered by seven grounds, although it must do so with prior approval. That is, obtaining the approval of the Labor Inspector through an administrative procedure.

The worker who, without just cause and without leaving a replacement accepted by the employer, unexpectedly leaves the job must pay the employer a sum equivalent to 15 days of his remuneration.

Unlike the current regulations, the Opportunities Creation Law states that if a contract ends due to eviction, the employer must pay a bonus of 15% of the equivalent of the last full monthly remuneration for each year of service completed, not to exceed 15 years.

If there is an untimely dismissal, the employer must pay compensation equivalent to 50% of the last full remuneration for each year of service completed, without exceeding 15 years for the calculation.

The employer can terminate a contract for 13 reasons, without prior approval. In such cases, the worker must compensate the employer with a payment equivalent to his last full remuneration.

The worker can terminate a contract for four reasons, including insults to his family. In these cases, the reform establishes that if a contract ends for any of these reasons, the employer must compensate the worker with a payment equivalent to his last full remuneration.


Submit a Comment

Your email address will not be published. Required fields are marked *

Share This