The reform of the Labor Law for fixed-term and hourly employment is one of the approaches in nine additional questions in the popular consultation proposal that President Daniel Noboa sent to the Constitutional Court to evaluate its constitutionality and ways of amending the Constitution.

From the expert’s point of view, it is generally “excellent” that this issue is included, because Ecuador is “years behind the new forms of contracting that exist in the world”.

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Question 9 reads: Do you agree with the amendment of the Constitution of the Republic and the reform of the Labor Law for a fixed-term and hourly employment contract, when it is concluded for the first time between the same employer and employee, without affecting the acquired rights of the employee. workers, in accordance with Annex 9?

In this annex, Articles 327 of the Constitution and 14 of the Labor Law were amended to adapt to this approach, stating that “fixed-term contracts and hourly contracts do not constitute forms of job insecurity”. And the Ministry of Labor is given a deadline of 30 days to issue ministerial approvals to regulate these contracts.

The executive branch bases its approach on the level of unemployment in Ecuador. Citing figures from the Chamber of Industry and Production, it is pointed out that of the 8.4 million people who make up the economically active population (PEA) as of June 2023, around 2.9 million (34.5%) are in proper employment compared to 5, 1 million (61.4%) who are employed under inadequate conditions.

Faced with this gap of 2.2 million between people with suitable employment and those in unsuitable conditions, the popular consultation project aims to include a contractual figure that makes the Ecuadorian labor market more flexible and increases the possibilities of finding formal and suitable work. .

Fixed-term contracts were rejected by union headquarters every time they were proposed, just like in the previous government. For groups of workers, they represent job insecurity.

However, for former labor undersecretary Pedro Cruz, “generally speaking, it is excellent for the country that this issue of partial reform of the Labor Code is included in the chapter on the form of employment of personnel.”

Labor lawyer Vanessa Velásquez points out that it must be understood that “Ecuador is years behind with regard to the new forms of contracting that exist in the world, and even more so with the constitutional block due to the effect of mandate 8 that prohibits outsourcing and mediation,” which she believes is the development with flexicurity is appropriate, respecting workers’ rights, preventing migration under these contracts if there is already a current employment relationship.

Cruz explains that the neighboring countries, Colombia and Peru, which are “our natural competitors at the regional level in terms of markets and foreign investment,” have this agreement for a fixed or fixed period, as well as Panama and El Salvador, which are dollarized countries. “The only one we don’t have is Ecuador since 2015, the year it was repealed.”

The former undersecretary for labor indicates that the fixed-term contract should no longer be for one year, but for a minimum of three and with all the guarantees of the inalienable rights of workers from Article 326 of the Constitution, i.e. all the privileges of the law, membership in the Ecuadorian Institute for Social Insurance (IESS) , payment of the thirteenth and fourth salary, reserve funds, etc.

As for the hourly contract, Cruz says it’s known in labor doctrine as a time-unit contract, because it’s a two-, four-, or six-hour contract based on time, but always less than an eight-hour contract. the usual, mandatory and legal working day that other workers have.

Velásquez believes that young people would benefit most from these reforms, in their first job, and support for creating employment plans for other sectors will depend on the Ministry of Labour.

Cruz has a similar criterion, adding that it will allow an injection in obtaining labor in private companies, because many young people studying would no longer have to spend eight hours in a company or job to earn a salary. “I can work four hours in one place, and if they have time, two hours in another company and in all places that are contracted by the inalienable rights of workers.”

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Cruz says the previous hourly contract, which was repealed with Mandate 8 in 2008, failed “because it was simply no longer attractive for the worker to work for the minimum wage effective hour, that cannot continue.”

To put that into perspective, it shows that if the current unified base wage, $460, is divided by 30 and divided by 8, the result of that operation would be hourly paid work. “It should be more attractive” so that both the manufacturing sector and the labor sector can have an affordable legal framework. “Well, it won’t go into consultation, but it can go into reform or into the labor reform rulebook, which the Ministry of Labor will be in charge of, so we all win.”

Although he agrees with the approach to this issue, Cruz points out that it is “not a total reform”, as he believes that other issues, such as probationary contracts, fixed-term contracts and the employment of retirees, are missing.

Cruz points out that since 1938, when the Labor Law was issued, there have been five major reforms, in 1961, 1971, 1979, 1997 and 2005, “but in none of them, nor now in the consultation, was proposed that for the first time in the country there is a law on labor procedure”, which is basically a procedural tool for litigation, for claiming rights when they are violated by workers and pensioners.

For his part, Velásquez believes that we should not only depend on public consultation to solve the crisis, which is why he believes that among the alternatives are ministerial agreements with contracts according to production sectors, flexibility of schedules for production activities.

What does Annex 9 bring?

Article 327.- The employment relationship between the worker and the employer will be bilateral and immediate. All forms of precariousness, such as labor mediation and outsourcing in the usual activities of the company or employer, or any other that affects the rights of workers individually or collectively, are prohibited.

Fixed-term contracts and hourly contracts are not forms of job insecurity.

Failure to comply with obligations, fraud, simulation and unjustified enrichment in employment relationships will be punishable and sanctioned in accordance with the law.

Article 14.- Standard contract and exceptions.- An individual employment contract for an indefinite period is a typical form of a permanent or permanent employment contract, its termination occurs only due to the reasons and procedures established by this Code. The following are exempted from the provisions of the previous paragraph:

a) Fixed-term contracts;

b) Hourly contracts;

c) Contracts on specific jobs, which are not usual in the business of the company or employer;

d) Temporary, casual and seasonal contracts;

e) those who study; and,

f) others determined by law.