For what reasons is the employment contract canceled in Ecuador?: In one year there were more than 800,000 confirmations of cancellation

Due to emigration, premature dismissal, and even the death of a worker are some of the reasons why of employment contracts, which in Ecuador already has 809,996 dismissalsdata from the Ministry of Labor show.

The data refer to the period from January 1 to December 11, 2023. These settlement certificates increased by 7.33% more than in 2022, when there were 750,692. In 2021, there were 709,508 of them. It is growing, but in 2020 there were 762,431 minutes, which is a figure higher than the two following years, a year complicated by the COVID-19 pandemic.

Ider Salgadoprofessor at the Faculty of Labor Sciences and Human Behavior of UISEK, indicates that the data are variants and it is necessary to analyze each period in order to determine why there was a growth in 2023.

“My son and I survive with the little savings I have left,” says a woman who has been unemployed for six months, part of the 500,000 birth certificates in 2023.

“We have to take into account that we are at the end of the contract period, the effect of the pandemic.”, where special emerging contracts are created in 2020 that can be continuously renewed. It is true that there is an economic, political issue, lack of stability of the executive function in terms of government policies and causes companies to not continue with labor contracts or they don’t have foreign investment that allows them to continue providing services or producing products,” explains Salgado part of the effects on the labor sector.

Reasons for dismissal

The labor lawyer agrees with this. Vanessa Velasquezwhich adds that more than 800,000 settlement certificates also originate from the insecurity experienced by the country, the lack of guarantees.

Of these 809,996 minutes, 63.38% is by agreement of the parties. Here, according to Velásquez, there are resignations through negotiations, although not all of them are like that. For example, to avoid going to court when there is a problem, says Salgado.

Article 169 of the Labor Law lists the reasons for the termination of the employment contract. And among them, the most common are those who were executed during 2023. The second is for the completion of works, the period of performance of works or services that are the subject of the contract, which amounts to 12.77%.

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Velásquez points out that there are two ways when a business ends, which can be building or offering a service. For example, the construction of urbanization, which can last for years or months. This is closely related to the activity of the employer.

That contract is detailed in Article 17, Salgado says. “Seasonal contracts are those that due to custom or collective bargainingconcluded between an enterprise or an employer and a worker or a group of workers for the performance of cyclical or periodic work, due to the discontinuous nature of their work, these contracts enjoy stability, understood as the right of workers to be called upon to provide their services in each season when they are needed”, it is summarized in article.

The third way most contracts end is by causes provided for in the contract, which covers 10.76%. This also goes with the direction of business, experts point out. An example is the mining sector, if a foreign company comes, they hire an Ecuadorian company for labor and even food.

And then it comes termination of employment during the probationary period, which is 6.38%, untimely termination, which reaches 4.35%, and eviction, which is 1.76%.

Early dismissal is nothing but a unilateral termination of the employment relationship by the employer, and the eviction referred to in Article 184 is a written notice by which the employee informs the employer that he wants to terminate the contract, even electronically.

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Meanwhile, there are other motivations that are below 1%. Due to the death of a worker or permanent and complete incapacity for work represents 0.26%; according to the employer’s decision prior approval 0.11%; due to the death or disability of the employer or termination of contractual legal entity 0.10%; and accidental or force majeure does not even reach 0.01%.

This last figure will drop more and more, according to Velázquez. “There should no longer be such causes, and they will disappear unless they obey the questions, as defined by the law of force majeure, a fact that I cannot control, stop, preventand this actually forces the employment relationship to end,” says Velásquez.

Number 6 of Article 169 is where it is determined to apply in cases such as fire, earthquake, storm, explosion, Polish plague, war and, in general, any other extraordinary event which the contracting parties could not foresee or which they did foresee.

A disheartening prospect

Salgado explains that the country is currently in force ​​Executive Decree 111 in which the existence of an internal armed conflict is recognized. “We can say that it is a case of force majeure, but that is not the case in all cases. For example: the 2016 earthquake did because several buildings fell, there is nowhere to go to work. It’s hard to say whether (those numbers) will decrease,” says Salgado.

Economic analyst Jorge Calderón ensures that employment is a key metric for a country where deflation, which is a generalized and prolonged fall in the prices of goods and services, must be taken into account.

“The economy is not growing at the rate it should be growing, so that means, in which companies do not hire what they would like if they had better conditions. The tax bill passed by President Daniel Noboa should help with this. If we add security, the state of emergency and everything else, it’s complicated,” says Calderón.

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Likewise, the economist points out the proposal for an increase VAT from 12% to 15%, which currently has no support in the Assembly, could damage more workers. “You force yourself to pay more for certain products that could affect workers in activities related to taxable goods and services“, he explains.

Velásquez indicates that this security crisis will deepen the situation and create a problem of employability. She says that most of the consultations and advice she receives as a lawyer are related to restructuring and dismissal of workers, but not employment,” she laments.

That is why it is important for Salgado solve uncertainty to improve the environment and thus an increase in foreign investment and exports, which equals more work.