Ecuador: Humanitarian Support Law Enacted to Address COVID-19 Economic Emergency

(Sept. 21, 2020) The Organic Law on Humanitarian Support, enacted on June 22, 2020, declares COVID-19 an economic emergency in Ecuador and seeks to mitigate the health, economic, and social crises it has caused. The Law includes a provision on the termination of employment relationships due to unforeseeable circumstances or a force majeure. Other key measures implemented by the new law are as follows:

  • Reduction of working hours: Employers and workers may modify the economic conditions of the employment relationship. The working day may be reduced by 50 percent of normal hours and up to 45 percent of previous remuneration.
  • Special labor contracts: Special emergency labor contracts are authorized with work shifts that can range from 20 to 40 hours a week, distributed over six days. The new contracts may last up to one year, renewable for an additional year.
  • Dismissal due to a force majeure: Termination of employment due to unforeseeable circumstances or a force majeure will apply only when the employer ceases all operations. If a judge determines that the force majeure ground for dismissal was improperly applied, the employer will have to pay termination compensation for improper dismissal multiplied by 1.5.
  • Encouragement of new businesses: The government will encourage the starting of new businesses by issuing provisional operating permits valid for 180 days. During this time, entrepreneurs will be required to comply with all tax, municipal, and permit requirements.
  • Health coverage in the Ecuadorian Institute of Social Security: Health benefits coverage will be extended beyond the time period established by law to 60 additional days, starting from March 16, 2020, when the President of Ecuador issued the Declaration of a State of Exception.
  • Extensions for debt repayment: During the State of Exception and for up to 60 days after the end of that period (until mid-September considering the recent extension of the state of exception by Decree 1127/2020), financial institutions, including credit card companies and commercial establishments in general, are required to reschedule the collection of monthly debt payments in the form of deferment or rescheduling unpaid installments. Late-payment fees or interest will not be charged during this period.
  • Pre-bankruptcy payment agreements: Companies, businesses, and individuals will have the option to reach pre-bankruptcy payment agreements with their debtors, such as customers and suppliers. All types of businesses in the commercial, economic, cultural, and recreational sectors are potentially eligible for this relief.
  • Reordering of credits: Privileged class credits will be paid, from 2020 to 2023, in a new 11-point preferential order. Among the first are food credits in favor of girls, boys, and adolescents; credits for labor debts owed by employers to their workers; mortgage credits; and credits for court costs, among others.
  • Suspension of evictions under lease agreements: During the State of Exception and up to 60 days after its conclusion, there will be no evictions of tenants for nonpayment of rent unless there is danger of destruction or damage of the building in which they reside. In order to be eligible, the tenant must pay at least 20% of the rent due and, if residing in a commercial building, must demonstrate that his or her income has diminished by at least 30% since February 2020.
  • Suspension of fines and interest for vehicle transactions: The collection of fines and interest for vehicle registrations and inspections during the State of Exception is suspended. At the end of the State of Exception or when the appropriate conditions are met to restore the service, the National Transit Agency and the Revenue Service will reschedule the charges and establish related processes.