Extension of deadlines for tax matters

lawyers-ecuador-extension-of-deadlines-for-tax-matters

In accordance with the state of emergency declared by the President, the following tax authorities, in the exercise of their powers, have suspended the following deadlines and terms:

  1. Regulation NAC-DGERCGC20-00000022 issued by the Internal Revenue Service establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 31, 2020. The suspension was extended until May 22, 2020 by regulation NAC-DGERCGC20-00000034.
  2. Regulation SENAE-SENAE-2020-0016-RE issued by the Customs Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 17 to March 31, 2020. The suspension was extended until June 1st, 2020 by regulation SENAE-SENAE-2020-0025-RE.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Idealex – COVID-19 and international trade

international-trade-covid-19-andrea-moya-idealex

DETAILS

DATE: 15-05-2020

CORRALROSALES IN THE NEWS: 

-Andrea Moya

MEDIA: Idealex

The world is facing a health, human and economic crisis without precedent. The measures taken to reduce the effects of the pandemic, such as isolations and social distancing, have direct impacts on the supply and demand. The suspension of commercial and productive activities generates a global recession and higher unemployment.

In 2019, the global economy recorded its worst performance since 2009, with a grow rate of 2.5% and with global GDP grow projections for 2020 revised downwards. In 2019, the volume of world trade goods fell by 0.4% against 2018 and it is projected that in 2020 it would contract even more. COVID-19 appeared in this scenario.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), COVID-19 is affecting the region for the following reasons:

  1. The decline in the economic activity of the region’s main trading partners.
  2. The drop in commodity prices.
  3. The interruption of global value chains.
  4. Lower demand for tourism services.
  5. Greater risk aversion and worsening global financial conditions.

According with ECLAC, the value of Latin America and the Caribbean exports will fall at least 10.7% by 2020 due to lower prices by 8.2% and volume in 2.5%.

table-international-trade-andrea-moya-01

In the case of Ecuador, given that its main commercial partners China and the United States are the countries with the most infections, it is foreseeable that the value of non-oil exports reduces. This fact added to the fall of the oil prices will generate a significant fall on the value of Ecuadorian exports.

Under these circumstances, the country’s trade policy must facilitate a prompt answer to this crisis. The reduction of non-tariff barriers to import and exports, especial procedures for the release and clearance of goods, simplified mechanisms for the reimbursement of taxes and payment facilities for taxes on foreign trade are measures that would allow companies to overcome the challenges derived from the pandemic.

The Ecuadorian Customs Authority has made and efficient work in order to facilitate foreign trade operations during the state of emergency, it has maintained its services in all customs districts through electronic channels, it has implements specific procedures for the inspection of goods and it has suspended the terms applicable for the abandonment of good through the duration of the emergency.

However, the following measures are needed urgently:

  1. The Law for Simplification and Tax Progressivity issued on December 31, 2019 amended the Production, Commerce and Investment Code adding article 157.1. This article establishes a simplified procedure for reimbursing any taxes applicable to foreign trade (drawback). The amount of the reimbursement is equal to a percentage of the FOB value of the export and must be done automatically after the export customs forms are definitive. This process must be put into place in an effective and immediate manner.
  2. The Law for Tax Equity establishes that the foreign exchange tax (ISD) paid on the import of raw materials, capital goods and other goods to be incorporated in production processes may be regarded as tax credit for the payment of the importer’s income tax within the following five years. The importer is able to request a reimbursement of the foreign exchange tax that has not been credited against its income tax. However, the reimbursement request procedure is slow and bureaucratic. It is necessary to adopt simplified reimbursement processes that are effective and resolved on a timely manner.
  3. Article 116 of the Production, Commerce and Investment Code establishes that the importers are able to request payment facilities on foreign trade taxes derived from the import of capital goods. This benefit must by applicable to the payment of foreign trade taxes on the import of raw material and similar goods.
  4. The third general provision of the Law for the Development of Production, Investment Attraction, Employment Generation and Fiscal Stability establishes that the investment incentives included in such law will be applicable for 24 months, this deadline expires in August 21, 2020. The President is able to extend this deadline for 24 additional months. It is importer to extend this deadline in order to stimulate local and foreign investment which may generate employment. It is also important to simplify the processes needed to access certain benefits such as the exemption of tariffs and foreign exchange tax on the import of raw material and capital goods needed for the development of investment projects.

These measures will contribute to protect the cash flow of the taxpayers which is a fundamental issue in order to keep companies’ operating and avoid, to the extent possible, its closure and the subsequent loss of jobs and default with its creditors.

This crisis has worsened the country’s fragile economy, particularly for the fiscal imbalance that has been occurring for several years, and the lack of contingency funds to be injected in an economic recession. The alternative is not the “deglobalization”, but an international cooperation policy that allows each country to develop its best capacities. Ecuador urgently requires structural changes in the labor and tax areas, along with a clear foreign trade policy.

If you want to read this article in Spanish, click here


Table’s source: Special Report COVID-19 issued by the Economic Commission for Latin America and the Caribbean (ECLAC) – https://repositorio.cepal.org/bitstream/handle/11362/45351/1/S2000263_en.pdf

Latin Lawyer – Ecuador adopts expedited merger protocol amid covid-19 woes

accelerated-merger-protocol-xavier-rosales-latin-lawyer

DETAILS

DATE: 29-04-2020

CORRALROSALES IN THE NEWS

-Xavier Rosales

MEDIA: Latin Lawyer

The prestigious international publication “Latin Lawyer” has published an article on the new accelerated merger protocol approved by the Ecuadorian antitrust authority as a measure to fight against the effects of Covid-19 in the country. To deal with this issue, the entity had the expert opinion of our Partner Xavier Rosales.

“It was something that had been expected for a long time, and it is positive for the development of companies,” says our Partner in the text, who believes that the head of the antitrust authority, Danilo Sylva Pazmiño, has a more open approach than previous ones, which facilitates the authorization process for non-problematic transactions.

As explained in the text, the Superintendency of Control of Market Power (SCPM) approved on April 20th a draft resolution that creates expedited reviews for certain transactions that require notification prior to the merger. According to local professionals, COVID-19 has caused widespread delays in the agency’s ability to examine and investigate certain transactions.

This new protocol will ensure that an agreement can be approved within 40 days. The authority will have 15 days to send its conclusions to its decision-making body that will have 25 days to issue a final decision. Previously, the authority had 50 days to send its conclusions to the First Instance Resolution Commission (CRPI), and the decision-making body 60 to issue a decision – with the possibility of requesting another 60 days if the merger is very complex.

This accelerated merger system will be available for holding companies that do not directly or indirectly do business in Ecuador, companies merging with a combined market share of less than 30% in all relevant markets, and dealings with companies in bankruptcy that have a credible defense.

If you want to read the article, click here

Gestión Digital – COVID-19 and the limits of antitrust law

antitrust-ana-samudio.gestion-digital

DETAILS

DATE: 28-04-2020

CORRALROSALES IN THE NEWS: 

-Ana Samudio

The main objective of antitrust law is to ensure the existence of an equal playing field so that competitors have the same opportunity to offer goods and services to consumers in every relevant market. This initial budget necessarily implies the ban of agreements between competitors – any express or implicit agreement that reduces uncertainty about the behavior of a competitor – and the abuse of market power.

Within the framework of necessary and urgent measures to confront the world health crisis derived from the COVID-19 pandemic, several competition authorities have seen the need to relax – and even suspend – the sanctioning regime applicable to agreements between competitors, allowing exceptionally that these take place when temporary cooperation is necessary to guarantee the fair provision of essential goods and services during the crisis.

The first such announcement was from the Norwegian competition authority, which allowed, over a three-month period, coordination of itineraries between two local airlines to ensure the availability of the service. This announcement was quickly followed by regulators in Germany, England and the Netherlands, who relaxed the control regime for agreements between competitors aimed at guaranteeing the provision of goods and services; allowing competitors: (i) the exchange of information regarding availability, (ii) the cooperation necessary to keep the establishments open, (iii) the sharing of logistics of warehouses and transport; and (iv) the assignment / exchange of personnel to meet demand.

On its part, the European Competition Network (ECN), which groups the European Union’s competition authorities, issued a joint statement determining that, under current circumstances, reasonable cooperation between competitors would not constitute a restriction of competition in the terms of the community regulation and / or creates efficiencies in the production and distribution of goods and services that overweight the restriction that they could generate; and defined channels of attention to resolve doubts that operators may have about the legitimacy / illegitimacy of an intended cooperation, in light of these exceptional circumstances.

Likewise, the authorities in charge of the control and judgment of competition matters in the United States of America -Department of Justice and Federal Trade Commission- have created an expedited procedure -with duration of seven (7) calendar days- for the analysis and authorization of cooperation between competitors. The entire process is carried out online, for which operators interested in cooperating must provide information that demonstrates the relation with the crisis, necessity, and reasonability of the cooperation, under the protection of the crisis unleashed by the pandemic.

In Colombia, an exceptional regulation was created by which the Logistics and Transportation Center, created as an independent entity from the competition authority, has the mission of evaluating and approving agreements between competitors that are intended to generate efficiencies in the logistics and cargo transportation market which would be deemed illegal at any other time.

Along with these measures that make the system applicable to agreements between competitors more flexible, several authorities have stressed the importance of guaranteeing the provision, at fair and competitive prices, of products considered essential to protect the health and life of consumers (such as respirators, masks and disinfectant products), while warning that the operators that abusing their market power to affect this guarantee will merit a swift and hefty sanction. Along these lines, the Superintendence of Control of Market Power in Ecuador has issued two warrants to producers and sellers of these goods, reminding them that, according to the Organic Law of Regulation and Control of Market Power, they cannot take advantage of the emergency to increase their profit margins through unjustified price increases and will remain vigilant and implement the necessary control actions to preserve consumer rights and free competition.

In the first of the warrants, the Superintendent of Control of Market Power stated, that “Any variation in prices must obey the dynamics of the market and the individual and independent decisions of economic agents and not to anti-competitive agreements or union recommendations.” This assertion -which a priori would be contrary to the affirmative actions taken by competition authorities from other jurisdictions that were explained above- applies to the anticompetitive price-fixing agreements and not to the fair temporary cooperation between competitors aimed to benefit the consumers and tends to guarantee the supply  in this delicate estate of emergency, under the exemption to the prohibition provided in article 12 of the Organic Law of Regulation and Control of Market Power, which in the present state of affairs would justify cooperation between competitors when the following conditions are met simultaneously:

  1. Consumers or users be allowed to participate equally in their advantages: The purpose of cooperation would be to guarantee the provision of goods and services during the state of emergency, with which this condition would be fulfilled.
  2. That they do not impose restrictions that are not indispensable for the achievement of those objectives: Any intended cooperation must be strictly limited to measures required to meet the objective.
  3. That they do not grant economic operators the possibility of eliminating competition with respect to a substantial part of the products or services contemplated: The terms of the cooperation must not constitute barriers of entry or permanence of other competitors in the market.

If you want to read this article in Spanish, click here

Implementation of an expedited merger control procedure by the Superintendence of Market Power Control

combination-transactions-control-antitrust

On April 20, 2020, the Antitrust Authority issued an abbreviated analysis and control procedure applicable to certain combination transactions.

This expedited procedure, also known as fast-track, is common in most jurisdictions that have an antitrust merger clearance process and generally apply to transactions that either (i) do not imply any change in the market structure – such as a change of control of a local business in favor of a foreign acquirer with no prior participation in the Ecuadorian market-; or, (ii) in which,  a priori, the market power resulting from the operation is not significant enough to allow unilateral anticompetitive/abusive behaviors by the combined operator.

The analysis and resolution within a fast-track process must be completed within 25 business days. This term contrasts with the regular process that usually lasts between 4 and 14 months (when remedies apply).

The fast-track process is applicable to the following 6 scenarios:

  1. When the change of control of the business occurs in favor of a foreign economic operator with no prior economic activity in Ecuador.
  2. In horizontal combinations (transactions between competitors) where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  3. In horizontal combinations that occur in markets where the Herfindahl-Hirschman index (HHI) before the combination is less than 2,000 points and, as a result of the transaction, the HHI index variation is less than 250 points.
  4. In vertical combinations (transactions between operators in the same production/marketing chain), where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  5. In vertical combinations where the Herfindahl-Hirschman index (HHI) of each of the vertically integrated markets post-merger is less than 2,000 points.
  6. In transactions involving one or more economic operators that are at risk of bankruptcy, duly supported and qualified by the Antitrust Authority.

The implementation of the fast-track processis highly positive to facilitate new business opportunities, particularly involving foreign investors. In addition, it contributes to the timely application of the competition regulation in the scope of merger control during the state of emergency deriving from Covid-19.

 

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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

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Gestión Digital – Implications of the Declaration of Sanitary Emergency and State of Emergency in the Administration of Justice

state-of-emergency-mateo-zavala-gestión-digital

DETAILS

DATE: 15-04-2020

CORRALROSALES IN THE NEWS: 

-Mateo Zavala

On Thursday, March 12, 2020, the Ministry of Public Health declared a State of Sanitary Emergency due to the outbreak of coronavirus—or COVID-19—to prevent a potential massive contagion among the population.

Despite having declared a State of Sanitary Emergency, the Judiciary Council and the National Court of Justice did not make any immediate pronouncements, which meant that activities in all Judicial Branch offices continued as normal.

On March 16, 2020, the Judiciary Council, through Resolution 028-2020, restricted public service in judicial offices, with the exception of judicial units with jurisdiction over: flagrante delicto, criminal, violence against women and the family unit, traffic, juvenile offenders, multi-competent units and penitentiary guarantees.

In turn, The National Court of Justice, through Resolution 04-2020, ordered on the same date the suspension of terms and deadlines in all judicial proceedings, except for flagrant crimes while the State of Sanitary Emergency continues; this is, until May 10, 2020.

Can a person go to court if constitutional rights not limited by the declaration are violated during the State of Emergency?

Note that declaring a State of Emergency, as set out in article 165 of the Constitution, only limits freedom of movement and freedom of association and assembly rights. Therefore, if during the State of Emergency any right other than those mentioned above is violated, citizens may initiate the actions set forth in the Constitution before the criminal judges on duty by meeting the requirements established in the Organic Law on Jurisdictional Guarantees and Constitutional Control, and in the decisions issued by the Constitutional Court.

The Constitution and the Organic Law on Jurisdictional Guarantees and Constitutional Control foresee the following actions in case of constitutional rights’ violation:

i) Precautionary measures action, which can be requested independently or in conjunction with another constitutional action for the protection of rights, will depend on whether the claim is to stop the violation of a right or to avoid the violation thereof; ii) Protective action; iii) Habeas Corpus action; iv) Access to public information action; and v) Habeas Data action.

Knowledge and resolution of these actions, in accordance with article 86 numerals 1 and 2 of the Constitution, pertains to any judge of the Republic, given that the aforementioned norm establishes that all judges of Ecuadorian territory are competent to hear and solve constitutional cases. Thus, if there is a violation of constitutional rights that are not restricted under the State of Emergency, it is possible to approach any of the flagrante delicto units to request cessation of the violation.

Do court servers perform teleworking? What happens to the hearings and other proceedings scheduled for the dates when the judicial offices are not open to the public?

Even though the Judiciary Council has taken several actions for the use of technological means in the administration of justice, such as electronic notifications, it decided to suspend public service for judges and courts and did not opt for teleworking for judicial—non-administrative— officials.

Previously scheduled proceedings and hearings, on dates when the State of Sanitary Emergency continues, will be rescheduled according to the availability of each judicial unit. The Judiciary Council did not deem it appropriate to carry out the proceedings and hearings via telematic means, although this is permitted by law.

If the health emergency continues beyond the initially established period, it would be highly convenient for the Judiciary Council to arrange for hearings and other proceedings to be conducted electronically, in order to alleviate the impact of the situation on the administration of justice. It is worth noting that some proceedings are scheduled for 2022, which reveals the overload in courts and tribunals.

If you want to read this article (in spanish), click here

Extension of deadlines for tax matters

deadlines-extension-tax-matters

In accordance with the state of emergency declared by the President, the following tax authorities, in the exercise of their powers, have suspended the following deadlines and terms:

  1. Regulation NAC-DGERCGC20-00000022 issued by the Internal Revenue Service establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 31, 2020. The suspension was extended until April 30, 2020 by regulation NAC-DGERCGC20-00000028.
  2. Regulation SENAE-SENAE-2020-0016-RE issued by the Customs Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 17 to March 31, 2020. The suspension was extended until April 30, 2020 by regulation SENAE-SENAE-2020-0022-RE.
  3. Regulation GADDMQ-DMT-2020-001-R issued by Quito Municipal Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 20, 2020. The suspension was extended until March 31, 2020 by regulation GADDMQ-DMT-2020-002-R. As soon as the municipality extends the suspension period, we will inform you through this bulletin.

 

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State of emergency – tax measures (April 1st)

state-of-emergency-tax-measures

Regulation NAC-DGERCGC20-000000025 issued by the Internal Revenue Service on April 1, 2020 regulates the application of Executive Decree 1021 by which regulated certain tax issues with regard to the state of emergency.

1. New deadline for filing the income tax return

Taxpayers, except non-profit and government entities, may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 April 15, 2020
3 and 4 April 17, 2020
5 and 6 April 21, 2020
7 April 23, 2020
8 and 9 April 29, 2020
0 April 30, 2020

Non-profit and government entities may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 May 4, 2020
3 and 4 May 5, 2020
5 and 6 May 6, 2020
7 and 8 May 7, 2020
9 and 0 May 8, 2020

2. Taxpayers that are able to defer the payment of taxes:

The following taxpayers are able to defer the payment of corporate income tax of the fiscal year 2019 and, value added tax (VAT) to be declared in April, May and June 2020:

  • Micro-enterprises understood as those that obtained gross revenues of up to US$300,000.00 during fiscal year 2019.
  • Taxpayers that, before March 27, 2020, have registered the province of Galapagos in their Tax ID (RUC).
  • Taxpayers that are regular exporters of goods, or that 50% of their income derives from the export of goods; or,
  • Taxpayers that, before March 27, 2020, have registered one of the following as their main economic activity in their Tax ID:
    • The operation of airlines,
    • The provision of accommodation and/or food services; or,
    • Activities of the agricultural sector.

 

3. Deadlines for paying the corporate income tax:

Taxpayers described in paragraph 2 are able to pay the corporate income tax of the fiscal year 2019 in a single installment, according to the general rules of the Income Tax Regime Law and its regulations, or in six installments, in accordance with the following percentages:

Month for filing
the tax return 
Payment
installments 

Payment
percentage

April, 2020 April, 2020 10%
April, 2020 May, 2020 10%
April, 2020 June, 2020 20%
April, 2020 July, 2020 20%
April, 2020 August, 2020 20%
April, 2020 September, 2020 20%

The first installment shall be paid on the date the return is due in accordance with the schedule set forth in paragraph 1. The remaining 5 installments shall be made through the Multiple Payment Form in accordance with the following schedule:

Tax ID 9th digit:

Due date:

1 10th of each month
2 12th of each month
3 14th of each month
4 16th of each month
5 18th of each month
6 20th of each month
7 22th of each month
8 24th of each month
9 26th of each month
0 28th of each month

If the taxpayer doesn’t pay the tax within the deadlines described before, it would be subject to pay the applicable interests and fines.

 

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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

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Measures to mitigate the effects of COVID-19 on labor issues

measures-effects-covid-19-labor-issues-marta-villagomez

The arrival of COVID-19, cataloged as a global pandemic, and the measures that Governments have adopted to mitigate its effects, have brought a deep economic crisis that affects directly both employers and workers.

According to ILO’s (International Labor Organization) official data, it is estimated that COVID-19 could cause the loss of 25 million jobs worldwide.

In Ecuador, the President of the Republic declared a state of emergency and suspended on-site labor activities from March 17th to April 12th. This period may be extended according to the development of the pandemic.

Those entities that perform activities within health, safety, airports, financial, food, pharmacies and exporting sectors and its supply chain are authorized by the Government to operate.

Entities belonging to other sectors are able to operate if services they provide and the activities carried out by their workers can be performed from home through “emergency telework”, as the authority has called it.

Some emergency measures have been established with the purpose of protecting employment and guaranteeing the health of workers, but also with the objective of preserving the financial stability of the employer. These measures are described below:

1. Suspension of work maintaining payment rights

For those entities that are required to suspend all or part of their activities as a consequence of the Government’s measures, the following should be considered:

  • Employer must pay its workers during the period on which activities are suspended.
  • Employer and its workers may agree on a payment schedule of the salaries accrued during the period on which activities are suspended.
  • Employer has the right to recover the period on which activities were suspended, increasing the working schedule up to 12 hours a week and 8 hours on Saturdays.
  • If worker does not fulfill with recovery time, employer may deduct from any future salary payments what employee had received during the suspension period.

In order to introduce suspension of work, employer must fulfill the online process implemented by the Ministry of Labor.

2. Reduction of working hours (work schedule)

Employers may reduce the working hours temporarily or permanently and reduce proportionally worker´s remuneration – including teleworkers – under the following scenarios:

  • With worker’s consent

According to article 82 of the Labor Code, it is possible to agree with worker to permanently or temporarily reduce their working hours and their remuneration proportionally. For its implementation, it will be necessary to enter into an addendum to the employment agreement and file such addendum with the Ministry of Labor and the Ecuadorian Institute of Social Security (“IESS”).

  • Without worker’s consent

According to article 47.1. of the Labor Code and Accord MDT-2020-077 issued by the Ministry of Labor, the latter may authorize the reduction of working hours. Such reduction will be mandatory for workers, under the following conditions:

  1. Working hours may not be reduced to less than 30 hours per week.
  2. The measure can be applied for up to 6 months, renewable for an additional 6 months.
  3. Employer contribution to IESS must be paid based on the full remuneration corresponding to 8 hours of work per day.
  4. In the event that during the reduction of the working hours the labor relationship is terminated without cause, severance shall be calculated based on the last monthly remuneration received by worker before the working hours reduction.
  5. If the company generates profits in the fiscal year in which the measure was applied, it will not be entitled to distributing dividends without first paying workers the balance they stopped receiving as a result of the reduction in working hours.

In order to introduce suspension of work, employer must fulfill the online process implemented by the Ministry of Labor.

3. Emergency vacation planning

During the health emergency, employer may require its workers to take any pending paid vacation time. Employer may also agree with its workers for them to take advance vacation time.

4. Work leave with or without payment

Additionally, employers may resort to the following alternatives in order to maintain employment and at the same time preserve the financial status of the company: 

  • Leave without payment

With worker’s consent, a “leave without payment” may be agreed. In order to apply such leave, an agreement must be entered between the parties. Under this alternative, the employment relationship does not end, worker holds his/her seniority in the company.

An exit notice for “leave without payment” must be registered in IESS online system. Therefore,  worker will not be covered by Social Security during the leave period.

  •  Leave with partial payment

With worker’s consent, a “leave with partial payment” may be agreed. In order to apply such leave, an agreement must be entered between the parties. Under this alternative, employer recognizes the worker a percentage of his/her remuneration during the leave period.

Contribution to the IESS will be made on the amount actually paid to the worker, but it may not be less than 50% of the statutory minimum wage (currently US$400.00).

5. Modification of working conditions

Employer and workers may agree on work alternatives established in the existing regulations, due to conditions arising from the COVID-19 pandemic, such as mobility restrictions, preventing infection risks and employer’s financial situation. All these must not imply a waiver to workers’ rights. For example, parties could modify the type of agreement or take health and safety measures such as workers’ remaining in suitable places inside the employer’s facilities, among many others.

6. Termination of the employment relationship

If it is not possible for employer to maintain its workers or part of them, company will be able to unilaterally terminate the employment contracts by paying the corresponding severance determined by law. Government has not established the intangibility of employment contracts due to the pandemic, except for those specific cases already provided by law.

Some lawyers have expressed their opinion that labor contracts may be unilaterally terminated without severance payments under these circumstances due to force majeure (restrictions imposed by the government). We do not agree with these criteria, due to the social nature of labor law, pro operario principle, and consequently, the possible risks employer would assume now and in the future.

Finally, it shall also be considered that workers who lose their jobs due to causes beyond their control and who meet the conditions established by  IESS – 24 accumulated monthly contributions and at least 6 continuous contributions immediately prior to termination – will be able to access “unemployment insurance” for a maximum period of 5 months, once 60 days have elapsed without employment.

 

Marta Villagómez
Senior Associate at CorralRosales
mvillagomez@corralrosales.co

Reforms to Ministry of Labor guidelines on the application of reduction, modification or emergency suspension of work activities

work-activities-reduction-modification-suspension-Covid-19-labor

On March 28, the Ministry of Labor amended the Ministerial Agreement MDT-2020-077, regarding guidelines on the application of reduction, modification or emergency suspension of work activities during the sanitary emergency.

Working-day schedule modification

Employer that modifies working schedule due to the sanitary emergency, must allow their workers to rest for 2 consecutive days.

Suspension of work activities 

  • Employer is entitled to recover the period on which activities were suspended, increasing the working schedule up to 12 hours during the week and 8 hours on Saturdays.
  • Employer and workers may agree on a wage payment schedule during the period on which activities are suspended.

Emergency vacation planning

During the health emergency, employer may require its workers to take any vacations days they have available. Employer may also agree with their workers to take early vacations, to do so, the corresponding vacation request must be submitted.

Working conditions modifications 

Employer and workers may agree on work alternatives established in the existing regulations, due to conditions arising from the Covid-19 pandemic, such as the mobilization impossibility, prevention infection risks and employer´s financial status. All these must not imply a waiver to workers’ rights.

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