Payment facilities and exceptional payment plan – IRS

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Regulations NAC-DGERCGC20-00000043 and NAC-DGERCGC20-00000044 issued on June 23, 2020 by the General Director of the Internal Revenue Service, the rules for applying the Second and Third Transitory Provisions of the Law for Humanitarian Support to Combat the Health Crisis arising from COVID-19 were established.

The Second Transitory Provision of said law and Regulation NAC-DGERCGC20-00000043 establish that those taxpayers that applied the tax amnesty provided in the Law for the Promotion of Production, and that from January 2020 to June 22, 2020 have not paid 2 or more installments of their payment facility plan, may cover the amount owed until September 30, 2020 without surcharges, interest or fines.

Furthermore, the Third Transitory Provision of said law and Regulation NAC-DGERCGC20-00000044 establish that those taxpayers that applied the exceptional payment plan provided for in the Law on Tax Simplification and Progressivity, and that as of June 22, 2020 have not paid any of their installments, may cover the amount owed in 12 equal monthly installments, which must be paid on the 28th of each month, beginning July 28, 2020, without surcharges, interest or fines.

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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.

CORRALROSALES

El Comercio – Contractual unforeseeability resulting from the pandemic

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DATE: 12-06-2020

CORRALROSALES IN THE NEWS

-Ramón Paz y Miño
-Mateo Zavala

MEDIA: El Comercio

Novedades Jurídicas, the legal supplement of El Comercio, publishes an article by our Senior Associate Ramón Paz y Miño and our Associate Mateo Zavala in which they explain the contractual unforeseenness arising from the health crisis caused by Covid-19. In the “new normality”, the dispute resolution clauses incorporated in contracts will be triggered in the absence of agreements and, therefore, ordinary justice or arbitration will be used.

“In recent decades, the theory of unforeseeability – which is an ideal mechanism for facing adverse effects in the execution of contracts – has acquired greater importance and relevance in the legal world, with the exception of Ecuador, where little or nothing has been said on the matter,” our lawyers put into context in their article.

As they point out, contractual unforeseenness is incorporated in several legislations, such as in Argentina and Colombia, where the objective is to preserve the survival of a contract legally entered into by the parties and where compliance has been affected by external factors beyond their control, which could not be foreseen during the contract negotiation stage.

“In addition to ensuring the full force of the contract, the theory of unforeseeability seeks to ensure fairness in the contractual relationship and to avoid excessive costs for one of the parties, which could affect the performance of the obligations”, explain the authors of the article.

The current situation suggests that the theory of contractual unforeseeability will be used in more than one case in Ecuador. The absence of an express rule that regulates it does not prevent its application, which will make it possible to use reasonability criteria for contractual relations due to events that generate an imbalance between the contracting parties. “This does not mean that the validity of legal security is ignored, much less the reliability and effectiveness of the system, but seeking other solutions will ensure that the performance is fair,” add Paz y Miño y Zavala.

If you want to read the full article, click here

Aula Magna – The Ecuadorian Intellectual Property Office (or SENADI according to its Spanish acronym) rejected ex-officio the registration of a mark because it considered that it was applied for in order to perpetrate an act of bad faith

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DATE: 13-05-2020

CORRALROSALES IN THE NEWS: 

-Katherine González

MEDIA: Aula Magna

Through Resolution No. SENADI_2019_RS_19814, the Ecuadorian IP Office rejected the application to register the mark KRUSELINGS in Class 28, for being similar to a globally well-known mark. Therefore, it was considered that the registration was sought in bad faith so as to mislead consumers. 

A mark is any sign capable of identifying goods or services in the market. For the purposes of registration, the community and national legislation establish a series of grounds for irregistrability that must be reviewed by the intellectual property offices, in order to avoid the acceptance for registration of signs that do not comply with the minimum requirements of a mark or that affect the rights of third parties.

One of the most well-known grounds for refusal which tends to be the most common ground for denying a mark at the Ecuadorian IP Office and in general at the IP Offices around the world is when a mark is similar to a prior application or registered mark[1]. However, another of the grounds to deny a mark is when it has been applied for to mislead consumers or to perpetrate an act of unfair competition or in bad faith according to the articles 135 and 137 of the Decision 486 of the Andean Community and the article 362 of the National IP Law.

The KRUSELINGS Case:

An Ecuadorian natural person applied for the mark KRUSELINGS in March 2019, covering “games, toys; gymnastic and sporting articles not contained in other classes; decorations for Christmas trees” in Class 28.

The mentioned application was not opposed by third parties. However, when issuing its decision, the Ecuadorian IP Office considered that the applied-for mark was confusingly similar with a mark well-known globally, and therefore that the application fell within the grounds for refusal since consumers would be deceived, in addition to establishing that it was an application made in bad faith.

Within its decision, the authority made it clear that despite there not being a prior application or registration similar to KRUSELINGS in Ecuador, the relevant grounds are directed at protecting the general interest, particularly consumers.

These types of decisions are aligned with global trends in the protection of intellectual property, most notably in trademarks. In particular, a Board Resolution of the International Trademark Association[2] (INTA) has established indicators to help trademark authorities determine whether a trademark application has been made in bad faith, from which we cite the two most relevant to the current case:

  • If the mark has been applied-for primarily to appropriate a trademark well-known in other jurisdictions or to disrupt the business of a competitor;
  • If the trademark was applied for with the intention of creating confusion regarding the source, sponsorship, affiliation or endorsement of the goods or services of the applicant;

In the mentioned resolution, INTA arrived at the conclusion that “the possibility of arguing and demonstrating bad faith should be used as a tool to defeat the piracy of trademarks and other clear cases of misappropriation of trademarks”.

The decision in the case of KRUSELINGS signals progress in the protection of intellectual property in Ecuador, since arguing bad faith previously, at least in opposition proceedings, was almost always rejected or ignored, leading in many cases to the acceptance of the registration of marks that infringed the rights of third parties, under the sole pretext that the mark was not registered or applied for in Ecuador.

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


[1] Article 136 section a), Decision 486 of the Andean Community
[2] Board resolution: September 22, 2009

Resumption of terms – IRS

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The Internal Revenue Service, through Regulation NAC-DGERCGC20-00000022, suspended the terms and deadlines in all administrative processes and the statute of limitations for collecting debts from March 16 to March 31, 2020. The suspension was extended until June 15, 2020 by regulation NAC-DGERCGC20-00000038.

By Regulation NAC-DGERCGC20-00000042, issued by the Director General of the Internal Revenue Service on June 16, 2020, the terms and deadlines in all administrative processes and the statute of limitations for collecting debts have been resumed, with the following exceptions:

  1. The terms and deadlines of administrative processes and the statute of limitations for collecting debts that are being attended in administrative units of the Internal Revenue Service located that are located in cities classified under “red light” remain suspended. These terms and deadlines will resume once the Emergency Operations Committee classifies the cities under “yellow or green lights”.
  2. In Quito Metropolitan District, the terms and deadlines of administrative processes and the statute of limitations for collecting debts will resume once the government institutions resume their work on-site. When this bulletin was issued, the day on which the on-site work is expected to resume is June 22, 2020.

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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.

CORRALROSALES

Procedure for the Exchange of soon-to-be-expired Medicines

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Article 175 of the 2006 Health Law required medicines suppliers  to exchange products that are about to expire in accordance with “… with what the corresponding regulation establishes.”[1]

Almost 13 years after the aforementioned law entered into force, Ministerial Agreement No. 00015-2019 published in Official Registry No. 30 on September 2, 2019 issued the “Soon-to-be-expired General Medicine Exchange Regulations” (hereinafter, the “Regulations”), which are mandatory for all health establishments and warehouses of the institutions of the National Health System.

Due to the time it took to issue the regulation, doubts have arisen about theirs application. This article summarizes and clarifies the implemented procedure.

The procedure[2] for the exchange  of medicines in general, biological medicines and medicine kits containing medical devices (hereinafter and collectively, “medicines”), which are about to expire, has the following stages:

  1. Periodically, the person in charge of the information system of the pharmacy, medicine cabinet and / or warehouse of the institution of the National Health System will send the head of the requesting unit the stock of those medicines that are about to expire and subject to exchange.
  2. The technical manager of the pharmacy or warehouse and the staff in charge of the medicine cabinet of the institution will carry out the physical verification along with the warehouse keeper who will draw up the list of medicines subject to exchange.
  3. The head of the institution´s requesting unit will prepare the technical report of the medicines to be exchanged, taking into account the information sent by the technical manager of the pharmacy or warehouse or the staff in charge of the medicine cabinet and will request the supplier the respective exchange.
  4. The supplier will notify the head of the requesting unit of the date, information and quantity of the medicines to be exchanged.
  5. The head of the requesting unit will notify the technical manager and the warehouse keeper of the exchange to be executed.
  6. Once the technical manager and the warehouse keeper have been notified, the medicines that are about to expire shall be placed in the warehouse withdrawal area for the respective exchange.
  7. The person in charge of the warehouse will deliver the medicines that are about to expire to the supplier. Then, a reception delivery document[3] will be drawn up and signed between the person in charge of the warehouse, the head of the requesting unit and the supplier.
  8. The supplier will deliver the “new” medicines to the warehouse manager for the corresponding technical and administrative reception, in which the quantity and technical specifications of the medicines will be verified in accordance with the internal procedures that each institution of the National Health System has for this purpose.
  9. A record will be drawn up and signed[4] for the receipt of the “new” medicines between the person in charge of the warehouse and the supplier. Said act must be verified and signed by the head of the requesting unit.
  10. The institution must prepare the complete file on the exchange. The responsibility for filing said files shall be laid down in the instructions drawn up by each institution.

Regarding the procedure, the following requirements must be taken into account:

  • Supplier must withdraw the medicines subject to exchange up to one month before the expiration date.
  • Medicines that are about to expire must be exchanged for medicines with the same technical specifications and a shelf life of at least twelve months.
  • Withdrawal of medicines that are about to expire and the delivery of the “new” medicines may be carried out at different times, subject to an agreement between the parties, provided that the provisions of the Regulations are complied with.

Here are some details regarding doubts that may arise in the application of the Regulation:

  • Exchange of medicines that are about to expire is regulated regardless of the date on which they were purchased. Therefore, it also applies to the exchange of medicines that were purchased before the Regulation entered into force.
  • A maximum of one exchange for each acquisition will be accepted[5]. In addition, for exchanges involving the health establishments of the Comprehensive Public Health Network – RPIS, it must be taken into account that:
    • The percentage of exchange cannot be greater than fifteen percent (15%) of the total volume of the medicine purchased in each acquisition process.
    • In purchases through corporate reverse auction or other joint mechanisms, the indicated percentage will not be applied, but the provisions of the specifications prepared by the Commission of Public Purchases. In no case may they contemplate a percentage higher than ten percent (10%).

Although the Regulation does not expressly[6] indicate it, it is considered that these percentages would apply only to the replacement of the medicines and not to their withdrawal, in accordance with the provisions of article 175[7] of the Health Law. Therefore, the supplier would have the obligation to withdraw all the medicines that are about to expire, but their replacement will be limited to the percentages established in the Regulation.

  • In the case of vital[8] medicines or medicines that are difficult to access for rare or orphan
  • [9] diseases, which are about to expire, the Regulation establishes that the supplier must carry out the number of exchanges that are necessary, without considering the percentage of medicine to be replaced in each exchange.
  • If the supplier justifies that it cannot make the exchange with the same products, the Regulation allows it to be carried out with other medicines with an equivalent economic value. If this is not possible, the supplier, in agreement with the buyer, must reimburse the institution the respective value.

In conclusion, while the Regulation for the exchange of medicines is welcome, it is necessary for the authority to clarify rules that may lead to confusion, without waiting for conflicts to arise from  different ways of interpreting and applying the Regulation by the acquiring institutions.

Mario Fernández
Associate at CorralRosales
mfernandez@corralrosales.com


[1] Art. 175.- Sixty days before the expiration date of the medicines, the pharmacies and medicine cabinets will notify their suppliers who have the obligation to withdraw said products and exchange them in accordance with the provisions of the corresponding regulations. (highlighted out of text).
[2] Ministerial Agreement No. 00015-2019, Official Registry 30, September 2, 2019, Art. 9.
[3] In accordance with number 6 of article 9 of the Regulation, based on this act, the institution will generate the release of the medicines in the inventory control information system that it has.
[4] In accordance with number 8 of article 9 of the Regulation, based on this act, the institution will generate the entry of the “new” medicines in the inventory management system that it has.
[5] Art. 1 of the Regulation defines the acquisition of medicines as “… the process by which medicines are purchased in general, biological medicines or medicine kits that include sufficient medical devices to meet the expected demand, according to the corresponding contracting mechanism and based on the approved schedule. ”
[6] Ministerial Agreement No. 00015-2019, Official Registry 30, September 2, 2019, Art. 12.
[7] Art. 175.- Sixty days before the expiration date of the medicines, the pharmacies and medicine cabinets will notify their suppliers, who have the obligation to withdraw said products and exchange them in accordance with the provisions of the corresponding regulations. ” (Highlighted out of text).
[8] The Regulation defines vital drugs as those indispensable or irreplaceable drugs to safeguard the life or alleviate the suffering of a user / patient or a group of users / patients. Each health establishment will define its list of vital drugs, through the Pharmacotherapy Committee or whoever takes its place
[9] The Health Law defines rare or orphan diseases as those potentially fatal, or long-term debilitating, low prevalence and highly complex diseases.

 

Reinstatement of administrative procedures at the Ministry of Labor

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The Ministry of Labor (“MdT”) through Resolution No. MDT-2020-024 dated June 10th, decided to resume as of June 15, 2020, the hearings, terms, deadlines, and prescriptions that were suspended, within the following procedures:

  • “Visto Bueno” (employment termination with cause);
  • Administrative proceedings;
  • Administrative appeals;
  • Collection actions; and,
  • Other administrative procedures followed at any MdT unit.

Complaints submitted under the emergent procedure during the state of emergency will continue the on-line procedure until its completion.

Deadlines and terms of the administrative procedures for those county for which the restrictions continue to be under red light will be resumed when the restrictions change to yellow light, in accordance with the provisions issued by the county Emergency Operations Committee.

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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.

CORRALROSALES

Extension of deadlines for deferral of tax obligations

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Regulation NAC-DGERCGC20-00000036, issued on May 27, 2020 by the General Director of the Internal Revenue Service establishes the following rules for applying the Executive Decree 1030, which allows taxpayers the deferral of its tax obligations:

1. Which taxpayers are eligible for deferral of its tax obligations?

The following taxpayers are able to defer the payment of 2019 corporate income tax and VAT to be declared in the months of April, May and June:

  1. Micro, small and medium enterprises understood as those that obtained gross revenues of up to US$5,000,000.00 during fiscal year 2019.
  2. Taxpayers who during the fiscal year 2019, obtained gross revenue higher than US$5,000,000.00, provided that they meet at least one of the following conditions:
    • Taxpayers that, before March 27, 2020, have registered in their Tax ID one of the following as their main or secondary economic activity: operation of airlines, agricultural activities, provision of accommodation and/or food services.
    • Taxpayers that, before March 27, 2020 have registered in their Tax ID the province of Galapagos as their main tax address.
    • Taxpayers that are regular exporters of goods, or that 50% of their income derives from the export of goods.

Small and medium-sized enterprises that, on April 1, 2020, have registered any of the following as their main economic activity in their Tax ID, will not be eligible for the deferral.

  • Financial services ancillary activities; and/or,
  • Financial service activities, except insurance and pension funding activities.

2. How can taxpayers benefit from the deferral?

In order to apply the deferral, taxpayers are able to submit an original or substitute tax return and pay any fines and interests applicable.

If the taxpayer has already filed the tax return, they are able to apply the deferral if they have outstanding tax obligations. Any payments made by the taxpayer prior to the date on which the substitute tax return is filed, these will be applied in accordance with article 47 of the Tax Code (first to interest, then to the tax amount and finally to fines).

3. Until what date can the income tax return be filed?

For purposes of tax deferral, taxpayers must file their original or substitute income tax return according to the following schedule:

 

Corporate Income Tax
fiscal year 2019
Ninth Digit of Tax ID Date of submission
(until)
1,2 and 3 4th of June, 2020
4,5 and 6 5th of June, 2020
7,8 and 9 8th of June, 2020
0 9th of June, 2020

Taxpayers domiciled in the province of Galapagos may file the return until June 9.

Taxpayers must pay the first instalment of the tax plus interests and fines, if applicable at the date the tax return is filed. The second instalment must be paid within the same deadlines, through the Multiple Payment Form.

The payment of the remaining four installments must be made according to the following percentages, through the Multiple Payment Form:

 

Quota Month of Payment Rate of
payment
3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%

4. Until what date can the VAT returns be filed?

For the purposes of tax deferral, taxpayers must file their original or substitute VAT returns according to the following schedule:

VAT  – March 2020
Ninth Digit of Tax ID Date of submission
(until)
1,2 and 3 4th of June, 2020
4,5 and 6 5th of June, 2020
7,8 and 9 8th of June, 2020
0 9th of June, 2020

 

VAT  – April 2020
Ninth Digit of Tax ID Fecha de presentación
(hasta)
1,2 and 3 4th of June, 2020
4,5, 6 and 0 5th of June, 2020
7,8 and 9 8th of June, 2020

Taxpayers domiciled in the province of Galapagos may file the return until June 9.

Taxpayers must pay the first instalment of the tax plus interests and fines, if applicable at the date the tax return is filed. The second instalment must be paid within the same deadlines, through the Multiple Payment Form.

The payment of the remaining four installments must be made according to the following percentages, through the Multiple Payment Form:

VAT – Month Payment quota: Month of
Payment
Rate of
Payment
March 2020 3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%
April 2020 3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%

According to Executive Decree 1030, taxpayers that layoff their workers during the emergency will not be eligible for tax deferral. The Ministry of Labor shall notify the Tax Authority of any dismissals made during such period.

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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.

CORRALROSALES

Aula Magna – Does Covid-19 pandemic constitute force majeure that justifies the termination of individual employment contract?

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DATE: 03-06-2020

CORRALROSALES IN THE NEWS: 

-Alisson Vera

MEDIA: Aula Magna

Coronavirus or Covid-19 pandemic shocked the world. All countries are reacting with various measures to mitigate the multiple consequences being generated in all scopes.

After health concerns, the economic impact is a great concern, since in addition to the closing of companies and the consequent fall in the economy, the loss of jobs will condemn a significant part of the workforce to unemployment.

The International Labor Organization ILO, in its publication “COVID-19 and the world of work: Implications and Responses[1]”, provided a preliminary assessment of the possible impact of Covid-19 on the world of work and proposed a set of measures to mitigate these repercussions. There is no doubt that this situation affects workers and employers worldwide, since there are sectors in which there is no production nor incomes, but they still have expenses (rent, suppliers, payroll, social security, etc.). Therefore, dialogue is the best tool to achieve an agreement.

On March 16, 2020, the State of Exception was decreed in Ecuador to mitigate the spread of Covid-19. Among other measures, the closing of certain sectors and social isolation were ordered. Priority and strategic industries such as health, food, basic services, telecommunications, among others are the only ones authorized to provide services in person.

Due to this situation, the Ministry of Labor, in order to comply with the restrictions ordered by the authority and maintain jobs in the country, has issued several agreements that encouraged companies to implement, to the extend possible: emergency teleworking, modifying workday, establishing vacation time, implementing the temporary suspension of work, and has even opened the possibility for employers and workers to reach agreements, taking into consideration the economic situation of the company, as long as their labor rights are not infringed.

Despite the efforts of the labor authorities, it is not possible to apply temporary measures to maintain employment contracts in all scenarios, and there are cases in which employers find it necessary to terminate employment contracts due to the effects of the Covid-19.

In this regard, section 6 of article 169 of the Labor Code, which contains the grounds for terminating the employment relationship, provides:

“Art. 169.- Causes for the termination of the individual contract.- The individual employment contract ends:… 6) By unforeseen circumstances or force majeure that makes the work impossible, such as fire, earthquake, storm, explosion, plagues of the field, war and, in general, any other extraordinary event that the contractors could not foresee or that they anticipated, they could not avoid;… (I did the underlining.) ”

Despite the fact that, on a doctrinal level, there is a difference between unforeseen circumstances and force majeure, since the term “unforeseen circumstances” should be reserved for the acts of nature, while “force majeure” refers to the events caused by man, most legal and treaty systems agree that the effects are the same. Ecuadorian regulations do not distinguish between those two[2]. Thus, the definition of force majeure is the same as that of unforeseen circumstances and is contemplated in article 30 of the Civil Code that establishes: “(…) It is called force majeure or unforeseen circumstances, the unforeseen event that it is not possible to resist.” Its effect is the exoneration of the debtor’s responsibilities[3].

Therefore, it is important to identify the fact that constitutes force majeure, since based on this, the analysis of the effects it may have on the employment relationship will be carried out. On the other hand, for force majeure to apply, as an exemption from labor responsibility, the doctrine and jurisprudence[4] establish that the following elements are necessary:

  1. Non-imputable: The constitutive act of force majeure cannot, nor should it be attributable to the party that alleges it; that is, for an event to be considered force majeure, the employer cannot have caused it, whether through fault, fraud or negligence.
  2. Unpredictability: that the fact could not have been foreseen within the ordinary calculations; and that, although it has been foreseen, it is inevitable.

In this regard, the Supreme Court of Justice – today the National Court of Justice – has said:

 “There is no doubt that the background of the closing of the company’s activities was due to the fault of the employer, for the lack of payment to the treasury. Therefore, there is no logical and legal basis for the closing of the company due to force majeure, since the situation of force majeure defined in Article 30 of the Civil Code is not presented in the case, because the closing situation of the company was foreseeable by virtue of the delay of the payments before the State. Judicial Gazette. CIII year. Series XVII. No. 8. Page 2533; Quito, May 29, 2001. ((I did the underlining.)”

In this case, the elements detailed above are not configured, since the supposed fact of force majeure; that is, the closing of the establishment was attributable to the employer for not complying with a legal obligation. Likewise, the employer could foresee the closing of the establishment, since it was one of the sanctions provided by law as a consequence of its acts.

  1. Irresistibility: “that could not have been avoided” as expressed by Coustasse[5], refers to the conduct of those who invoke the force majeure in the face of the event itself, and consists of the mechanisms used to mitigate the unforeseen event tending to avoid its harmful effects.
  2. Causation: that the damages caused are a consequence of the unforeseen event that is constituted as a unforeseen circumstance and not of another factor.
  3. Impossibility to work. – For Alberto G Spota[6]: “The unforeseen circumstance means the legal or physical impossibility of executing the due provision (…)”. This element must be configured with irresistibility, since the impossibility of rendering the service must be linked to the impossibility to overcome the harmful effects of force majeure or unforeseen circumstance alleged.

For this analysis, it is necessary to consider that, to mitigate the effects of Covid-19 on industries, the Labor Code contemplates figures such as the temporary suspension of work activities – maintaining the payment of workers’ compensation – and cease of activities by the employer. Therefore, the impossibility to work as a cause to end the employment relation should not be temporary, since, if it were temporary, it could be facing a suspension of activities or possible cease of activities by the employer and not to a termination of the employment relation.

The termination of the employment relation, under this cause, does not constitute untimely dismissal, since the dismissal is the termination of the employment relation by unilateral decision of the employer. In this  case, the breakdown of the relation occurs due to the damaging effects of force majeure – events beyond the control of the employer. In this sense, Dr. Marcucci[7] states that the effect of the unforeseen circumstance and force majeure “(…) when they are actually proven in the labor field cause the contract to cease due to the absolute impossibility of continuing to provide the service and without any of the parties taking responsibility for it. Both are victims of force majeure (…) But neither of the two contractors is guilty of the misfortune of their former counterpart, nor therefore is forced to compensate (…) ”

Therefore, although the Covid-19 pandemic, by its nature meets the requirements of being non-imputable and unpredictable, its application as a cause for termination of the employment relation, and therefore, the exemption from the payment of compensation, cannot be applied in a generalized way based on the sole existence of the pandemic (Covid-19), because despite the fact that many industries reflect losses and liquidity problems, as a consequence of Covid-19, this does not necessarily mean that work is permanently impossible or that the effects have the necessary weight for the termination of the employment relation. It is imperative to carefully analyze the harmful effects of each case, to verify if the other three elements – irresistibility, causation and impossibility to work– are configured to justify the Termination of the employment relation for this cause: “force majeure or unforeseen circumstances make impossible to work”.

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


[1] Published March 18, 2020 .- https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_739158.pdf
[3] This effect has been contextualized by the Supreme Court of Justice, today the National Court of Justice: Judicial Gazette. CVIII year. Series XVIII, No. 4. Page 1434. (Quito, February 22, 2007); Judicial Gazette. CIV year. Series XVII. No. 11. Page 3395. (Quito, November 12, 2002); Trial N ° 228-2007-Ex Third Civil, Mercantile and Family Division. (Quito, November 5, 2009.
[4] National Court of Justice, Specialized Labor Division, Trial No. 0027-2018. (Quito, May 14, 2019); National Court of Justice, Specialized Labor Division, Trial No. 0026-2018. (Quito, February 4, 2019); National Court of Justice, Specialized Labor Chamber, Trial No. 1948-2015. (Quito, June 22, 2017)
[5] El Caso Fortuito ante el Derecho Civil, 1958  p. 114
[6] Instituciones del Derecho Civil, Contratos, volumen III, 1975, p. 538
[7] Panorama Contextualizado del Derecho Laboral Sustancial Colombiano, Marcucci Cesar, 2005, p.120

Aula Magna – Termination of employment contract due to work harassment

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DATE: 08-05-2020

CORRALROSALES IN THE NEWS: 

-Edmundo Ramos

MEDIO: Aula Magna

In November 2017, the concept of “workplace harassment” was incorporated into the Labor Code as a cause for “Visto Bueno” (termination with fair cause) for employer and the worker.

The Labor Code defines workplace harassment as “all behavior that violates the dignity of the person, repeatedly and potentially harmful, committed in the workplace or at any time against one of the parties in the employment relationship or among workers, which may result in the person affected being impaired, mistreated, humiliated, or that threatens or damages their employment situation. ”

Two elements of the definition stand out: (i) the law aims to regulate this type of action even outside the company’s facilities and outside working hours; and, (ii) regarding events that occur between workers, without necessarily one of them being the employer’s representative.

The law reform is inconsistent, since it forces employer to take responsibility for events beyond his control and outside his scope, allowing the employment relationship to be terminated – prior authorities approval´s – due to interpersonal relationships between workers that could happened in their free time.

Based on this, below an analysis of a “Visto Bueno” process when it is requested by the employer against a workers.

Article 172.8 of the Labor Code transcribed below includes workplace harassment among the grounds for the employer to terminate the employment contract, prior approval of “Visto Bueno”:

“For committing workplace harassment, either individually or in coordination with other individuals, towards a colleague, the employer or towards a subordinate in the company.

Prior to the request for approval of “Visto Bueno”, a conciliation chaired by the competent authority will be opened, in which besides the interested party, the representatives of the workers and the employer or whoever represents him will be heard.”

According to this, workplace harassment can occur: (i) when one or more workers harass the employer or workers who represent the employer (e.g. managers, chief, directors, etc.); or, (ii) when one or more workers harass any of their coworkers.

In the first scenario, the employer knows the harassment event directly, since it is the victim of the harassment. In the second scenario, the harassment occurs without the employer necessarily being aware of the event or only knowing about it when the harassed worker (s) communicates it, either directly to the employer or by filing a complaint to the labor authority (Ministry of Labor).

According to the transcribed article, the approval process could only be initiated, prior a conciliation proceeding between the parties, which implies that it will only be possible to initiate the “Visto Bueno” proceeding when it has not been possible for the parties to reach a conciliation or that the harassment persists despite the conciliation.

Consequently, the “Visto Bueno” could only be filed once the conciliation proceeding is finished, either in the workplace itself or before the labor authority (prior employee´s complaint).

In any “Visto Bueno” proceeding, the employer has a period of 30 days, from the moment the harassment event occurred, until the worker is legally notified with the “Visto Bueno” request, except for those violations considered as a “lack of probity” (honesty), in which case that period begins when the employer becomes aware of the workplace harassment event.

The foregoing implies that the employer has approximately 22 days to initiate a “Visto Bueno” proceeding, considering that notice to worker takes approximately 5 business days from the day the request is filed.

Additionally, as the law requires prior conciliation before filing the “Visto Bueno” request, it is very likely that this will take more than 30 days between the harassment event and the notification of the request, in which case the action would have expired.

In conclusion, the chances of obtaining a “Visto Bueno” against a worker for workplace harassment are very low. For the termination of an employment contract due to workplace harassment to be applicable in practice, a legal reform or a National Court ruling with mandatory effect will be necessary. It must determine that the 30 days to filed the “Visto Bueno” request should begin when the employer becomes aware of the workplace harassment event.

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

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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