Terms And Conditions Of The Productive Employment Agreement

• Published date: 29 April 2021
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal, Employee Rights/ Labour Relations
• Law Firm: CorralRosales
• Author: Marta Villagómez

In 2015 the fixed-term employment agreement, which allowed the hiring of employees for one-or two-years, was repealed from the Labor Code. As a result, the open-term agreement became the most widespread agreement for employment relationships covered by the Labor Code.

The open-term employment agreement grants the employee a high degree of stability, since it protects him/her in the event of unilateral termination and grants him/her the right to the payment of significant severance packages.

The pandemic caused by Covid-19, and its strong impact on the Ecuadorian labor market, made it necessary for the government to regulate new contractual mechanisms that make the hiring of employees more flexible, that adjust to the reality of each company and guarantee employment rights.

Since March 2020, the following types of agreements have been regulated: (i) agreement for work or services within the core business; (ii) emerging employment agreement; (iii) employment agreement for productive sectors, among others.

This article analyzes the employment agreement for productive sectors, also known as "productive employment agreement", regulated by the Labor Ministry on October 30, 2020, through Ministerial Agreement MDT-2020-220. The regulation seeks to promote job creation in these sectors through a mechanism that allows them to cover the different needs of their activity.

Pursuant to Article 2 of the Organic Code of Production, Commerce and Investment ("COPCI"): "Productive activity shall be considered as the process by which human activity transforms inputs into lawful, socially necessary and environmentally sustainable goods and services, including commercial and other activities that generate added value."

As a consequence, this agreement may be implemented by companies whose purpose or activity is (i) to transform inputs into lawful goods and services; (ii) to generate commercial activities; and/or (iii) to generate added value.

The productive employment agreement subjects employment relationships to the following conditions:

• Term: The term will be equivalent to the duration of the work, service or activity to be performed, up to one year renewable once for the same term.

The employment relationship will be terminated upon completion of the work, the service or the established term, without the need of any other formality. The employer must pay the employee the proportional amounts corresponding to the thirteenth and fourteenth...