EMBASSY ANALYSIS OF SUBCONTRACTING DECREE

UNCLAS QUITO 002724

SIPDIS

USTR FOR WILLIAM CLATANOFF. USDOL FOR
JORGE PEREZ-LOPEZ. DEPT FOR WHA/AND, WHA/PPC, DRL/IL, EB.

E.O. 12958: N/A
TAGS: ELAB PGOV EC
SUBJECT: EMBASSY ANALYSIS OF SUBCONTRACTING DECREE

REF: QUITO 2690


1. Summary: President Gutierrez signed Executive Decree
2166 regulating subcontracting (Reftel) on October 5, which
will be published in the Official Register on October 12.
While several articles in the decree differ from the version
Minister of Labor Raul Izurieta originally gave us, we
believe the agricultural workers exemption in contracting
does not represent a loophole exempting subcontractors from
protections in the decree. Congressional Deputy Andres Paez
plans to submit draft legislation on subcontracting to
Congress with similar content to the decree during the week
of October 11. End Summary.

Changes to Decree May Provide Less Protection
--------------


2. Several articles in the latest version of the decree
differ from the last version the MOL had provided to LabOff.
For example, Article 2 of the decree states that "all
third-party services should be provided by societies that
have the exclusive purpose of providing these services.
Excepted are third-party services that are provided in the
rural agricultural sector which can be provided by natural
persons." LabOff is attempting to confirm with Izurieta that
this does not exclude agricultural workers from other
provisions in the decree.


3. In addition, the previous draft version of the decree
provided by the MOL on September 14, Art. 3 stated that if
the decree were violated, subcontracted workers would be
considered direct employees of the main company, since the
date they were hired. This article was deleted from the
signed version. However, Art. 21 of the signed decree states
if the decree is violated, the main company will take over
the contracting of the workers indefinitely, with all the
legal labor obligations and social security benefits.


4. Art. 11 now states that subcontracted workers cannot
receive less pay than what is stated as the minimum wage for
each sector. In the case that there is no specified minimum
wage for a sector, workers must receive the national minimum
wage. In the previous version, the decree said subcontracted
workers had the right to equal pay, benefits and conditions
of work as the main companies' direct-hire employees.


5. The decree states that companies may contract
subcontractors to hire workers to perform the companies'
primary activities indefinitely. Art. 9 of the decree was
not changed and limits the number of subcontracted work force
to 75%. This is significantly higher than the percentage
requested by union leaders (15%),and was added after a
Presidential meeting with union leaders.

Subcontracting Law Project in Congress
--------------


6. Andres Paez, President of the Congressional Labor
Committee, told LabOff on October 7 that there are currently
four draft bills on subcontracting. He is working on
harmonizing them and said he plans to present a report to
Congress the week of October 11. The majority of points in
the law project will be the same as those in the executive
decree, he said, including guarantees of indemnization and
benefits. He hopes to have a first debate on the topic later
this month and a second debate in November. Paez said he is
optimistic about prospects for Congressional approval.

Comment
--------------

7. The decree is not law until it is published in the
Register, currently planned for October 12. While the news
of its signing is now public, the text is not yet available
to the public or press. We believe the agricultural workers
exemption on contracting does not represent a loophole
exempting subcontractors from the rest of the protections in
the decree, and are attempting to confirm this.
Unfortunately MOL Izurieta has been unavailable due to his
efforts to resolve health workers strike.
CHACON