US embassy cable - 04QUITO2724

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, Labor 
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