Mexico: Mexican Federal Labor Law Reform: Opportunities And Challenges For Employers With Operations In México

On November 29, 2012, departing Mexican President Felipe de Jesús Calderón signed a comprehensive reform of México's Federal Labor Law (FLL), instituting more than 300 changes, effective December 1, 2012. Many of the more significant amendments favor employers and, as a result, could potentially lead to future economic growth in México. These changes have implications for current and future United States employers with operations in México. This Client Alert provides a summary of the foundation of Mexican labor law and notable FLL amendments that are relevant to employers with operations in México.

Background

The Mexican Constitution is the basis for Mexican labor law: it guarantees workers a set of minimum rights and grants the federal government exclusive power to enact labor laws to carry out and expand upon those rights. México's government passed its first labor law in 1931; the law has been amended several times - most significantly in 1970 and, now, in 2012. Additionally, México enacted the federal Social Security and Housing laws (these laws are not covered in this summary). Several government agencies and tripartite commissions implement, oversee and enforce Mexican labor laws. Generally, the constitutional, statutory and regulatory labor laws apply to all workers in the country, including those workers employed in México by United States employers. Failure to comply with Mexican labor laws can result in significant penalties and financial liability for employers.

Major Amendments to the FLL

Wage Payments

The Mexican minimum wage is expressed in pesos per day. The amended FLL formalizes the system for paying employees an hourly rate, directing that employees may not receive less than the equivalent of the daily minimum wage. Employers, therefore, must calculate an employee's hourly rate accordingly. In addition, the amended FLL formally permits employers to issue wage payments by check, direct deposit, transfers or electronic means, with the employee's consent.

Employment Contracts and Temporary Employment

The amended FLL now permits employers to enter into limited duration contracts with employees for seasonal work and for initial training agreements. Initial training agreements must provide a minimum term of three months for general employees and six months for executive employees.

The amended provision is significant because every employee must enter into a written employment agreement with his/her employer setting out the terms and conditions of employment and the duration of employment is presumed indefinite. Prior to the amendment, contracts for a limited duration were only permitted in the following situations: work on a vessel, work on a limited and defined project, or to hire artists and athletes, medical students and substitute workers.

Discrimination

The amended FLL outlaws discrimination based on ethnicity, national origin, age, disability, socioeconomic status, health, religion, immigration status, political opinion, sexual orientation, or marital status.

Outsourcing

As amended, the FLL seeks to regulate the outsourcing of jobs. Previously, employers would outsource employment to avoid paying worker benefits. Now, among other requirements, employers may only hire temporary workers or independent contractors if those individuals will not be performing work similar to the work already performed by other employees of the company. In other words, the outsourced employees must perform work of a specialized character.

Employers may not outsource jobs to subcontractors to avoid labor law obligations. All outsourcing contracts must be in writing, and the employer has an affirmative duty to ensure that the contractor complies with Mexican labor laws. If the employer violates these new requirements, the outsourced workers will be considered employees of the employer, subject to the protections and benefits of full-time employees, such as notice requirements, severance payments, profit-sharing and social security.

Termination and Back Wages

The amended FLL permits employers to terminate employment at any time for "just cause." Under the statute, just cause for termination includes, among other situations, falsifying employment application materials, immoral conduct on the job, insubordination, using drugs or alcohol while at work, or refusing to comply with safety requirements. The FLL amendments add bullying and sexual harassment to this list. Note, however, that an employer must terminate the employee within 30 days of the event justifying the termination.

The amended FLL also requires employers to obtain an advisory opinion from the Joint Commission for Productivity and Training before terminating initial training or probationary employees.

Keep in mind that employers must still provide written notice of termination to each employee prior to termination. If an employee refuses to accept the notice, the employer must provide the written notice to the Conciliation and Arbitration Board. The notice must include the grounds for termination to establish that the employer had just cause for the termination. Regardless of the grounds for termination, certain workers are entitled to severance and bonus payments based on their years of service.

Employees have two months from the date of discharge to challenge their termination. Employees may challenge their termination as a wrongful or constructive discharge. A successful employee may seek reinstatement with back wages or, alternatively, indemnification equal to three months' salary, back wages and any accrued salary and bonuses. The amended FLL limits back wages to one year (plus interest after fifteen months), significantly reducing an employer's liability for a wrongful termination.

Productivity and Training

The FLL amendments created a National Productivity Committee to oversee other agencies and to establish state-based committees. Employers must undergo training and provide training for workers to increase and optimize productivity. The amendments require stakeholders (employers, unions, employees, academia and government) to reach agreements to measure and increase productivity. Finally, the amendments regulate the promotion process and eligibility, giving a worker's skills and productivity greater weight than seniority.

Union Elections and Transparency

The initial proposal to amend the FLL included vast reforms to union democracy and transparency. Mexican unions are powerful entities that have long influenced policy and legislation. Consequently, there is very little union transparency.

Due in part to the unions' political prowess, most of the union reform proposals did not survive the legislative process. For example, President Calderón attempted to pass a measure to permit employees to vote on their own contracts, but the Mexican Congress removed this provision from the bill.

Nonetheless, three notable reforms were passed. First, unions are now required to have labor leader elections by free and secret ballot. Second, unions must provide an accounting of all union finances to the government every six months, and employees may pursue a cause of action against the union if the union fails to provide the employee an accounting of union finances. Finally, the amended FLL repeals the "closed shop" laws, which required membership in the union.

Conclusion

Keeping in mind the fact that employees may not waive their constitutional labor and employment rights, the FLL amendments have broad implications for employers with operations in México and for employers seeking to establish operations in México. Because the potential financial penalties and liability for non-compliance can be significant, and because this summary is not exhaustive, companies with operations in México should consult with Godfrey & Kahn, S.C.'s Labor, Employment and Immigration Practice Group regarding their obligations under Mexican labor laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions