1 Legal framework

1.1 Are there statutory sources of labour and employment law?

Yes. Article 123 of the Mexican Constitution outlines general principles of employment law in two main sections: one which applies to employees in general and another which applies to federal government employees. Article 123 also indicates which industries are considered to fall within the federal jurisdiction; all other industries not specifically mentioned are considered to fall within the local jurisdiction.

The Federal Labour Law is the statutory instrument through which these constitutional principles are regulated for employees in general. Although it is a federal law, it is applied by local (state) authorities regarding industry segments that are not reserved to the federal jurisdiction.

The Federal Labour Law regulates the rights and obligations of employees and employers. It also regulates procedural terms and conditions for employment disputes and governs the organisation of conciliation and arbitration boards, which are the administrative entities that resolve employment disputes.

In 2017 a constitutional amendment to Article 123 did away with conciliation and arbitration boards as an administrative entity with jurisdictional capacity, instead creating labour tribunals within the judicial branch to administer and oversee labour and employment disputes. This procedural reform is taking effect in a phased and regional manner between 2020 and 2022, with a view to ensuring that all new labour disputes are handled through labour tribunals by the end of 2022. The labour and conciliation boards will remain responsible for handling and overseeing cases presented to them until the labour tribunals have commenced operations; so we expect that cases will continue in both forums for about another 10 years, while the boards clear the backlogs of cases under their care.

Federal and local government employees are further subject to specific laws that regulate their labour relationships with the federal and local governments.

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

No. The Federal Labour Law sets out certain parameters for determining whether a labour relationship exists, regardless of the existence of a written agreement or even where a written agreement is intended to avoid the creation of a labour relationship. As long as there is subordination between two parties, with an obligation to obey or carry out orders, economic dependence and recurring payment for such services, a labour relationship is presumed, even if there is no written agreement or if there is an agreement that purports to expressly exclude a labour relationship.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

Yes. A contract is always presumed at any level of employment when there is a labour relationship. Article 25 of the Federal Labour Law provides a list of basic information that should be included within an employment contract. The general rule is that all contracts are of an indefinite duration; although temporary employment is allowed where the nature of the employment justifies a time constraint or where another employee is temporarily replaced. Contracts may also be time limited where they are associated with a specific project with a defined termination date.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

Fathers have a right to five days' paid leave from the date of delivery or adoption.

Mothers have a right to six weeks' pre-natal paid leave prior to the expected delivery date and six weeks' post-natal paid leave from the date of delivery. With a doctor's consent, a pregnant employee can transfer up to four of the six weeks' pre-natal paid leave to the post-natal paid leave period.

Paid leave income is subsidised by Social Security, as long as the employee signed up to Social Security at least a year prior to pregnancy.

In case of adoption, adoptive mothers can enjoy up to six weeks of paid leave from the date of adoption.

During pregnancy, employees benefit from a special mantle of protection. It is prohibited for pregnant women to perform physical labour that requires effort such as lifting, pushing or pulling weight, or that could entail any risk.

2.2 How long does it last and what benefits are given during this time?

See question 2.1

2.3 Are trade unions recognised and what rights do they have?

Yes. Unions are recognised as rightful associations that are protected by the inalienable right of employees to legally assemble. Unions have the right to represent employees in collective bargaining with employers and to represent employees in claims made to the employer.

Unions have special legal standing, given that they are associations with their origin and legal framework within the labour statutes. They need not be constituted through incorporation, as per mercantile or civil regulation. If a union has received a certificate of inscription in the federal or local registry, it acquires legal standing to own property, open bank accounts and act on behalf of registered employees.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

A special federal statute which protects personal information has general application throughout Mexico whenever anyone handles personal information of any other person. As best practice, employment contracts should include a provision on consent to store and handle employees' personal information; though, strictly speaking, the Personal Information Statute excludes special requirements such as a privacy notice or even written consent where the acquisition of personal information is a prerequisite under law within the labour relationship and is necessary for the employer to comply with its legal obligations.

2.5 Are contingent worker arrangements specifically regulated?

There has been a general use of business process outsourcing and outsourcing of some or all employees within all types of businesses in Mexico; but there are no special contracts for or provisions on ‘contingent workers'. All workers in Mexico enjoy the same standard benefits and Mexican law has a very clear intent to limit any contract that is not permanent or indefinite in duration. Where companies use outsourcing to fill employee positions or create a subsidiary to act as the employer of all personnel, there is usually an underlying fiscal or tax purpose for such decision.

In 2021 the Federal Labour Law was amended to outlaw the general outsourcing of personnel. As a rule of thumb, any company that uses an employee to carry out its core business is responsible as a direct employer and is not allowed to subcontract such personnel. However, the Federal Labour Law does allow for the possibility of hiring third-party personnel to provide a specific and specialised service. The services provided by the third party must differ from the core business or main business activity of the client, and the service provider must be registered in a special register kept by the Labour Department. Failure to comply with these special rules could result in fines and the sanction of having no fiscal benefit from service invoices.

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

Yes. The minimum wage has been revised annually for over 20 years, though there is legal provision and precedent to revise it more than once in the same year.

As of January 2022, the national minimum wage is MXN 172.87. A special minimum wage has been introduced for border cities (specifically for the border with the United States) in the order of MXN $260.34.

3.2 Is there an entitlement to payment for overtime?

Yes. The legal intent is that there should be no overtime; requiring employees to work overtime thus exposes employers to the risk of an administrative fine imposed by the labour secretary. Nevertheless, the Federal Labour Law does contemplate a specific rate at which overtime should be paid. One general rule is that employees should not work more than 48 hours in a seven-day week, with one full rest day for every six days of work. Another general rule is that overtime should not last for more than three hours per day and should not be performed more than three times a week. For the first nine hours of overtime, the payment should include the cost of the hours of work performed plus a payment of 100% of the cost of overtime paid hours. Should overtime exceeds nine hours in a week, all additional hours will be paid at the normal hourly rate, plus a payment of 200% of that cost.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

The Federal Labour Law provides for a sliding scale of paid holiday, as set out in the following table.

Seniority (years) Days of paid holiday
1 6
2 8
3 10
4 12
5-9 14
10-14 16
15-19 18
20-24 20
25-29 22

For each day's holiday enjoyed by an employee, he or she should receive the standard payment for that day plus a vacation premium of 25% of the daily wage.

There have been several legislative initiatives to increase the number of statutory annual vacation days, but as yet, no bills have been enacted in this regard.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Yes. Employees can take up to 52 weeks of paid sick leave, as long as they are being treated by Social Security. Social Security is responsible for authorisation, treatment and payment of sick leave.

3.5 Is there a statutory retirement age? If so, what is it?

There is no statutory retirement age. Subject to the satisfaction of administrative requirements, Social Security provides that persons can take retirement from age 60 onwards. However, this is completely voluntary; age is not considered a valid reason to terminate a labour relationship.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

The Federal Labour Law expressly forbids discrimination based on ethnic origin or nationality, health condition, gender, age, disability, social status, religion, migratory status, opinions, sexual preferences or civil status. Any act that affects an individual's work security based partially or totally upon such considerations will be deemed discriminatory.

The Federal Labour Law also regulates harassment in the workplace, with or without sexual content, as an abusive use of force with a subordinate or a colleague of equal standing which creates a dangerous situation for the victim.

4.2 Are there specified groups or classifications entitled to protection?

The Federal Labour Law has special chapters which protect working minors and pregnant women.

4.3 What protections are employed against discrimination in the workforce?

Discrimination in the workforce is something which labour inspectors commonly check for in case of an inspection. Employees with a credible case of harassment can sue for termination of the labour relationship and severance pay from the employer.

If an employer has enough evidence to prove harassment or discriminatory misconduct by an employee, it should terminate his or her employment; but this does not indemnify the victim.

4.4 How is a discrimination claim processed?

Where an employee commences legal proceedings for discrimination, there is little precedent to guide the courts accordingly. The claim will be processed in the same way as any other claim for termination of employment through which severance pay is sought. As this type of procedure requires the employee to voluntarily terminate the employment first, it is not common.

If an employer has enough evidence to prove discrimination or harassment by an employee, it will serve notice to terminate the relationship and will likely have to defend such termination in court against a claim by that employee for wrongful termination.

4.5 What remedies are available?

The Federal Labour Law provides only for severance pay of three months' wages, complemented by 20 days' wages per year of seniority plus a seniority premium of 12 days' wages per year of seniority, capped at twice the minimum wage. Discretional or punitive damages are not available.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

Employees can be advised free of charge by a state-appointed attorney if they wish to file suit against their employer. Different local and federal commissions may further begin proceedings to determine whether there is discrimination in the workplace; while human rights commissions can also launch inquiries into human rights violations in the workplace.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

Yes. In Mexico, termination at will by the employer is not possible. Both a valid (legal) reason for termination and a formal termination notice procedure for the employee are legal requirements.

5.2 Is a minimum notice period required?

There is no minimum termination notice period; termination can be effective immediately, but the employer only has one month to terminate the employment relationship from the point of learning of the cause for termination.

5.3 What rights do employees have when arguing unfair dismissal?

Employees can file for reinstatement or for severance pay due to wrongful termination.

5.4 What rights, if any, are there to statutory severance pay?

Severance pay for wrongful termination amounts to three months' wages, plus seniority premium (see question 4.5). If the employee seeks reinstatement, in specific situations the employer can opt not to reinstate, paying legal severance of three months' wages and a seniority premium, and pay an additional sum of 20 days' wages per year of seniority.

If an employee sues, there is an additional contingency due to the accumulation of accrued wages during the trial for up to one year. After one year, wages no longer accrue; instead, a legal formula applies to calculate a severance pay that is equivalent to 25% of the value of the daily wage.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

Local and federal conciliation and arbitration boards serve as de facto tribunals that oversee labour and employment claims and procedures. However, this regime is in the process of being overhauled; see question 1.1.

Prior to filing a lawsuit, and subject to specific exemptions, all employees must go through a conciliation process at an administrative office, with the employer summoned to participate in order to avoid possible trial. If the conciliation process fails, the employer will receive written proof of this, which is a prerequisite for filing a labour lawsuit.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

Black-letter procedural law indicates that employment proceedings, including the pre-trial conciliation process, should not last more than six months. However, given the backlog in cases, procedures normally last between two and four years. Since the new labour tribunals – which have no case backlogs to deal with – began operations, trial times have been cut down to four months in general. However, we expect that trials will last longer once backlogs begin to build up.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The ongoing legislative overhaul (see question 1.1) implies that there will be considerable procedural changes in the near future. There has already been a constitutional amendment to replace the conciliation and arbitration boards with labour tribunals under the judicial branch. Conciliation is now handled before trial through a compulsory pre-trial conciliation meeting. The same entity that will be responsible for conciliation will become a national registry for all unions and collective bargaining agreements.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

The Mexican market can seem to be very employer oriented, but legislation and court precedents are very protective of employee rights. It is important to keep this in mind, and to be proactive and keep a close eye on compliance throughout recruitment, contracting and eventual termination of employee relations. Ensuring a healthy working environment and prioritising compliance and employee welfare, with market-consistent benefits, is the best way to prevent labour disputes from arising and achieve a corporation's full potential.

When terminating employees, it is often more cost effective to pay legal severance and execute a termination agreement than to enter into a labour dispute, given that the trial contingency often exceeds the initial cost of severance and the courts will seek whenever possible to benefit the employee.

It is also important to keep in mind that legal reforms have drastically changed the way that unions and employers can negotiate on collective bargaining agreements. The process of registering new collective bargaining agreements or revisions to existing agreements requires proof that all employees were consulted and voted in favour of the relevant content. This has resulted in a significant shift in how union and employee relations are handled within HR, legal and industrial relations departments.

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.