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Mexico

January 15, 2021

By Andrés Rodríguez and C. Ernesto de la Puente

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Mexico

KEY DEVELOPMENTS FOR 2021


 

Outsourcing restrictions

On 12 November 2020, the President of Mexico sent a bill to the House of Representatives to reform the outsourcing related provisions contained in multiple Laws, including the Federal Labour Law. This initiative is being discussed in Congress and multiple forums, but approval is not expected until later in the year. The main implications are: a) prohibition of subcontracting staff (i.e., when individuals or corporations place their own workers for the disposal of a third party); b) possibility to subcontract services that are not part of the corporate purpose or economic activity of the company, as long as they are carried on with legal entities duly authorized and registered by the Labour and Social Welfare Ministry, by proving their specialised nature and compliance of labour, tax, and social security obligations (therefore, insourcing is restricted); and c) severe penalties in the event of non-compliance such as fines, non-deductibility of taxes and even the possible commission of crimes in case of simulation (qualified tax fraud or organized crime). Additional discussions about the employee's right to receive profit sharing are also involved in this bill.


 

Labour justice reform

On 1 May 2019, several reforms to the Federal Labour Law were published, including a major change on the way labour justice had been imparted for almost 100 years in Mexico. In the past, labour justice was a task assigned to Conciliation and Arbitration Boards dependent of the Executive Branch; however, since 2020 and gradually per State until there is a total change in 2023, labour justice will be imparted by Labour Tribunals dependent on the Judicial Branch through a newly created process that will favour conciliation (in charge of the Federal Centre for Conciliation and Labour Registration or by Local Conciliation Centres) as a pre-stage to the actual process that will be more expedited since it is expected to reduce the general time periods for a final resolution, from three to five years, to only eight months.


 

New collective labour relationships

As part of the 2019 labour reform and also as a consequence of the specific rules included in the United States-Mexican-Canadian Agreement (T-MEC for its acronym in Spanish), the collective labour relationships will change. From 2020 to 2023 all Collective Bargaining Agreements (CBAs) in Mexico will have to be legitimated by the direct, personal, and secret vote of all the corresponding employees. In addition, for the execution of new CBAs, labour authorities will review the representativeness of the Trade Union amongst employees with a similar voting process that will be supervised by a newly created authority called "Federal Centre for Conciliation and Labour Registration" who are in charge of granting a special certificate that Unions will have to use to file new CBAs and even to have the possibility to strike for the execution of a CBA.

With thanks to Andrés Rodríguez and C. Ernesto de la Puente of Santamarina + Steta for their invaluable collaboration on this update.

 

KEY DEVELOPMENTS FOR 2020


 

Reform of Mexican Federal Labour Law

Labour and employment matters have been subject to huge changes in the last year. As part of the negotiations for the new North American Free Trade Agreement (the United States-Mexico-Canada Agreement ("USMCA")), a reform to the Mexican Federal Labour Law was recently enacted to ensure it is consistent with the Constitutional Reform of 24 February 2017.

There are two main topics dealt with by the reform; the first being the provision of justice, moving from justice granted by the Executive Power (Conciliation and Arbitration Boards) to justice granted by the Judicial Power (Labour Courts). The second topic relates to union and collective matters. Principles such as transparency and democracy have been reinforced under the new law.


 

The New United States-Mexico-Canada Agreement

The new United States-Mexico-Canada Agreement ("USMCA") came into force on 1 July 2020. The new USMCA comes with an array of labour challenges as, for the first time, any alleged failure in the fulfilment of labour obligations by Mexican companies (or U.S. and Canadian companies with Mexican subsidiaries) covered by the USMCA may result in a complaint being filed with a U.S. Government panel, which is legally entitled to impose sanctions.

 

KEY DEVELOPMENTS FOR 2019


 

Creation of the Federal Labor Conciliation and Registry Institute

New rules have been submitted to the Senate and the House of Representatives to approve the setting up of a new Labor Conciliation and Registry Institute at Federal Level. If approved, the new Institute will be responsible for offering mandatory conciliation between employees and employers prior to litigation. This will only apply to employers in the federal jurisdiction. The Institute would also be tasked with registering collective bargaining agreements.


 

New procedural rules on employment related litigation

New procedural rules for employment litigation have been submitted to the Senate and the House of Representatives for approval. One of its aims is to bring current proceedings in line with the changes that are being made as a result of the new mandatory conciliation obligation (see above). New Labor Courts will also need to be set up, which would form part of the Judicial Branch, as opposed to the Executive Branch.


 

New rules on collective bargaining agreements

New rules advocating for the enhancement of Union Rights have been submitted to the Senate and the House of Representatives for approval as a result of the ratification of Convention 98 of the International Labor Organization and the recently signed United States, Mexico and Canada Agreement (in substitution of NAFTA). If approved, employers and business friendly unions (i.e. inactive unions) will no longer be able to enter into employer friendly collective bargaining agreements.

 

KEY DEVELOPMENTS FOR 2018


 

Creation of the Federal Labour Conciliation and Registry Institute

Subject to the approval by the Senate and the House of Representatives, a new Institute will be in charge of mandatory conciliation between employees and employers, as well as registering collective bargaining agreements.


 

New Regulation Regarding Subcontracting (Outsourcing) Regime

A new initiative will change the current legal provisions establishing requirements for this type of work, providing greater certainty to workers and the contracting parties.


 

New Procedural Rules on Employment Related Matters

Subject to the approval by the Senate and the House of Representatives, all proceedings will need to go through mandatory conciliation prior to filing a lawsuit.

Labor Courts will be created which form part of the Judicial Branch, as opposed to Conciliation and Arbitration Boards belonging to the Executive Branch.

 

KEY DEVELOPMENTS FOR 2017


 

New forum for employment claims

Subject to the approval by the House of Representatives, employment related conflicts shall now be transferred to the new labour courts as opposed to Conciliation and Arbitration Boards for resolution.


 

New requirements to register a collective bargaining agreement

An initiative which would impose far more burdensome requirements on both employers and unions (in order to register a collective bargaining agreement to ensure that workers are aware of the existence of such collective agreements) is under review. There is also a proposal for a law to require unions to evidence workers’ representation when calling for the execution of a collective bargaining agreement.


 

New strike procedures

Several specific formal procedural rules have been proposed and are under review with the purpose of further regulating strike procedures and voting evidence.

 

KEY DEVELOPMENTS FOR 2016


 

Resolutions by Federal Courts regarding outsourcing

A non-binding finding was made which held that it is possible to pierce the corporate veil in order to determine whether several legal entities are from the same corporate group and form an economic unit which is jointly liable for employment related obligations.


 

Prevention of discrimination

During 2016 we saw an increase in initiatives with the purpose of eradicating employment discrimination towards pregnant women, the disabled, and LGBT people.


 

Increase in union conflicts regarding representation claims

During 2016 there was a significant increase in representation claims through which different unions claim to represent the majority of the workers at a certain workplace, in particular in the mining, automotive and hotel industries.

With thanks to Francisco Udave Treviño and Andrés Rodríguez of Santamarina y Steta for their invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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