Practice Area Articles
January 16, 2023
Andres Rodriguez, C. Ernesto de la Puente T. and Bedya Rosalia Olivares
Back to International Employment Law
KEY DEVELOPMENTS FOR 2023
Freedom of association and collective bargaining
Under the framework of globalization and the re-establishment of supply chains around the world, Mexico is ensuring compliance with international standards regarding freedom of association and collective bargaining rights described in Conventions 87 and 98 of the ILO (the latter ratified in November 2018).
In such context and to ensure fair competition with its main commercial partners under the United States – Mexico - Canada Agreement ("USMCA"), Mexico created a process to legitimize or validate the existing collective bargaining agreements by free, personal, direct and secret votes of the employees, to ensure Trade Union´s representativeness. The Collective Bargaining Agreements ("CBAs") that are not legitimized will be automatically terminated on 1 May 2023, although all the employee´s rights will be respected.
As part of the same changes, there are currently new valid processes to ensure that all contractual revisions of the CBAs (those where salaries and benefits are revised) are decided by employee´s vote, and additionally, any breach of both labor principles in a specific premise and targeted industry may be subject to a complaint from the United States or Canada that will be solved through a “Labor Rapid Response Mechanism” included as part of the USMCA social clauses.
Trade Unions and Authorities are the main actors in this change, however, active involvement of the employers is necessary to coordinate the legitimization and consultation processes, but also in respecting collective rights, because any breach could be used by employees, unions and foreign agencies to hinder production in a specific Plant.
Since Mexico is one of the countries of the Organization for Economic Co-operation and Development that grants fewer vacations (6 days after the first year), currently the Chamber of Deputies is discussing a possible reform to the Federal Labor Law approved by the Senate on 3 November 2022, that will increase minimum rights starting on 1 January 2023, or if it is approved afterward, the day after the official publication.
This change not only impacts the number of paid vacation days according to seniority, but indirectly, it also changes the percentage of vacation premium granted to the employees (25% of the ordinary salary per every day) and the proportion of consolidated salary for the payment of social security quotas.
Employers will have to review their vacation policies to amend what is necessary to comply with the imminent reform.
In the last couple of years the Federal government has put pressure on the Council of Representatives of the National Committee for Minimum Wages to approve annual increases above 15%. In line with the above, a 20% increase to the minimum wage has been approved.
Due to the above, as of 1 January 2023, the general minimum wage is $207.44 MXN (around USD$10.00) and the minimum wage in the Northern Border Free Zone is $312.41 MXN (around USD$15.00).
We must point out that the increase to the minimum wage is taken as a reference by unions for collective bargaining, so we anticipate harsh negotiations for the revisions to collective bargaining agreements.
KEY DEVELOPMENTS FOR 2022
New rules to prohibit interference in union activities by employers
New rules have been introduced which prohibit the employer from interfering with union activities, namely: (i) the employer shall not dominate the union; (ii) the employer shall not place the union under its control; (iii) the union shall not economically depend on the employer; (iv) the employer shall not aid the union economically; (v) it shall not be considered an interference if any given arrangement is agreed in the collective bargaining agreement (CBA) and, thus, disclosed to the workers; and (vi) employees shall not be dismissed because of their union membership. Yearly union negotiations will be subject to a process of consultation with all employees for the purposes of obtaining their majority support by means of a direct, personal, free and secret vote. Employers are prevented from interfering with the union and the worker’s vote.
Employers should be mindful of these new rules in respect of its relationship with any applicable union.
Requirement to validate CBAs
All CBAs must be validated by a personal, free, secret and direct vote from the employees to whom the CBA applies, before 30 April 2023. If the CBA is not validated, it will be deemed terminated. Separately, unions should obtain a certificate of representativeness if at least 30% of employees voted for said organization. If another union contends, the Federal Centre for Conciliation and Labour Registration shall organize a procedure in which employees would issue their vote in favour of their preferred union.
KEY DEVELOPMENTS FOR 2021
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.
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.