Mexico: New Labour and Employment Amendment Bill

On May 1, 2019, the Chamber of Deputies approved the Amendment Bill to reform the Federal Labour Law. The Bill that reformed the Federal Labour Law is aimed to fulfill three main commitments:

• The inclusion of the obligations set forth in ILO’s Convention 98 to guarantee the freedom of association and for collective bargaining.
• Creation of new Labor Courts that will replace the current Conciliation and Arbitration Boards, modifying the procedural rules.
• The modification of other legal provision that are important for the new government’s agenda.

Due to the aforementioned, we include hereby, a general analysis of the Bill, focusing in those provisions that may generate an important impact for companies or that may have a general interest.

The Bill regulates the modifications made to Article 123 of the Constitution that came into force in February 2017, modifications that, as it is known, correspond to the commitments assumed by Mexico due to its interest  to be part of the Transpacific Partnership Agreement (“TPP”), and to the execution  and ratification of Convention 98 of the International Labour Organisation (“ILO”) regarding Right to Organise and Collective Bargaining.

After the Constitutional reform, Mexico entered into negotiations to update the North America Free Trade Agreement, that resulted in a new trade agreement known as USMCA. These negotiations took place at the same time that the Mexican Congress was discussing the changes to the Federal Labour Law for the implementation of the Constitutional reform.

The new trade agreement included Article 23 and Annex 23-A, which set forth the commitment for Mexico to make important amendments to its labor and employment legal framework, to ensure the right of freedom of association, the right for collective bargaining, as well as  the implementation of a new system of labour justice independent from the Executive Branch of Government.

1. Freedom of Association and Right for Collective Bargaining

As we mentioned, the Bill, in accordance with the constitutional obligation and the international obligations accepted by Mexico, includes the principles established by ILO’s Conventions 87 and 98, with the objective  to guarantee the freedom of association and collective bargaining, setting certain requirements  that will entail  important  implications  for employers, as follows:

• Unions shall enjoy adequate protection against any act of interference from employers, which means that employers will not be able to interfere, in any form, in the union’s internal organisation. The employer cannot make any economic payment to union and the Bill sets forth, that the employer cannot support in any form the union with the purpose to put it under its control.
• Workers will have freedom of association, having the necessary protection to not be obliged to be part of a union, to freely elect the union’s officers through democratic processes and to receive complete and detailed information about the finances of the union and its administration.
• An important aspect is that workers will have the possibility to express their will to accept or not accept the withholding of union dues by the employer, It is also established that exclusion clauses cannot be included in the collective bargaining agreement and workers cannot be sanctioned and lose their employment due to their resignation to the union.
• However, the Bill does not include the elimination of the closed shop clause, which is against the right of workers to not be obliged to be part of a union.
• Establishes democratic processes to elect the union’s leadership, through personal, free and secret vote.
• The registration of unions will be performed by the Federal Center of Conciliation and Labour Registry (hereinafter referred as the “Federal Center”) which is created as part of the reform. It is important to mention that collective bargaining agreements and union matters will be of federal jurisdiction. Therefore, local authorities lose their authority on this regard, regardless of the industry or the location in which the work center is located or the scope of the union.
• For its registration, the union must file the necessary documents to prove that they were incorporated through a democratic process. The Federal Center will publish all union’s documents in the web page created to that end.
• Unions will be prohibited to be part of tax elusion schemes or to avoid the fulfillment of employer obligations with its workers, To incur in acts of violence against their members and to participate in schemes to be falsely consider as employers.
• An important modification in the Federal Labor Law, is the inclusion of the possibility to dissolve, through a judicial resolution, those unions which participate in acts of extorsion against employers by demanding the payment of money or any other benefit to withdraw calls for strike or to not r participate in Union Certification Processes related to collective bargaining agreements.
• The execution of collective bargaining agreements (hereinafter referred as “CBA” or “CBAs”) must have the support of workers that will be covered by them, be expressed through the personal, free and secret vote of workers. Likewise, the union must have the Representation Certificate issued by the Federal Center.
• To request from an employer the execution of a CBA, a union must have, prior to the request, the Representation Certificate, which requires several actions to be obtained, including the workers vote showing that at least 30% of workers covered by the CBA support the union. By having the Certificate, the union can request the participation of the corresponding conciliatory authority, and if the employer does not accept the execution, the union may file the call for strike attaching the Representation Certificate.
• The agreements to renew or modify a CBA must be executed before the authority and will require the ratification of o the majority of workers covered by the CBA, through their  personal, free and secret vote. Likewise, the revision and modification agreements, to be registered, will need to be ratified by workers for its approval.
• Several provisions are included regarding the strike proceeding to adequate such proceeding to the freedom of association right and. In case that the voting of employees is offered by the parties, there will be specific provision to guarantee the legality of the list of voters and secrecy of the vote.
• A positive addition in strike proceeding is that employers can file a motion before the Labour Court to rule on its termination, if the strike has extended for more than sixty days.
• It is also established in the law that the union may extend the period before the strike, only one time, for a period of up to 30 days.

2. Labour Courts and Procedural Rules

• The Bill modifies all the legal provisions that refer to the Conciliation and Arbitration Board to make reference to Labour Courts.
• The filing of the conciliatory stage before the competent authority will interrupt the statute of limitation period related to the filing of the lawsuit arguing a wrongful termination.
• Establishes rules for the Preliminary Conciliatory Proceeding, which is a mandatory stage that must be followed before the trial. If the employee does not appear to the conciliatory meeting, the stage will be dismissed and, in the contrary, if the employer does not appear, the stage will be concluded, and the statute of limitation period will restart. If claim cannot be served upon the employer, notwithstanding it has been tried, the stage will be terminated, and the employee may file the lawsuit. If an agreement is reached, the same will be considered as a final judgment. In cases of discrimination due to pregnancy, it will not be mandatory to file the conciliatory claim.
• Establishes rules related to notification and communication processes through electronic mails which will be applicable for the Preliminary Conciliatory Proceeding as well as for the judicial trial.
• Regarding evidence, it is established that the printed payment receipts must have the wet signature of the employee to be valid; the payment receipts included in the internet digital tax receipts create the presumption of the payment and their content will be validated in the Internal Revenue Service website.
• The denial of the dismissal and the offering of the job, as well as the simple denial of the dismissal does not revert the burden of proof to the worker, which is a change that will affect the majority of the defenses that currently are filed.
• The process will be faster, therefore, companies will have to work faster to gather all the evidence related with the case, since the evidence must be filed attached to the answer of the complaint, which must be filed within the following 10 days after the lawsuit was served.
• The lack of a termination notice, delivered to the employee or to the Court, will presume that the termination was without causes, unless there is evidence that proves otherwise. This modifies the current wording of the law, which considers that the lack of termination notices as a wrongful and void termination.
• Another important change in the law is that the employer is granted with the possibility to appear before the Court, through a special process to file the severance in case the employer expresses its will to not accept the trial.

3. Other modifications

• Several provisions are included in order to avoid discriminatory practices, mobbing and sexual harassment.
• There are many provisions related to gender equality and employer organisations and unions must fulfill with gender equality in proportion to the number of employees.
• The protection to maternity is increased and it is established that if the employer decides to terminate the employment relationship for a justified cause of a pregnant woman, the employer must keep the social security benefits for a period of 6 months after the birth.
• In case of dead or forced disappearances derived from a criminal act, the severance will be paid to children under the age of 18 and those older but with a disability of 50% or more, or children up to 25 years old if they are studying in a public school. In any case the economic investigation will be carried out, since those individuals have the presumption of economic dependency.
• The Bill does not include any modification to outsourcing matters.

4. Transitory Provisions

• The Bill will become into force the day after its publication in the Federal Official Gazette.
• The Federal Center, regarding its registration obligations must start its activities in a maximum period of two years after the Bill becomes into force. Until the Federal Center starts its registry functions, the Conciliation and Arbitration Boards as well as the Ministry of Labour and Social Welfare will continue with their registration functions. The day after the Federal Center starts its operations, the registration services provided by the Conciliation and Arbitration Boards and the Ministry will be suspended
• The Conciliation Centers and the Labour Courts of the states will start operations three years after the Bill becomes into force.
• Within the maximum period of four years after the Bill becomes into force, each delegation and regional office of the Federal Center will start the process of conciliation requests under its jurisdiction, at the same time the Federal Labor Courts start their operation in the Circuit they are part of.
• The individual and collective proceedings that are registered by the Conciliation and Arbitration Boards before the Bill becomes into force, as well as those filed after Bill is published but before the starting of operations of the Labour Courts, will continue until its conclusion and will be regulated by the current Federal Labour Law.
• Current collective bargaining agreement must be revised at least once in the next four years after the Bill becomes into force.