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Mexico: The Reform to Outsourcing leaves Workers Unprotected

Eliminating the figure of the labour intermediary and subcontracting will leave the working class unprotected and it will unleash a series of amparo proceedings, because companies will be forced to contract services that are not related to their corporate purpose.

In an interview with Salud, Dinero y Amor, Ricardo Martínez, founding partner of the De la Vega Martínez y Rojas Firm qualified the bill for the reform to subcontracting as aberrant, because it is a mode that protects the rights of workers. He explained that the approach of the bill violates the human right of freedom of profession and hiring.

He anticipates risks to employment, since there are employers who do not have the capability of having an accounting or personnel administration area, and they hire third parties to support them in these areas. He stated that there is still time for businessmen to establish a dialogue with representatives and senators to express how these modifications would affect them.

Ricardo Martínez said that the bill for the reform to outsourcing, having been presented by the President of the Republic, will pass quickly and with few changes, since his political party has the majority in both chambers.

He explained that it is important to conduct more thorough audits and inspections to avoid tax fraud or simulation, but that modes that protect the workers should not be eliminated.

We share with you the interview with Ricardo Martínez, founding partner of the De la Vega Martínez y Rojas Firm

MARIELENA VEGA: There is still a lot to discuss in regard to the topic of outsourcing, what can you tell us? It seems that it is reaching the final stretch in its approval, is this right?

RICARDO MARTÍNEZ: I believe that the reform will pass almost as it is, since the House of Representatives is, in fact, already in commissions and, therefore, I believe that it will pass very quickly and I foresee few changes to what they have now, it is a bill presented by the President of the Republic and, with the majority of the Morena Party in the Chambers, I believe that we will have this reform soon, before December 15, when the legislative process of this year ends.

ROMINA ROMÁN: With these high probabilities that you are mentioning of this bill being approved as it is before December 15, there are analysts who are already warning that it could be approved just as it was presented, they are even mentioning that between two and four million jobs could be lost. What are the risks that you see with this law? Particularly at a time of a health emergency and above all of economic emergency.

RICARDO MARTÍNEZ: The risks to employment will be very clear because a very high number of companies that comply with their obligations use subcontracting as a means of support, not all employers have the capability of having an area of accounting, of administration, and they hire the people through those means and that helps them with payrolls, taxes, with the payment of social security dues, what they are taking away is a burden for those small entrepreneurs who do not have that structure, we will see unemployment because they will not be able to hire all of those positions and obligations.

A second step that we believe is very serious is that the PTU [Profit Sharing] unfortunately continues to be at 10%, the 6th commission just approved it, but this is a percentage that was imposed 35 years ago, when we had an inflation of 70% and now, when inflation is 5% and CETES [Federal Treasury Certificates] pay 6%, it is very expensive and unjustified to pay 10% as PTU and particularly since our main trade partner lowered the corporate rate to 20%, which means that an investor in Mexico has to leave 40% of each peso, which is unjustified and, therefore, makes us lose competitiveness; the truth of things is that subcontracting has been incurred in because they are not willing to pay that 10% and I can assure you that if it was set at 3% everyone would pay it; what good does it do the workers to have 10% if it is not paid? Thus, through this mode they are intending to make people pay 10, this will cause unemployment, disinvestment.

CLAUDIA VILLEGAS: Could you please explain to us how it is that the rights already created by the workers are harmed, how the modes that had been protecting them disappear?

RICARDO MARTÍNEZ: what I see as very serious problems is that two modes that help protect the workers are disappearing, one is the labour intermediary, which is an old figure achieved in the Mexican law and which we have even exported to all of Latin America and that means that the intermediary, when it has its own elements and economic capability is the employer and, through this mode, the intermediary complies with all of the worker’s rights and, in the event that the intermediary doesn’t have the necessary elements, the law now says that the beneficiary of the services is jointly responsible, a way of dealing with this that seems to me is aberrant against the workers, as it now says that the intermediary will never be an employer, that the beneficiary will always be the employer.

In my opinion, it is aberrant that the figure of intermediation is removed, it is a very beautiful figure within our labour law that protects our workers.

And then they remove and eliminate true subcontracting, they eliminate Article 15, which was very successfully written, it was very well thought out by the house of representatives and the chamber of senators in 2012 and the truth is that it protects workers and what they are doing now is a mistake, then, which they are making in seeking to make the law stronger, the only thing that they are doing is leaving the working class unprotected, subcontracting is a non-legal figure and it is a world figure, subcontracting exists all over the world and it is regulated.

So now, in their desire to over-regulate they are making two modes that protect workers disappear, there will be a series of very serious amparo proceedings, because companies will be forced to contract specialized services or specialized works that are unrelated to the corporate purpose, which violates several human rights, like the right to trade.

I imagine that a great number of amparo proceedings will be filed; there was already an article like this in Brazil and the Brazilian court declared it to be unconstitutional, in violation of the human right to trade and to free profession and to freedom of hiring.

The way in which the reform is drafted is very extreme and the question is in which sense it is justified; it is true that the wave of fraud in regard to income tax and social security has to be stopped, it has to be done, but this is not done through a labour reform, it is by means of audits, more thorough inspections, the truth of things is that the figures that are used are not labour related, they are figures of simulation and coops, corporations that do not exist declare people as working for commissions or professionals when they are not, this is what the authorities should be fighting against, not freedom of hiring.

MARIELENA VEGA: In this sense, what could the business sector do and, of course, the labour sector via unions, is any reaction expected?

RICARDO MARTÍNEZ: I believe that the right thing to do at this time is to go to the chambers and talk with the representatives and senators so they can understand the seriousness of what they are doing, now, in the event that it isn’t possible, there will be a shower of amparo proceedings and there is no leeway for companies to prepare, it will be an enormous change, imagine that the law enters into force the next day. A minimum of six months to one year should be granted, to give time for companies to come into compliance and then start applying the law, but it says that the STPS [Department of Labour and Social Welfare] will have four months to confront guidelines, but the regulation will already be in place; thus, you could be subject to an inspection tomorrow; it is a very serious situation, indeed, it has to be given a lot of serious thought, because not only are they are leaving the employers’ sector unprotected, they are leaving the worker unprotected by removing two modes that have protected him and they tell him when thousands of awards are applied in benefit of the workers, it is a very serious legal mistake.

CLAUDIA VILLEGAS: Thank you very much, Doctor Ricardo Martínez, founding partner of the De la Vega Martínez y Asociados Firm.


For more information on these articles or any other issues involving labour and employment matters in Mexico, please contact Oscar De La Vega (Partner) of De La Vega & Martinez Rojas S.C. at odelavega@dlvmr.com.mx or visit www.dlvmr.com.mx.