Mexican employment law
Mexican Labour Law grew out of an armed revolution that concluded with the adoption of the current Federal Constitution in 1917. Article 123 of the Federal Constitution, entitled “Labour and Social Welfare”, expressly recognises and protects the basic inalienable rights of employees. This was the first constitutional recognition of labour rights in world history. Thereafter, in 1931, the first Federal Labour Law was enacted to regulate employer-employee relations nationwide, later replaced by the 1970 Federal Labour Law, which improved working conditions for employees. The 1970 Law was, for all practical purposes, the federal government’s “political reward” to workers’ organisations for not supporting the 1968 student movement.
In September 2012, the President of Mexico, Felipe Calderon, introduced a bill to amend the Mexican Federal Labour Law, which after much debate before both the House of Representatives and the Senate, was approved by the Congress on 13 November 2012 and enacted by the President of Mexico on 30 November 2012 becoming effective on 1 December 2012. The reform amends and includes important provisions to the Mexican Federal Labour Law (herein after the “FLL”), which has extensive implications for employers with operations in Mexico.
In April 2016, President Enrique Peña Nieto sent to the Senate a bill to substantially amend the Constitution on labour justice. The bill proposed discontinuing the Conciliation and Arbitration Labour Boards, which have been the agencies in charge of labour justice, and their replacement by federal labour courts belonging to the federal judicial branch and by local labour courts belonging to the local judicial branch. This initiative was discussed and approved by both the Senate and the Chamber of Representatives and was sent to the local congresses for their approval. The proposed constitutional reform was approved by 17 local congresses.
On 24 February 2017, the bill amending several provisions of Sections 107 and 123 of the Mexican Constitution was published in the Official Gazette and became effective on 24 February 2018. As a result of this constitutional reform, Labour Justice will be provided by labour courts belonging to the Federal or Local Judicial Branch, which will give them more Independence in relation to the Executive Branches. This reform created a decentralised organism, independent of the Federal Administration and similar bodies in the States, which will be in charge, in the federal jurisdiction, of substantiating a mandatory pre-trial instance for the parties, which aims to fasten labour proceedings. Also, this organism will be in charge of the registration of union and collective bargaining agreements. This Constitutional Reform necessarily involves adjustments to the Regulatory Law, especially on procedural labour matters.
On 1 July 2018, Mexico had federal and local elections for several political positions, including the President, State Governors and Majors, among others. Andrés Manuel López Obrador (AMLO), candidate of the National Regeneration Movement (MORENA, by its acronym in Spanish) won the Presidential election with 53% of the votes. For the first time in modern history, Mexico will be governed by a leftist President. MORENA, with its ideology based on social equality and egalitarianism, also won the majority of both Chambers of the Congress. As a result, MORENA unveiled a highly ambitious, multi-faceted labour and employment reform agenda for the next six years:
Young people: Empower young people by providing them universal access to education and granting economic scholarships to all students.
Minimum wage: Increasing the minimum daily wage. This topic has been addressed during TPP and NAFTA’s negotiations by the governments of the U.S. and Canada.
Outsourcing: This topic has been regulated by the Mexican tax and labour authorities in the past to avoid violations to labour rights and tax fraud. Therefore, MORENA has proposed to regulate this further to guarantee labour rights to all employees.
Collective Bargaining Agreements: There has been international pressure to abolish the practice of executing non-active collective bargaining agreements CBAs. Mexico ratified the Convention 98 of the International Labour Organisation (ILO) to guarantee the right to collective bargaining, as well as to apply ILO Convention 87 regarding freedom of association.
New Union Confederations: During AMLO’s administration it is probable that there will be new Union Confederations, led by Napoleón Gómez Urrutia, leader of the Mining Union, who has been in exile in Canada since 2006. He was registered as MORENA’s elected Senator on 27 August 2018.
Labour Ministry: AMLO appointed Luisa María Alcalde as Labour Secretary. She is in charge of implementing the Constitutional reform and the application of Conventions 87 and 98 of the ILO.
Constitutional amendment to reform the FLL: The reform to the Mexican Federal Labour Law (herein after the “FLL”), came into effect on 1 May 2019. The amendment did include pro-employees and pro-union provisions in order to create a better system.
It is important to mention that this amendment arose as part of Mexico’s obligations after the signing of the United States Mexico Canada Agreement (USMCA) that came into effect on 1 July 2020. In this sense, there was a necessity to make substantial changes in labour and union matters in order to adapt to the terms of the agreement.
The three main pillars of the 2019 amendment to the FLL are:
- A new Labour Justice system: The parties are now obliged to attend the Conciliation Center before filing for trial; if no agreement is reached the Labour Justice will now be provided by labour courts belonging to the Federal or Local Judicial Branch. The new procedure is governed by the principles of orality, immediacy, continuity, concentration and publicity.
- Union democracy: A new democratic procedure came into effect to guarantee the unionised employees their right to a personal, free, secret and direct vote for choosing their union leaders, as well as knowing about and approving their collective bargaining agreements.
- The kick off for the Federal Conciliation and Labour Registry Center: Beside the conciliation part, this Center will keep the records of unions and collective agreements at the national level. Moreover, it will ensure that union rights and the collective interests of employees are respected, through free and democratic processes.
- Employers dealing with operations in Mexico should be aware that labour relations are highly regulated in our country and that Mexican employees generally have greater rights than their American counterparts.
- Job stability principle. Any individual employment relationship is subject to the principle of ‘job stability’, that is, subject to the employee’s right to keep his job as long as the employment relationship so requires. If the employment relationship is for an indefinite term, the employee cannot be laid off without cause. In other words, there is no employment-at-will in Mexico.
- Duration of the employment contract. The Mexican Federal Labour Law assumes, as a general principle, that an employment agreement has been executed for an indefinite term, unless the nature or the particular type of service to be provided calls for an employment agreement for a specific job or term, or if the parties agree to execute an employment agreement for initial training or subject to a probationary period.
- Restrictive Covenants or Non-Competes. In the strictest sense, non-compete agreements are void under Mexican law; specifically, under Article 5 of the Mexican Constitution. Notwithstanding the foregoing, pursuant to an opinion issued by a Circuit Court, Covenants not to compete are fully enforceable provided they are limited in time, geographical scope, clients and activity, products and services, and consideration is paid in exchange.
- Outsourcing. Although strictly ruled, the FLL currently allows for the subcontracting of specialised services or ‘outsourcing’. This type of work must comply with the following conditions: (a) It cannot cover the totality of the activities, whether equal or similar in whole, undertaken at the work centre; (b) It is justified due to its specialised character; (c) It cannot include tasks equal or similar to the ones carried out by the customer’s workers. If any or all of these conditions are not met, the customer will be deemed to be the employer for purposes and effects under the Law, including as it applies to obligations related to social security. It is important to mention that on 12 November 2020, AMLO issued an amendment proposal for the FLL, to entirely prohibit the subcontracting of services or ‘outsourcing’. This proposal to eliminate outsourcing is now pending the approval and ratification of the Mexican Congress. It is very likely that the amendment will enter into force before 2021, and those who continue subcontracting employees could face an imputation for tax fraud.