Employment 2019 Comparisons

Last Updated March 08, 2019

Law and Practice

Authors



Creel, García-Cuéllar, Aiza y Enríquez, S.C. (Mexico City - HQ) 's employment and labour practice is based in the Mexico City office. As of 1 September 2018, the firm has a total headcount of 13 professionals, which includes one partner, nine associates and three law clerks. We have a full-service labour, employment and social security practice with ample experience in representing and advising large multinationals, including the hire and termination of employees, negotiation of collective bargaining agreements with local and national unions, establishment of incentive compensation schemes, including stock option plans, incentive bonus plans and benefits, creation and operation of cost-efficient employment structures, employee training manuals, and health and safety regulations, advice on the employment law implications of commercial transactions, litigation before State and Federal Labor Courts.

The Mexican Federal Labour Law (“FLL”) does not distinguish blue-collar or white-collar employees. Pursuant to the FLL, as a general rule all employees are entitled to the same working benefits and conditions.

The classification of unionised employees provided by the FLL is not equivalent to the category of blue-collar employees, since all employees affiliated to a union shall be considered unionised employees irrespective of their position or activities. Likewise, the classification of trust employees as per the FLL is not equivalent to the category of white-collar employees since not all employees who carry out professional or administrative activities comply with the conditions to be considered trust employees.

Even though the FLL provides that all employees are entitled to the same working benefits and conditions, it distinguishes the following categories of employees and grants them with special entitlements or imposes special restrictions as described below.

Unionised Employees

As per the FLL, unionised employees are those who are members of a union incorporated in terms of the law. Depending on the particularities of the case, it may not be enough to be bound by a collective bargaining agreement in order to be classified as a unionised employee. In this regard, the FLL provides that the highest salary of a unionised employee within a company shall be considered for the calculation of the individual amounts to be paid as employees' profit-sharing. Likewise, the FLL sets forth that in equality of circumstances, employers shall grant preference to unionised employees over non-unionised personnel.

Trust Employees

As per the FLL, trust employees are those who perform: (i) direction, inspection, vigilance or supervision activities, provided they are of a general nature (that they apply to the totality of an organisation and not to particular areas thereof); or (ii) personal services for the employer (regardless of the activities carried out, employees shall be in direct and personal contact with the employer). Pursuant to the FLL, whether an employee is considered to be a trust employee does not depend on the title of a position or the content of the employment agreement but rather on the activities carried out by the relevant individual.

In this regard, the FLL imposes special restrictions to trust employees rather than providing additional rights. Trust employees cannot join unions of employees who are not categorised as trust employees or claim reinstatement to their jobs in the case of wrongful termination of employment. Likewise, the salary of trust employees might be capped for the calculation of the individual amounts to be paid as employees' profit sharing. Finally, employers may terminate the employment relationships of trust employees with justified cause and without the obligation to pay severance when they have reasonable motives to distrust them.

Employees Hired for an Indefinite or Definite Term

The FLL distinguishes employees depending on the term of their employment relationships, including employees hired for a definite or indefinite term (and within employees hired for an indefinite term, those who are engaged under a seasonal modality). In this regard, the statutory severance payment payable to employees in the case of unjustified termination of employment differs depending on whether they are hired for an indefinite or definite term. In most cases, employees hired for a definite term are entitled to a higher severance payment; however, this depends on the length of the temporary contract.

Employment Contracts

Pursuant to the FLL, the general rule is that employment relationships/contracts shall be for an indefinite term. Exceptionally, parties to an employment relationship may agree that such is subject to a definite term or a particular work, provided that the nature of the services and the activities to be carried out strictly require such modalities.

In addition to the above, parties to an employment relationship for an indefinite term or for a definite term that exceeds 180 days may agree to a probation period. The purpose of probation periods is that employees demonstrate to have the specific abilities and knowledge required for the position they are hired for. The maximum term for probation periods is 30 days; however, parties may agree to probation periods of up to 180 days for employees who carry out direction or management activities of a general nature within the organisation, or for those who perform technical tasks or specialised professional services. In the case that at the end of the corresponding probation period the employee does not demonstrate the abilities and knowledge required for the position that person is hired for, the employer may terminate the employment relationship without liability. In order to formalise such termination of employment, certain procedural requirements shall be observed.

Likewise, parties may also agree to an employment relationship for initial training in terms of which employees render their services with the purpose of acquiring the specific skills and knowledge required for the position for which they will be hired. In principle, the maximum term for employment relationships for initial training is three months, however, parties may agree to probation periods of up to six months for employees who carry out direction or management activities of a general nature within the organisation, or for those who perform technical tasks or specialised professional services. In the case that at the end of the employment relationship for initial training the employee does not demonstrate acquired the skills and knowledge required for the position that person would be hired for, the employer may terminate the employment relationship without liability. In order to formalise such termination of employment, certain procedural requirements shall be observed.

Contracts Required

The FLL provides that individual employment agreements in writing are required whenever there is not a collective bargaining agreement in place. The FLL provides that employees must be provided with a copy of their individual employment agreement. Individual employment agreements shall include the following information:

  • generals of both parties;
  • term of the employment relationship;
  • activities to be carried out;
  • workplace;
  • working schedule;
  • salary and conditions thereof;
  • the indication that the employee shall receive training and instruction; and
  • any other employment conditions agreed between the parties such as days of rest, vacations and any others that may apply.

Hours of Work

The FLL provides maximum working hours per day/week depending on the working shift during which the services are carried out. In this regard, the FLL classifies working shifts as described below:

  • daytime: working shift between 6am and 8pm, with a maximum duration of eight working hours per day (or 48 hours per week);
  • night-time: working shift between 8pm and 6am, with a maximum duration of seven working hours per day (or 42 hours per week); and
  • mixed: working shift encompassing periods of daytime and night-time working shifts as described above. If the period that corresponds to the night-time working shift is higher than three-and-a-half hours, the working shift shall be construed as night-time. Mixed working shifts have a maximum duration of 7.5 hours per day (or 45 hours per week).

The maximum working hours per day may be increased with the purpose of allowing employees to rest Saturday evening or in a similar modality, provided that the maximum working hours per week are observed. Particular provisions regarding working schedules apply to employees who carry out activities classified by the FLL as special jobs, including crews of ships and aircraft, and drivers and employees who render their services in inland transport, domestic employees and doctors during the residency period. 

Part-Time Contracts

The FLL does not distinguish full-time from part-time employment relationships/contracts. Employees hired under a part-time contract are entitled to the same working benefits and conditions than as a full-time employee. Notwithstanding the foregoing, as per the FLL, employers are not obliged to pay the same salary to part-time and full-time employees since they are not rendering their services under the same working schedule.

Overtime

In the case where employees render their services in excess of the working shift agreed with their employer (which may not exceed the maximum working hours per day/week permitted by the FLL), the payment of overtime shall be triggered. In terms of the FLL, all employees are entitled to the payment of overtime regardless of their position or activities.

Pursuant to the FLL, employers shall only require employees to render their services in overtime in cases of extraordinary need and such should not be a common practice. In this regard, payment of overtime is considered as a penalty for employers who violate the working schedules agreed with their employees.

The FLL provides that overtime shall not exceed three hours per day or three times per week. In other words, overtime is capped to nine hours per week divided equally in three days. Each hour of overtime under the aforementioned legal cap shall be compensated considering a payment of 200% of the employee’s hourly base salary. Each hour of overtime in excess of the nine hours per week legal cap shall be compensated considering a payment of 300% of the employee’s hourly base salary.

In addition to the payment of overtime, Mexican labour authorities may impose economic penalties on employers who violate the working shifts agreed with their employees. Furthermore, if employees regularly and systematically render their services in overtime, the amounts paid by the employer as overtime may be considered an integrating part of their salary for severance purposes.

Based on a consistent interpretation of the FLL, employees shall only be obliged to render their services in overtime for the first nine hours. Any work in excess of the aforementioned legal cap shall be freely agreed by the employees.

Minimum Age Requirements

Mexico has a “general” minimum wage and “professional” minimum wages. On the one hand, the general minimum wage applies to all employees regardless of their working schedule, type of work, age, industry, experience or any other variables. On the other hand, professional minimum wages only apply to certain employees depending on their specific profession, craft or activity. Professional minimum wages also apply to all employees within the specific job regardless of their working schedule, age, industry, experience or any other variables.

The current (2018) general minimum wage is MXN88.36. Professional minimum wages are higher than the general minimum wage and vary depending on the specific profession, craft or activity.

Bonuses and the "Thirteenth Month"

The FLL does not provide the payment of a “thirteenth month”. Notwithstanding the foregoing, pursuant to the FLL all employees are entitled to an annual Christmas bonus “Aguinaldo” of at least 15 days of employees’ base salary, regardless of their position, activities, term of employment, etc. Even though 15 days is the statutory minimum payable for this concept, it is common that in certain industries and for specific groups of employees, employers voluntarily grant a higher entitlement as Christmas bonus Aguinaldo.

Employers shall comply with the payment of the Christmas bonus Aguinaldo before 20 December. Employees who did not render their services to the corresponding employer throughout the entire calendar year will be entitled to a proportional payment for this concept.

In terms of the FLL, employers are not obliged to grant employees with bonuses, commissions or any other type of variable compensation. Notwithstanding the foregoing, it is a common practice for employers in Mexico to grant variable compensation based on the achievement of individual and/or organisational goals.

Government Intervention in Compensation and Increases

The Mexican government only intervenes in increases to general and professional minimum wages. Minimum wages are determined and increased periodically by a National Commission of Minimum Wages integrated by representatives of employees, employers and the government. Even though the government does not have any official intervention in compensation above the applicable minimum wages, in practice many collective negotiations or voluntary salary increases granted by companies are calculated based on the annual increase to the general minimum wage.

Pursuant to the FLL, all employees are entitled to an annual period of paid vacations, regardless of their position, activities, term of employment, etc. The statutory vacation entitlement increases based on employees’ seniority as described below:

  • six days after one year of service;
  • eight days after two years of service;
  • ten days after three years of service;
  • 12 days after four years of service; and
  • after the fourth year, employees’ vacation entitlement will increase by two days every four years.

Employees have the right to enjoy vacation periods of at least six continuous days. Even though the FLL provides the statutory minimum periods to be granted to employees as vacations, it is common that in certain industries and for specific groups of employees, employers voluntarily grant higher annual periods of paid vacations. Any vacation entitlement that is superior to the statutory minimum periods does not have to increase based on employees’ seniority or not at the same pace.

In terms of the FLL, employers shall pay the corresponding salary and employment benefits during the vacations period. Vacations cannot be cancelled in exchange for the payment of the corresponding compensation, except in the case of termination of employment.

In addition to the annual period of paid vacations, all employees have the right to receive a vacation premium of at least 25% of the amount to which they are entitled as base salary during each vacation period.

Required Leave

Pursuant to the FLL and the Social Security Law (“SSL”) all employees have the right to paid disability leaves in the event that they suffer any illness or injury, whether these are work-related or not. In order to be entitled to such paid disability leaves, the corresponding illness or injury has to be certified by the medical personnel of the Mexican Social Security Institute (“IMSS”). Depending on the particular circumstances of the illness or injury, the IMSS shall determine the duration of the disability leave and the type of disability (temporary disability, partial permanent disability or total permanent disability).

Provided that the corresponding employer and employee comply with the payment of social security contributions as per the FLL and the SSL, the IMSS shall be responsible for the payment of the employee’s medical service in the case of illness or injury whenever the employee receives the corresponding medical certificate. Notwithstanding the foregoing, the economic subsidies granted by the IMSS may vary depending on the type of disability and term thereof.

The FLL and the SSL provide defined paid disability leaves for the following cases:

  • maternity: female employees are entitled to a paid maternity leave of 12 weeks in the case of childbirth (six weeks prior and six weeks after childbirth). In this regard, the FLL allows employees to request the transfer of four weeks of the pre-childbirth period to the post-childbirth period. In order for such a transfer to be allowed, the opinion of the employer and the activities carried out by the employee shall be considered and the employee must obtain authorisation from the IMSS’ medical personnel;
  • adoption: female employees are entitled to a paid maternity leave of six weeks in the case of adoption of a child (granted immediately after they receive the adopted infant);
  • paternity: male employees are entitled to a paid paternity leave of five working days in the case of childbirth or adoption of an infant (granted immediately after childbirth or after they receive the adopted infant).

The FLL and the SSL do not grant a leave of absence for childcare; however, female employees are entitled to two resting breaks per day of half an hour each during the nursing period (which may not exceed a period of six months as of the date in which the employee returns to her job after the maternity leave). Alternatively, parties may agree to reduce the working schedule of female employees by one hour during the aforementioned period. 

Confidentiality

The FLL provides the obligation for all employees to maintain strict confidentiality over any technical, commercial and manufacturing secrets concerning products in which elaboration process they are involved in directly or indirectly, or to which employees may have access due to their activities. Likewise, employees are obliged not to disclose confidential administrative matters that may cause a damage to the company in the case of disclosure.

The disclosures carried out by employees in connection with trade secrets or any other confidential matters that may affect their employer are construed as a “justified” cause for termination, in terms of which employers may terminate their employment relationships without the payment of severance. It should be noted that in the case that employees challenge the termination of their employment relationship due to disclosure of confidential information, the corresponding employer may have to prove before labour authorities that: (i) the information which was disclosed had a confidential nature and the employee was aware of such; (ii) the employee disclosed the confidential information; and (iii) the disclosure of the confidential information caused a damage to the company.

In terms of the foregoing, it can be construed that from an employment standpoint the limitation for confidentiality requirements is that only sensitive information, the disclosure of which could potentially damage the company, is suitable for protection. In addition to the foregoing, from a criminal standpoint, employees who disclose confidential information or who use such for their personal benefit or for the benefit of a third party may be liable for economic penalties and even for imprisonment.

The FLL does not provide non-disparagement obligations for employees or employers; however, based on a consistent interpretation of the FLL, in specific cases and subject to an analysis of the circumstances the disparagement of either the employee or the employer in connection with the other party may be construed as a “justified” cause for termination, in terms of which: (i) employers may terminate the employment relationship without the payment of severance; or (ii) employees may terminate the employment relationship and claim payment of severance.

Employee Liability

From an employment perspective, employee liability is limited to: (i) suspension of the employee without salary payment for a period that may not exceed eight working days provided that the employer has the corresponding Internal Workplace Regulations duly filed before the labour authority; (ii) deductions to employees’ salaries in the specific cases permitted by the FLL and subject to the deductibility caps determined therein; and (iii) “justified” termination of the employment relationship without payment of severance if the employee is responsible for one or more of the actions or omissions provided by the FLL as justified causes for termination. 

In addition to the foregoing, in limited situations employers may pursue civil and/or criminal actions against employees if there is a breach of civil and/or criminal legislation.

Requirements for Non-Compete Clauses

The Political Constitution of the United Mexican States (the “Constitution”) provides the “freedom of work” principle in terms of which no person can be prohibited from engaging in any profession, industry, commerce or activity that they choose to, provided that the corresponding activity is legal. Pursuant to the foregoing, there is no legal action that can actually restrict a person from competing. However, there are certain mechanisms that may be implemented to disincentivise employees and particularly former employees from competing against their employer or former employer.

From an employment standpoint, non-compete obligations may be agreed in the form of restrictions to employees from carrying out any activities during the working schedule agreed by the parties that are not directly related to the services to be carried out by the employees pursuant to their employment relationships. Notwithstanding the foregoing, enforcement of non-complete obligations beyond the employee’s working schedule is very difficult from an employment standpoint. Furthermore, such a mechanism is only valid during the existence of the employment relationship.

In connection with the agreement of non-compete obligations with former employees, parties may address such matter through independent consideration. In general terms, civil legislation allows parties to agree to any obligations they choose. In this regard, non-compete obligations may be addressed through civil agreements in terms of which the former employee agrees not to perform certain activities or engage in specific competitive businesses for a definite term in a determined geographic area in exchange for a periodical payment agreed between the former employee and the former employer (or any other party) for these purposes.

Pursuant to the constitutional protection of the freedom of work, the implementation of a non-compete civil agreement does not impede former employees from performing the restricted activities or engaging in competitive business. Notwithstanding the foregoing, if former employees breach their obligations as per a non-compete civil agreement: i) they will not be entitled to receive any future payments in connection with the consideration agreed in the aforementioned agreement; and ii) the former employer may seek payment of damages before a civil court.

In this regard, the Federal Civil Code provides that if a party (eg, the former employee) fails to comply with its obligations (eg, the former employee's obligations not to compete) or does not comply with them in the agreed terms, it may be liable for the payment to the affected party (eg, the former employer) of the following:

  • the price of the obligation it failed to comply with;
  • the price for repairing the corresponding damages (daños) which are defined as the loss or impairment caused in the patrimony of the affected party (eg, the former employer) due to the lack of compliance of the corresponding obligation;
  • indemnification for liquidated damages (perjuicios), which is defined as the loss of any profits that should have been made by the affected party (eg, the former employer) if the corresponding obligation had not been violated; and
  • the payment of legal fees in which the affected party (eg, the former employer) incurs as a result of the of the lack of compliance with the corresponding obligation.

Enforcement of Non-Compete Clauses

As discussed above, non-compete obligations are very difficult to enforce from an employment perspective, except for those which are limited to activities carried out during the working schedule.

Enforcement of non-compete civil agreements is limited to the discontinuation of any payments to be made by the former employer as consideration for having the former employees not competing and the potential payment of the price of the non-compete obligation, the corresponding damages (daños) and liquidated damages (perjuicios) and any legal fees which the former employer incurs as a result of the lack of compliance of the former employees’ with their non-competition obligations.

In order for the payment of damages (daños) and liquidated damages (perjuicios) to apply, such must be an immediate and direct consequence of the lack of compliance of the former employees’ non-compete obligations. In practice this entails that where the former employer claims the payment of these concepts, it may have to demonstrate to the civil court that such damages (daños) and liquidated damages (perjuicios) are actually an immediate and direct consequence of the lack of compliance of the former employees with the non-compete obligations.

In order to increase enforceability of non-compete obligations, we consider that such restrictive covenants may be entered into for a definite term in a determined geographic area. Any additional limitations to the non-compete obligation may increase enforceability thereof since the complete prohibition of competing in any way may be considered by civil authorities to be overly broad and beyond what is strictly necessary to protect the legitimate business interests of the former employer. If the civil courts consider that the non-compete obligation is too broad, there is a risk that such is deemed as a violation of the constitutional principle of the “freedom of work”.

Employees

Mexican legislation does not provide specific regulation in connection with non-solicitation of employees. In our experience, labour courts are reluctant to issue any ruling in connection with the validity of non-solicitation obligations, arguing that such obligations are not of an employment nature; therefore non-solicitation clauses should be included in a civil agreement. 

As opposed to non-compete obligations, we consider that non-solicitation of employees does not necessarily contravene the constitutional principle of freedom of work since such a restrictive covenant does not directly prohibit a person from engaging in any profession, industry, commerce or activity that they choose to. Notwithstanding the foregoing, there are certain mechanisms that may be implemented in order to increase the enforceability of non-solicitation obligations with respect to employees addressing this matter through independent consideration.

As previously discussed, in general terms civil legislation allows parties to agree to any obligations they choose. In this regard, non-solicitation obligations may be addressed through civil agreements in the terms of which the obliged party agrees not to solicit employees from the other party for a definite term in a determined geographic area in exchange for a periodical payment of the consideration agreed between the parties for these purposes.

We consider that to the extent that the corresponding non-solicitation civil agreement is lawful, reasonable and does not have a significant negative impact on the trade/business of the obliged party, this might be held valid and enforceable by civil courts.

Customers

Mexican legislation does not provide specific regulation in connection with non-solicitation of customers. In our experience, labour courts are reluctant to issue any ruling in connection with the validity of non-solicitation obligations, arguing that such obligations are not of an employment nature.

Notwithstanding the foregoing, from an employment standpoint customer lists may be conferred with the nature of confidential and sensitive information, the  disclosure of which could potentially damage the company. Consequently, such customer lists may be awarded protection as confidential information as per labour (being considered as “justified” cause for termination of employment) and criminal (imposition of economic penalties and even imprisonment) legislation.

In addition to the foregoing, in order to increase the enforceability of non-solicitation obligations with former employees, parties may address such matter through independent consideration. In general terms, civil legislation allows parties to agree to any obligations they choose. In this regard, non-solicitation obligations may be addressed through civil agreements in terms of which former employees agree not to solicit customers with whom they had contact pursuant to their employment relationship with the former employer. Such non-solicitation agreements shall provide that the non-solicitation obligation is limited to businesses that directly compete with the activities of the former employer, that such is only applicable for a definite term in a determined geographic area, and that the former employee shall be entitled to a periodical payment of the consideration agreed between the former employee and the former employer (or any other party) for these purposes.

We consider that the complete prohibition of soliciting any customers whatsoever is overly broad and goes beyond what is strictly necessary to protect the legitimate business interests of the former employer, particularly if non-solicitation obligations extend to any business that is not in competition with the former employer. In the case that civil authorities consider that the non-solicitation obligation is too broad, there is a risk that such is deemed as a violation of the constitutional principle of the freedom of work.

The Federal Law on the Protection of Personal Data in the Possession of Private Parties (the “Data Protection Law”) regulates the obtaining, processing, transfer, use and storage of personal data (either sensitive or not) held by private parties. Since employers are private parties that hold personal information of employees, such have to comply with the obligations provided in the Data Protection Law.

In this regard, employers must get employees’ consent in order to obtain, process, transfer, use and store their personal information. Furthermore, employers may only use employees’ personal information for the legitimate purposes informed to them (there are limitations as to the personal information employers can obtain from employees insofar as such may lead to discrimination or is not required for any legitimate purpose), they have to store such information in accordance with the provisions of the Data Protection Law, allow employees to modify and limit the use of the personal information provided to them, abide by the regulations of the Data Protection Law in connection with how and with whom can they share any personal information in their possession, as well as when and how they delete such information.

In cases where a third party participates in any stage of per­sonal data processing on behalf of the employer, the latter shall ensure that the data processor abides by the same principles set forth in Data Protection Law and in the privacy notice delivered to employees. In order for employers to be able to transfer personal information in connection with the employees to a data processor, it has to comply with the following requirements: (i) obtain consent of the employees in order to transfer their personal data; (ii) com­municate the privacy notice to the data processor; and (iii) the data processor shall assume the same obligations that cor­respond to the employer.

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As a general rule, the FLL provides that at least 90% of the employees hired by Mexican employers should be Mexican nationals. Employers that do not comply with the aforementioned limitation could be subject to the imposition of economic penalties.

The limitation described above is not applicable for directors, managers and general directors/managers. Another exception to the aforementioned rule is that all technicians and professional employees shall be Mexican nationals, unless there are no employees available for a specific field, in which case foreign employees may be hired temporarily, provided they do not exceed 10% of the employees of that specialism. In this case, foreign em­ployees shall train Mexican employees so they can replace them once they acquire the correspond­ing skills/knowledge. Likewise, any doctors that render their services to a company shall be Mexican nationals.

Mexican employers who hire foreign nationals to render services in Mexico have an obligation to register before the Mexican National Migratory Institute (“NMI”) and follow the process to hire foreign employees, which includes issuing job offers for each foreign national they intend to employ and submitting a request for a work visa with respect to each foreign employee they hire.

Even though employers are the only parties responsible for the registration before the NMI, foreign employees who render services in Mexico for a Mexican employer also have other obligations, which include: (i) presenting documentation requested by the NMI; (ii) starting the process for the issuance of the work visa in the Mexican Consulate of the employee’s country and concluding it before the NMI after the employee’s arrival to Mexico; and (iii) renewing their work visa in the event that their engagement in Mexico is longer than the period for which such was issued.

The FLL defines unions as associations of employees or employers incorporated for the study, improvement and defence of their respective interests. The key role of unions in Mexico is the execution and negotiation of annual renewals to collective bargaining agreements to regulate the labour relationships of unionised employees.

For purposes of enforcing their role, unions are allowed to implement strike actions against employers. Pursuant to the FLL, strike actions consist in the temporary suspension of work carried out by a group of employees. A strike in Mexico ceases any type of activity within the premises of the employer and usually affects the totality of the employees that render their services in that location.

In general terms, unions may implement strike actions when the purpose thereof is to:

  • achieve the balance between employer and employees;
  • demand the execution or the annual renewal of a collective bargaining agreement, including annual increases on wages;
  • claim the compliance of the terms of the relevant collective bargaining agreement;
  • demand the compliance with employees’ profit-sharing; or
  • support a strike carried out by another union.

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The only bodies that exclusively represent employees as per the FLL are unions. The FLL provides the conditions for the institution of unions, including: (i) such may be integrated with at least 20 employees or three employers, depending on the type of union; (ii) unions shall be registered before the Labour Ministry in the case of federal jurisdiction and before local labour courts in the case of local jurisdiction; and (iii) such shall present the documentation described by the FLL before the aforementioned authorities.

Unions have the right to choose their representatives freely. In this regard, at the time of their registration, unions must inform labour authorities of the board that was elected for controlling the organisation in question. Furthermore, the internal regulations of the unions shall provide the procedure for the election of their board, the number of members thereof and the term during which the board shall continue in force. The board of a union must be elected by a free and confidential voting process carried out by the members of the union.

The representation of unions lies with the general secretary, unless the incorporation documentation of the union provides for additional representatives.

Collective bargaining agreements are agreements executed by one or more employees’ unions and an employer, several employers or a union of employers, with the goal of establish­ing the employment terms and conditions under which the unionised employees will render their services to the com­pany, and the benefits and salaries employees will receive in exchange. Employers that hire employees who are affiliated to a union have the obligation to enter into a collective bargaining agreement upon request of the union.

In order for a collective bargaining agreement to be binding, such has to be executed between a representative of the employer and the union, filed before the labour court and admitted by such authority. Collective bargaining agreements must be renewed every year in connection with any increases to salaries and every two years in connection with the totality of the agreement, including benefits. Annual renewals should also be filed before labour courts.

In the case that an employer refuses to enter into a collective bargaining agreement, to renew such, or if it violates the terms and conditions provided therein, the corresponding union shall have the right to implement strike action.

General Terms of Termination

Employment relationships in Mexico are governed by the “stability in work” principle, which consists of the right for employees to keep their job, as long as there is no legal ground for termination justifying the dismissal. In Mexico the principle of employment at will is not recognised.

In this regard, the FLL provides the following “general” causes of termination of employment relationships:

  • mutual consent of the parties;
  • death of the employee;
  • termination of the engagement in connection with employment relationships for a definite term or specific task;
  • physical or mental disability of the employee that makes it impossible to continue the employment relationship;
  • force majeure or the employer’s physical or mental disability that makes it impossible to continue the employment relationship;
  • notorious non-profitability of the business;
  • exhaustion of the corresponding minerals in the mining industry; and
  • legally declared bankruptcy in the case where the creditors decide to close the company or permanently reduce its activities.

In addition to the aforementioned “general” causes for termination, the FLL provides specific causes in terms of which employers and employees may terminate the employment relationship without liability if the other party carries out any of the specific wrongdoings determined by the law as “justified” causes for termination. If an employer terminates the employment relationship pursuant to an action or omission of an employee that is construed as a “justified” cause for termination, it will not be obliged to the payment of severance. In a case where an employee terminates the employment relationship pursuant to an action or omission of the employer that is construed as a “justified” cause for termination, the corresponding employee will be entitled to seek payment of the statutory severance as per the FLL.

If the employer terminates the employment relationship with an employee for any other reason besides the “general” or “justified” causes for termination, the employer will be obliged to make the payment of the statutory severance as per the FLL.

Different Procedures Depending on Grounds for Dismissal

The procedure to formalise the termination of the employment relationship varies depending on the grounds for dismissal as described below:

  • in the case of termination of employment pursuant to the “general” causes provided by the FLL, parties may formalise such a termination of employment through an employment termination and release agreement (if applicable) or, alternatively, follow a procedure before the labour court to formalise the termination;
  • in the case that an employer terminates the employment relationship of an employee with “justified” cause as per the FLL, it shall notify the corresponding employee in writing, clearly specifying the conduct causing the termination “for cause” and the date or dates where such conduct was committed.

The aforementioned termination notice shall be delivered personally to the employee or it may be filed before the corresponding labour court within the next five business days as of the effective termination date, in which case the labour court shall formally notify the employee of the corresponding termination notice. Failure to comply with the notification process will be considered as an “unjustified” termination of employment, entitling the employee to claim reinstatement to his or her job or payment of the statutory severance. In the event an employer terminates the employment relationship of an employee without “justified” cause as per the FLL, and provided the employee agrees to such termination of employment (usually subject to the payment of statutory severance as per the FLL or to any other amount agreed between the parties), parties may formalise such a termination through an employment termination and release agreement.

Collective Redundancies

Collective conflicts of an economic nature are procedures in terms of which an employer may request from the labour court the modification of the employment conditions with its employees or the collective suspension or termination of the employment relationships with its personnel. To this effect, the employer must present evidence that supports their request. In the case where the employer and the parties do not reach an agreement regarding the termination of the employment relationships, a process will be followed whereby ultimately the labour court shall approve or reject the employer’s request to terminate the employment relationships with its personnel. 

It is important to bear in mind that the FLL specifically provides that, in the event of doubt, the most favourable interpretation to the employee shall prevail; therefore, it is likely that the labour court will resolve the collective conflict of economic nature according to the foregoing. Furthermore, it should be noted that a strike action suspends any collective conflict of economic nature that may be in process, unless employees agree to the continuation thereof.

The FLL does not provide any obligation either for employers or employees to notify the other party of the dismissal/resignation in advance. Notwithstanding the foregoing, employers may voluntarily agree to provide notice in advance to employees in the event of termination of their employment relationships. This practice is not common in Mexico.

In the case that an employer terminates the employment relationship of an employee for any cause that is different from those which are specifically provided by the FLL, such a termination shall be considered as “unjustified”. Under this scenario employees can claim: i) the reinstatement to their jobs; or ii) the payment of the statutory severance determined by the FLL. As previously mentioned, the FLL does not require employers to grant prior notice of the dismissal; therefore these actions may be followed by employees irrespective of employers granting prior notice of the termination of employment or not.

The statutory severance provided by the FLL for employees hired for an indefinite term is comprised by the following concepts:

  • 90 days of daily total compensation;
  • 20 days of daily total compensation per each year of services rendered. This concept is only applicable in the case that employees claim reinstatement of their jobs and the employer refuses to - or is not able to - reinstate employees to their jobs;
  • seniority premium equal to 12 days of salary per each year of services rendered, with a salary cap of twice the minimum wage; and
  • accrued salaries and employment benefits as of the termination date.

Daily total compensation comprises employees’ daily base salary plus the daily proportion of any employment benefit or any other concept paid to employees as part of their compensation.

In addition, in the case of litigation the employer could be liable to pay back salaries from the date of the dismissal through the first 12 months of litigation. After the first 12 months of litigation a monthly interest of 2% over the amount of 15 months of salary will be generated.

Severance payment for employees hired for a definite term in the case of “unjustified” termination is different from that of employees hired for an indefinite term (in most cases it is higher, but ultimately it depends on the length of the temporary contract).

As described above in further detail, the specific procedure to be followed in order to formalise the termination of the employment relationship varies depending on whether such termination is based on: i) the “general” causes provided by the FLL; ii) “justified” cause(s) as per the FLL; or iii) “unjustified” termination of employment as per the FLL.

In principle, employers do not require external authorisation in cases where the termination of employment is motivated by “justified” or “unjustified” causes as per the FLL. However, in the case of termination of employment for “justified” cause, the employer may have to file a termination notice before the labour court; and, if the affected employee challenges the validity of such termination, the employer shall demonstrate to the labour court’s discretion the causes that led to such “justified” termination.

If the employer terminates the employment relationship for the following “general” causes, it may seek the authorisation of the labour court in connection with the termination of employment:

  • death of the employee;
  • physical or mental disability of the employee that makes it impossible to continue the employment relationship;
  • force majeure or the employer’s physical or mental disability that makes it impossible to continue the employment relationship;
  • notorious non-profitability of the business;
  • exhaustion of the corresponding minerals in the mining industry; and
  • legally declared bankruptcy in the event that the creditors determine to close the company or permanently reduce its activities.

In the event of termination of employment for the “general” causes provided by the FLL, or “unjustified” termination as per the FLL, employers may seek that the labour court ratifies the termination of employment; however, such process does not imply an authorisation per se.

According to the “stability in work” principle, an employer can only terminate the employment relationship with an employee when the latter commits any of the specific wrongdoings provided in the FLL as “justified” causes for termination of employment. The parties cannot agree to additional causes for termination of employment.

In this regard, employers may terminate the employment relationship with an employee without liability and with no obligation to pay severance when the employee incurs one or more of the “justified” causes for termination determined in Article 47 of the FLL.

Procedure and Formalities

As previously discussed, in a case where an employer terminates the employment relationship of an employee with “justified” cause as per the FLL, it shall notify the corresponding employee in writing, clearly specifying the conduct causing the termination “for cause” and the date or dates where such conduct was committed. Such notification shall be made within the following 30 days from the date on which the employer became aware of the “justified” cause(s) for termination.

The termination notice must be as detailed as possible, since anything that is not included therein might not be presented or argued as evidence of the “justified” termination of employment in case of an eventual litigation.

The aforementioned termination notice shall be delivered personally to the employee or it may be filed before the corresponding labour court within the next five business days of the effective termination date, in which case the labour court shall formally notify the employee. Failure to comply with the notification process will be considered as an “unjustified” termination, entitling the employee to claim reinstatement to his or her job or payment of the statutory severance.

The statute of limitation for employees to file an employment complaint derived from the “justified” termination of their employment relationship is two months from the date in which the employee is formally notified of the termination notice (either in person by the employer or through the labour court).

Consequences

If the affected employee challenges the justification of the employment termination, the employer will have the burden to prove to the labour court’s discretion that the employee is in fact responsible for the corresponding “justified” cause for termination. It is important to bear in mind that the FLL specifically provides that, in the event of any doubt, the most favourable interpretation to the employee shall prevail; therefore it is likely that the labour court will resolve according to the foregoing.

Failure to prove that the employee was in fact responsible for the corresponding “justified” cause(s) for termination argued by the employer in the termination notice shall result in the reinstatement of the employee to his or her job or in the payment of the statutory severance, depending on the action carried out by the employee.

Procedures Required for Termination Agreements

As previously discussed, parties to an employment relationship may formalise the termination through the execution of an employment termination and release agreement in the case that the grounds for termination are: (i) the “general” causes provided by the FLL (except for the specific causes that require approval from the labour court); and (ii) “unjustified” termination of employment as per the FLL.

Employment termination and release agreements may be executed privately between the parties or before the labour court in order to seek their ratification. In the case that parties ratify the employment termination and release agreement before the labour court, the latter shall review the content of the termination agreement in order to confirm that such is compliant with the provisions of the FLL. Furthermore, in this scenario parties shall comply with any particular requirements set forth by the labour authority (eg, the employer’s legal representative shall demonstrate its legal personality through the corresponding power of attorney and parties will have to make the corresponding termination payment before the labour court in the form requested by the authority, etc).

Requirements for Enforceable Releases

In Mexico the granting of releases is a common practice; however, proper caution should be taken since employees are protected by the “acquired rights” and the “no resignation of rights” principles. According to these principles, even if employees agree to grant releases, if such contain any sort of resignation of rights, authorities will consider the releases to be null and void.

The content of any employment releases must be in accordance with the FLL, accepted moral standards, good practice, employment principles, and shall not involve any waiver of rights.

In order to ensure the validity and enforceability of employment releases, parties may ratify the termination and release agreement before the labour court, who, after reviewing the termination agreement and the releases included therein, will issue a resolution awarding legal validity and enforceability if such are not in violation of the law.

Specific Protection Against Dismissal for Particular Categories

In principle, all employees are entitled to protection under the “stability in work” principle, which consists of the right for employees to keep their job, as long as there is no legal ground for termination justifying the dismissal. The only exception to the foregoing are trust employees. In this regard, employers may terminate the employment relationships of trust employees with justified cause and without the obligation to pay severance when they have reasonable motives to distrust them. Furthermore, trust employees cannot claim reinstatement to their jobs in the case of “unjustified” termination of employment.

Employees with a seniority of 20 years and over are entitled to a “superior” protection against dismissal. In this regard, employers may only terminate the employment relationship of employees under this category provided that they carry out any of the “justified” causes set forth in the FLL and that these are particularly grave or make it impossible to continue the employment relationship.

Quid Employee Representatives

The FLL does not award any additional protection against dismissal to employee representatives; however, such individuals are entitled to protection under the “stability in work” principle as the rest of the employees.

The Constitution, the FLL and the Federal Law to Prevent and Eliminate Discrimination protect any employee against discrimination based on ethnicity, national origin, colour, culture, sex, gender, age, disability, social, economic, health or legal status, religion, physical appearance, immigration status, pregnancy, language, opinions, sexual preferences, political identity or affiliation, marital status, family status, family responsibilities, language, criminal record, homophobia, misogyny, xenophobia, racial segregation, anti-semitism, as well as racial discrimination and related forms of intolerance, or any other that is prejudicial to human dignity or that aims to nullify or undermine the rights and freedoms of individuals.

Discriminatory acts by the employer or the employee may be construed as “justified” cause for termination of the employment relationship pursuant to the FLL.

In principle, affected employees have the burden of proof to demonstrate that they suffered any form of discrimination by the employer. If they present any such evidence, it may be up to the employer to prove that it is not responsible for the alleged discriminatory actions.

Employment legislation only provides for sanctions against employers who discriminate against their employees; however, it does not set forth any compensation for affected employees. Individuals who are victims of discrimination may seek for the payment of damages before civil courts based on the particularities of their cases.

Specialised Employment Forms

On the date in which this publication was written (August 2018) the competent authorities to resolve all employment disputes in Mexico arising from employment relationships between private parties are Conciliation and Arbitration Labour Boards, bodies which derive from the executive branch of the government.

Notwithstanding the foregoing, on 24 February 2017 a constitutional amendment was published in the Official Gazette which state that the administration of labour justice will be transferred from the Conciliation and Arbitration Labour Boards to labour courts derived from the judicial branch of the government. Such constitutional amendment provided that the changes included therein - including the transfer to labour courts - should be made effective no later than 25 February 2018. Since this publication was written, the legislative and the executive branches of government have not complied with their obligations to implement the aforementioned constitutional amendment, the labour courts have not been established and the administration of labour justice is still carried out by Conciliation and Arbitration Labour Boards.

Employment labour claims can be filed before the Federal or Local Conciliation and Arbitration Boards depending on the jurisdiction. The Federal Conciliation and Arbitration Board has jurisdiction to resolve employment disputes with respect to industrial branches such as mining, automotive, oil and gas, food production, beverage production, bank and credit services, among others. The Local Conciliation and Arbitration Board has jurisdiction to resolve all other employment disputes which do not correspond to the Federal Board.

Additionally, the Constitution provides a specialised forum to resolve employment disputes in Mexico arising from employment relationships between the government and its employees, which is The Federal Court of Conciliation and Arbitration.

¬Class Action Claims

The FLL does not regulate class action claims. However, the FLL regulates collective actions that can be filed by employees and unions. Among the most common collective action is the strike procedure, which consists of the temporary suspension of the activities in a workplace.

Even though the FLL does not include express provisions in this regard, several employees can file an employment complaint against one employer. This type of collective action is common in collective terminations of employment, where several employees claim the “unjustified” termination of their employment by the same employer. Nevertheless, these collective actions are not equivalent to class actions since each plaintiff has to appear individually before the labour court in the corresponding litigation (there is not a leading plaintiff). It is not necessary that the plaintiffs meet certain criteria to constitute a class, and the labour court will not necessarily issue the same resolution in connection with each plaintiff, as the particular circumstances of each case may vary.

Representations in Court

The FLL provides that employment procedures shall be public, free, immediate, predominantly oral, conciliatory and can only be followed as per the request of one of the parties. Representatives of both parties have to appear personally before the labour court for each of the hearings in connection with the corresponding procedure. Representatives of the employers have to demonstrate their legal capacity through a notarised power of attorney, whereas employees may appear themselves before the court or through representatives who have to demonstrate their legal capacity through proxy letters. 

Arbitration

Private arbitration is not acknowledged by the FLL. In terms of the foregoing, even though parties to an employment relationship may agree to submit their differences to arbitration, such process and any resulting resolution shall not be considered binding and enforceable. Furthermore, parties to an arbitration process may withdraw at any time and pursue a separate action before labour courts. Submission of a conflict to a private arbitration does not interrupt the applicable statute of limitation for the parties to pursue an action before labour authorities.

The only authority to mediate, resolve and arbitrate employment and labour disputes is in Mexico are labour courts. Pursuant to this, it is extremely uncommon that private arbitration is used in Mexico.

Pre-Dispute Arbitration Agreement

Any pre-dispute agreement entered into by the employee and the employer may be valid and enforceable, provided that it meets the minimum legal requirements and is ratified before the Conciliation and Arbitration Labour Board; otherwise any agreement entered into by the parties may be considered null and void.

In addition, the FLL establishes a conciliation stage, where the authority provides the parties with the opportunity to reach an agreement before the plaintiff and ratifies its complaint with the defendant responding. However, as of the day in which this publication was written (August 2018) the conciliation is not an independent procedure, since in the event that the parties decide not to settle, the litigation process will commence immediately thereafter.

The FLL does not provide the payment of legal fees to any of the parties in the case of success in a labour claim.

Creel, García-Cuéllar, Aiza y Enríquez, S.C.

Torre Virreyes
Pedregal 24, Piso 24
Col. Molino del Rey
Ciudad de México
Mexico 11040

+52 (55) 4748-06

+52 (55) 4748-0670

francisco.peniche@creel.mx www.creel.mx
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Law and Practice

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Creel, García-Cuéllar, Aiza y Enríquez, S.C. (Mexico City - HQ) 's employment and labour practice is based in the Mexico City office. As of 1 September 2018, the firm has a total headcount of 13 professionals, which includes one partner, nine associates and three law clerks. We have a full-service labour, employment and social security practice with ample experience in representing and advising large multinationals, including the hire and termination of employees, negotiation of collective bargaining agreements with local and national unions, establishment of incentive compensation schemes, including stock option plans, incentive bonus plans and benefits, creation and operation of cost-efficient employment structures, employee training manuals, and health and safety regulations, advice on the employment law implications of commercial transactions, litigation before State and Federal Labor Courts.

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