May 06, 2019 Issue: May 2019

MEXICO - Procedural Changes and Their Effects

By: David Eugenio Puente, Partner, Sanchez Devanny, Nuevo Leon, Mexico

The labor justice system in Mexico has been severely criticized in years past. It is not a secret that the Conciliation and Arbitration Labor Board (which is currently the authority in charge of solving individual and collective litigation), has proven to be somewhat obsolete. A regular litigation procedure at the Federal or Local Conciliation and Arbitration Boards takes between 3 to 4 years to be solved. This certainly does not provide any of the involved parties prompt or expedited justice, as our Political Constitution provides.

Due to the failure of our labor justice system and international pressure regarding this and some other collective issues, Mexico was forced to enact legislation to correct the current flaws and be able to face its international commitments, such as the 98 Convention of the International Labor Organization and the, still not in force, United States-Mexico-Canada Agreement (“USMCA”).

Now, being the official political party having an overwhelming majority in Congress, this past May 1st, 2019 (coinciding with the International Labor Day), the bill to reform the Federal Labor Law was published in the Mexican Official Gazette reforming the following laws:

  • Federal Labor Law,
  • Organic Law of the Judicial System,
  • Public Defense Law, and
  • Social Security and Housing Laws.

As it is customary in Mexico, Labor Law has had a clear trend to protect the working class, and we believe that these reforms are not the exception. However, it could possibly help to achieve the principles of prompt and expedited justice, as substantial modifications were made to the litigation process.

First, the reform provides a mandatory pre-litigation stage that will be held before the newly created figure of the Conciliation and Labor Registry Federal Center (“LCRC”). During this stage, parties will be forced to attend a conciliatory hearing, with the main purpose of reaching a settlement, which can be ratified and enforced by such authority. However, should they fail to reach a negotiated agreement, the LCRC will certify this, and will grant the claiming party a certificate to allow him/her to bring an action at the Labor Courts.

Similarly, there have been considerable changes in the litigation process. The most important is that the judicial branch, instead of the executive branch, will now control the labor justice system. This could be advantageous as we believe the judicial branch intends to purge formalistic procedures and focus disputes instead on the main controversies.

Under the previous litigation procedure, litigation and the introduction of evidence were divided into several phases. The new reform procedure provides that evidence should be provided by the parties in the lawsuit and its answer. Both parties will have the opportunity to challenge the reply to the answer, and to reply to that challenge.  Then the Judge will summon the parties to a preliminary hearing, where the Judge will purge the procedure, send it to the trial hearing where evidence tending to solve those items is to be taken.

Another relevant aspect of the reform is that it now gives the employer the opportunity to build a solid case in litigation, to substantiate a justified cause for dismissal. In the previous legislation, if an employee committed any of the acts enlisted by the law as justified cause of dismissal, the employer had only 30 days to gather sufficient evidence to prove the justified cause of dismissal and then present a rescission notice (a justified termination notice) to the employee or file it before the Conciliation and Arbitration Board.   If the notice to the employee or the Labor Board was not provided, then this omission would deem the termination as unjustified. 

However, thanks to the new reform, the employer is no longer required to file this notice to the employee or the Labor Board.  In exchange, evidence to prove the justified cause for dismissal can be brought up at the moment of answering the employee’s claim before the Labor Courts. We believe this will give the employer a much more ample time frame to prepare and build a case. This is particularly true because employees mustg exhaust the conciliatory pre-litigation stage before the LCRC (which can last up to 45 days) and then file their claim and get it accepted.

There is also another important change.  Previously, if an employer offered reinstatement, this shifted the burden of proof to the employee to show the dismissal was unfair. (This was called the reversion of the burden of proof.)   However, now the law provides that a reinstatement offer does not revert the burden of proof, meaning that the employer in all cases is obligated to prove that the dismissal was for good cause.

These reforms will be enforceable in three years for Local Labor Courts and local LCRC’s, and in four years for Federal Labor Courts and LCRC’s functions of conciliation.

In addition to the above, some other modifications were also made, including the following:

  • All termination agreements that are executed privately (as opposed to the ones ratified before the authority), will now be totally valid and enforceable. Should a clause be determined as null for containing a prohibited waiver of rights, it shall not affect the validity of the rest of the document;
  • All digital fiscal certificates will be official and the signature of acknowledgement of the employees will not be required, as long as such certificates can be found at the Tax Administration Office’s website;
  • Employers will be forced to enact a written protocol to prevent acts of discrimination, violence, labor and sexual harassment;
  • Employers can be asked not to withdraw a pregnant employee from the social security system, in case she has been dismissed. This is expressly mentioned within the reform; nevertheless, we are not certain as how could it work in case the employer is able to build a case for a justified dismissal;
  • Housekeepers and other employees providing household services should now be granted social security benefits;
  • Employees will be able to designate a beneficiary of their accrued benefits in case of death or disappearance. In the previous legislation, beneficiaries were subjected to a long administrative process before they could be officially named as beneficiaries and be able to receive the payment.

In general, we believe that the reform addresses important matters and it could prove to be useful when it comes to the principle of providing prompt and expedited justice. Additionally, some other aspects of the law were modified as a result of the reform, including a major change in collective matters. Those topics are addressed in a separate article within this Newsletter.