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August 29, 2023

Mexico: Supreme Court Issues Ruling on Subcontracting under 2021 Labor Law Reform

Francisco Udave Treviño

The Supreme Court of Justice has determined that changes to subcontracting under the April 2021 Labor Reform are constitutional, but the Ministry of Labor is not able to create further definitions thereon.

Within a recent resolution within a Revision recourse deriving from an Indirect Amparo lawsuit, the Supreme Court of Justice has established that the limitations to the subcontracting structure in Mexico, resulting from the April 2021 reform, are indeed constitutional.

The Court, through its Second Chamber, considered that the subcontracting reform is constitutional since the same is justified due to the need of eliminating practices which damage the employment rights of employees and the public treasury.

However, the Court has also determined that the Ministry of Labor exceeded its functions when it issued the resolution by which the referred administrative authority defined what should be understood per “specialized services”, when issuing the rules for the registration of “specialized services providers”.

In particular, in May 2021, the Ministry of Labor issued the guidelines for the registration of individuals or legal entities that provide specialized services or execute specialized tasks, and within those, it defined specialized services or tasks as "those that combine distinctive elements or factors of the activity performed by the contractor, which are supported, among others, by training, certifications, permits or licenses that regulate the activity, equipment, technology, assets, machinery, risk level, average salary range and experience, which provide added value to the beneficiary.”

Notwithstanding the foregoing, the Supreme Court of Justice resolved that the Ministry of Labor exceeded its authority when issuing such definition, as the legislative branch did not enable such administrative secretariat for such a purpose. In term of the Federal Labor Law, the only two conditions for a service or task to be deemed as “specialized” are:

  1. Those which are different from the corporate purpose of the services´ beneficiary; and
  2. Those which are different from the beneficiary´s main economic activity.

Based on the foregoing, as long as those two conditions are met, services or tasks shall be considered as “specialized”, despite the additional features established by the Ministry of Labor for such effect. This is particularly relevant when receiving and attending inspections carried out by the Ministry of Labor on subcontracting compliance at the workplace.

Francisco Udave Treviño

Partner, Santamarina and Steta Mexico City, Mexico

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