Mexico - An Overview of the Recent Labor Law Reform in Mexico

The new labor law of Mexico regulates the modifications made to Article 123 of the Constitution  that became into force on February 2017, modifications that correspond to the commitments assumed by Mexico due to its interest  to be part  in the Transpacific Partnership Agreement (“TPP”), and to the execution  and ratification of Convention 98 of the International Labor Organization (“ILO”) regarding Right to Organize and Collective Bargaining.

After the Constitutional reform, Mexico entered into negotiations to update the North America Free Trade Agreement, that resulted in a new trade agreement known as USMCA. These negotiations took place at the same time the Mexican Congress was discussing the changes to the Federal Labor Law for the implementation of the Constitutional reform.

The new trade agreement included Article 23 and Annex 23-A, which set forth the commitment for Mexico to make important amendments to its labor and employment legal framework, to ensure the rights of freedom of association and collective bargaining, and to implement a new system of labor justice independent from the Executive Branch of Government.

The Bill that reformed the Federal Labor Law is aimed to fulfill three main commitments:

• To include the obligations set forth in ILO’s Convention 98 to guarantee the freedom of association and collective bargaining.
• To create new Labor Courts that will replace the current Conciliation and Arbitration Boards, modifying the procedural rules.
• To modify other legal provision important for the new government’s agenda.

Below is a general analysis of the Bill, focusing in those provisions that may significantly impact companies or that may be of general interest.

1.  Freedom of Association and Right for Collective Bargaining

The new law, in accordance with the constitutional obligation and the international obligations accepted by Mexico, includes the principles established by ILO’s Conventions 87 and 98, with the objective to guarantee the freedom of association and collective bargaining, setting certain requirements that will entail important implications for employers, as follows:

• Unions shall enjoy adequate protection against any act of interference from employers, which means that employers will not be able to interfere, in any form, in the union’s internal organization. The employer cannot make any economic payment to union and the Bill sets forth, that the employer cannot support in any form the union with the purpose to put it under its control.
• Workers will have freedom of association, having the necessary protection to be or not be part of a union, to freely elect the union’s officers through democratic processes, and to receive complete and detailed information about the finances of the union and its administration.
• Workers will have the possibility to express their will to accept or not accept the withholding of union dues by the employer. It is also established that exclusion clauses cannot be included in the collective bargaining agreement and workers cannot be sanctioned and lose their employment due to their resignation from the union.
• However, the Bill does not prohibit closed-shop clauses.
• Establishes democratic processes to elect the union’s leadership, through personal, free, and secret vote.
• The registration of unions will be performed by the Federal Center of Conciliation and Labor Registry (the “Federal Center”) which is created as part of the reform. Collective bargaining agreements and union matters will be of federal jurisdiction. Therefore, local authorities lose their authority on this regard, regardless of the industry or the location in which the work center is located or the scope of the union.
• For its registration, union must file the necessary documents to prove that they were incorporated through a democratic process. The Federal Center will publish all union documents in the web page created to that end.
• Unions will be prohibited from being part of tax elusion schemes. They may not avoid the fulfilling an employer’s obligations with its workers. Nor may they encourage acts of violence against their members or participate in schemes to be falsely appear as employers.
• An important modification in the Federal Labor Law is the inclusion of the possibility to dissolve, through a judicial resolution, those unions which participate in acts of extorsion against employers by demanding the payment of money or any other benefit to withdraw calls for strike or to not participate in Union Certification Processes related to collective bargaining agreements.
• The execution of collective bargaining agreements (hereinafter referred as “CBA” or “CBAs”) must have the support of workers that will be covered by them, and be expressed through the personal, free and secret vote of workers. Likewise, the union must have the Representation Certificate issued by the Federal Center.
• To request from an employer the execution of a CBA, a union must have, prior to the request, the Representation Certificate, which requires several actions to be obtained, including the workers vote showing that at least 30% of workers covered by the CBA support the union. By having the Certificate, the union can request the participation of the corresponding conciliatory authority, and if the employer does not accept the execution, the union may file the call for strike attaching the Representation Certificate.
• The agreements to renew or modify a CBA must be executed before the authority and will require the ratification of o the majority of workers covered by the CBA, through their personal, free and secret vote. Likewise, the revision and modification agreements, to be registered, will need to be ratified by workers for its approval.
• Several provisions are included regarding the strike proceeding to adequate such proceeding to the freedom of association right and. In case that the voting of employees is offered by the parties, there will be specific provision to guarantee the legality of the list of voters and secrecy of the vote.
• Employers can file a motion before the Labor Court to terminate a strike that has lasted for more than sixty days.
• The union may extend the period before the strike, only one time, for a period of up to 30 days.

2.  Labor Courts and Procedural Rules

The new law:

• Modifies all the legal provisions that refer to the Conciliation and Arbitration Board to make reference to Labor Courts.
• Provides that the filing of the conciliatory stage before the competent authority will interrupt the statute of limitation period related to the filing of the lawsuit arguing a wrongful termination.
• Establishes rules for the Preliminary Conciliatory Proceeding, which is a mandatory stage that must be followed before the trial. If the employee does not appear at the conciliatory meeting, the stage will be dismissed. If the employer does not appear, the stage will be concluded, and the statute of limitation period will restart. If claim cannot be served upon the employer, notwithstanding that it has been tried, the stage will be terminated, and the employee may file the lawsuit. If an agreement is reached, the same will be considered as a final judgment. In cases of discrimination due to pregnancy, it will not be mandatory to file the conciliatory claim.
• Establishes rules related to notification and communication processes through electronic mails which will be applicable for the Preliminary Conciliatory Proceeding as well as for the judicial trial.
• Regarding evidence, it is established that the printed payment receipts must have the original signature of the employee to be valid; the payment receipts included in the internet digital tax receipts create the presumption of the payment and their content will be validated in the Internal Revenue Service website.
• The denial of the dismissal and the offering of the job, as well as the simple denial of the dismissal, does not revert the burden of proof to the worker, which is a change that will affect the majority of the defenses that currently are filed.
• The process will be faster. Therefore, companies will have to work faster to gather all the evidence related to the case, since the evidence must be filed attached to the answer of the complaint, which must be filed within 10 days after the lawsuit was served.
• The lack of a termination notice, delivered to the employee or to the Court, will create a presumption that the termination was without cause, unless there is evidence that proves otherwise. This modifies the current wording of the law, under which the lack of termination notice createes a wrongful and void termination.
• Another important change in the law is that the employer is granted with the possibility to appear before the Court, through a special process to file the severance in case the employer expresses its will to not accept the trial.

3.  Other modifications

• Several provisions are included on avoiding discriminatory practices, mobbing, and sexual harassment.
• There are many provisions related to gender equality and employer organizations, and unions must promote gender equality in proportion to the number of employees.
• Maternity protection is increased, and it is established that if the employer decides to terminate the employment relationship for a justified cause of a pregnant woman, the employer must keep the social security benefits for a period of 6 months after the birth.
• In case of death or forced disappearances derived from a criminal act, the severance will be paid to children under the age of 18 and those older but with a disability of 50% or more, or children up to 25 years old if they are studying in a public school. In any case the economic investigation will be carried out, since those individuals have the presumption of economic dependency.
• The new law does not modify outsourcing matters.

4.  Transitory Provisions

• The new law will become into force the day after its publication in the Federal Official Gazette.
• The Federal Center, regarding its registration obligations, must start its activities in a maximum period of two years after the Bill becomes into force. Until the Federal Center starts its registry functions, the Conciliation and Arbitration Boards as well as the Ministry of Labor and Social Welfare will continue with their registration functions. The day after the Federal Center starts its operations, the registration services provided by the Conciliation and Arbitration Boards and the Ministry will be suspended.
• The Conciliation Centers and the Labor Courts of the states will start operations three years after the law comes into force.
• Within four years after the law becomes into force, each delegation and regional office of the Federal Center will start the process of conciliation requests under its jurisdiction, at the same time the Federal Labor Courts start their operation in the Circuit they are part of.
• The individual and collective proceedings that are registered by the Conciliation and Arbitration Boards before the new law comes into force, as well as those filed after the new law is published but before the starting of operations of the Labor Courts, will continue until its conclusion and will be regulated by the current Federal Labor Law.
• Current collective bargaining agreement must be revised at least once in the next four years after the Bill becomes into force.