Mexico: Preliminary Analysis of the Project to Reform the Federal Labor Law

In a work session held on April 3, 2019, the Labor & Social Welfare Commission of Mexico’s House of Representatives issued the last draft of the decree to reform the Federal Labor Law (the “Law”). On April 11, the House voted and approved the general terms of the decree by an overwhelming vote of 417-1.  The decree is now pending in the Senate.

Pursuant to changes made to Mexico’s Federal Constitution in February 2017 addressing labor matters, as well as new commitments the Mexican Government took on as part of the United States-Mexico-Canada Agreement negotiation, the reform project seeks to reinforce workers’ rights, judicialize labor justice and regulate the creation of unions, as well as strengthen workers’ freedom to unionize and bargain collectively.

Although the project may face specific modifications in order to be approved in the plenary session, the following are the most relevant provisions that have been kept throughout the various work meetings of the labor commission:

Individual Employment

  • Individual employment agreements—i.e., agreements between a worker and the employer—must include the appointment of the workers’ beneficiaries for payment of accrued salary and benefits in case of the employee’s death or disappearance due to a criminal act. In the latter instance, the beneficiary must obtain a Special Declaration of Absence, which may be requested three months following the disappearance report or a complaint before the National Human Rights Commission.
  • The acknowledgement of internet-based tax certificates (comprobantes fiscales digitales por internet or “CFDI” for its acronym in Spanish) can be substituted for printed salary receipts. The Tax Administration Service (Servicio de Administración Tributaria) website can be used to verify their validity. Using the internet-based tax certificates would not relieve employers of the requirement to issue printed salary receipts upon the worker’s request. Such printed salary receipts will require worker’s actual written signature.
  • Each company must implement, in agreement with its workers, an internal protocol to prevent discrimination, address violence and sexual harassment cases, and eradicate forced labor and child labor.
  • A new provision mandates social security insurance for domestic workers. This provision will take effect once regulations are issued under the corresponding laws.
  • New provisions expand the eligibility criteria for workers’ beneficiaries in case of death or disappearance. Those eligible for benefits who will not need to demonstrate economic dependency include not only the surviving spouse, but also children under 18, children 18 or older who have a disability of 50% or more (as it is legally determined), and children up to age 25 who are studying in Mexico.  
  • Requests to void private termination agreements (i.e., without the certification of the Conciliation Center) may only be sought for agreements containing waivers of workers’ rights.

Labor and Collective Relationships

  • Reform to the Law will implement an open and transparent model of union elections that will require workers’ input into the content of the collective bargaining agreements (“CBAs”) and the ability to revise agreements prior to their filing with the registration authority.
  • Closed shop provisions will no longer be allowed in CBAs.
  • The Federal Conciliation Center and Labor Registry (Centro Federal de Conciliación y Registro Laboral or “CFCRL” for its acronym in Spanish) is created, which shall be in charge of:
  • the registry of unions and related matters;
  • the registry of CBAs and internal labor regulations; and
  • the issuance of the representation certificates.
  • The concept of the Representation Certificate is introduced to guarantee the representation principles of the unions, and provide certainty in the execution, registration and filing of CBA and revision agreements. Such certificates will:
  • prove that a union represents at least 30% of the unionized or unionizable workers of a company;
  • be required to register a new CBA or to call to strike;
  • be valid for six months from its issuance date, unless a strike is called, in which case the certificate will be extended for such process.
  • Among other obligations, employers must deliver to every worker a copy of the CBA, as well as post and disseminate the announcement and other documents required for the representation certificate, or the announcement about worker consultations regarding the content of the CBA.
  • It will be prohibited for employers to carry out any conduct intended to take control of or influence the union to which its workers belong.
  • Employers will be required to enter into a CBA with only one union; should more than one union obtain a representation certificate, however, the registration authority will be in charge of organizing elections through secret ballot to determine the union with which the CBA shall be executed or administered. Employers cannot intervene in this process or be present during the elections.
  • Once the employer and the union agree on the terms of the CBA, its contents shall be disclosed to the workers for majority approval before being filed with the registration authority.  Likewise, the employer may not participate during this process, and the agreement may only take effect after CFCRL approval. The requirement that salary revisions be made annually and full-text revisions be made every two years remains unchanged.
  • For CBAs in place at the time the reform takes effect, there will be an obligation to revise them at least once within the next four years, under penalty of termination of the CBA. If a CBA is terminated under this provision, workers will keep receiving the benefits set forth in that CBA.
  • A special collective procedure is established to address:
  • demands of ownership of the CBA (that is, a determination of which union will administer the CBA in place);
  • administration of the Law Agreement (a special type of CBA required for certain companies, industries and/or states);
  • breaches of internal labor regulations;
  • collective suspension of labor relationships for acts of God, lack of raw materials and lack of provision of State resources;
  • collective termination of labor relationships for acts of God, lack of matter and bankruptcy-protection measures;
  • reduction in force for introducing new machinery or technology;
  • violations of fundamental collective rights;
  • challenge of union elections; and
  • union penalties.
  • In the event of a strike, there are new requirements depending on the strike’s scope:
  • If the strike is called for the purpose of executing the CBA or Law Agreement, the union calling the strike must show the corresponding representation certificate.
  • A certificate proving that the union entered a CBA with the employer must be filed with the registry if the strike was called to reestablish the balance of the production; to require the performance of the CBA/Law Agreement; to require the compliance with profit-sharing provisions; or to require salary revisions.
  • Regarding the procedure for calling a strike, the Court will summon the parties within the pre-strike period to hold conciliation talks, for which a Conciliation Center’s conciliator may be appointed. In this hearing, the existence, nonexistence, justification or non-justification of the strike will not be analyzed, and may be postponed as requested by the union or both parties.
  • The pre-strike period may be extended: i) per the union’s request; ii) for lack of approval of the CBA by the majority of the workers; or iii) by mutual agreement between the parties to reach a conciliatory settlement.
  • An employer may submit to the Court for consideration the conflict that produced the strike if the strike exceeds 60 days.
  • Any party may request that the Court issue a certificate of the existence or nonexistence of the call to strike.

Individual Litigation

  • Conciliation Centers will be created to carry out the pre-judicial conciliation procedure ("Pre-Judicial Conciliation") and must initiate activities within three and four years for local and federal jurisdiction, respectively, as of the date the decree is enacted. The Pre-judicial Conciliation must be exhausted prior to the labor conflict, except the following conflicts are exempt from the conciliatory process:
  • Discrimination in employment and occupation due to pregnancy;
  • Designation of beneficiaries due to death of the employee;
  • Social security benefits for work risks, maternity, illness, disability, life, day care, benefits in kind and work accidents;
  • Protection of fundamental rights and public freedoms of an employment nature (freedom of association, freedom of unionization, effective recognition of collective bargaining, labor trafficking, forced labor, and child labor);
  • Actions to challenge the administration of a CBA or a Law Agreement; and
  • Actions to challenge the bylaws of the unions or their modification.
  • The Conciliation Centers will initiate activities within three years for local competence and four years for federal jurisdiction, from the entry into force of the decree.
  • In cases of sexual harassment, discrimination or other acts of violence contemplated by law, the authority will take the necessary measures so that the applicant and the summoned person do not face each other; therefore, the summoned person must appear by proxy or representative.
  • If the parties do not reach an agreement, the Conciliation Authority will issue a certificate of completion of the Pre-Judicial Conciliation stage.
  • If an agreement is reached, once executed before the Conciliation Centers, it will acquire the status of res judicata, enabling executive actions without the need for ratification.
  • Undoubtedly a relevant aspect that emerges from the bill is the disappearance of the Conciliation and Arbitration Boards; Labor Courts will stand in their place, which will be part of the Judicial Branch.
  • Those matters currently before the Conciliation and Arbitration Boards will be resolved by those authorities. Matters arising after the Law reform takes effect will continue to be resolved by the Conciliation and Arbitration Boards until the Labor Courts enter into operation.
  • The judge will have the broadest powers to preside over proceedings, including the ability to verify the availability of the documents to be exhibited and to moderate the development of the parties’ statements for the introduction and hearing of the evidence.
  • The bill to reform the Law establishes that the “plain and simple denial” of the dismissal (that is, a plain and simple statement that an employee was not fired), or a similar statement concerning the offer of a job, does not relieve the employer from the burden to prove its defense.
  • As proposed by the bill, employers will have the opportunity to prove in Court that the employee’s dismissal was justified, even if no notice of termination was given, since the lack of notification would only lead to a presumption that the dismissal was unlawful. Employers would be able to admit evidence to support a justification for the dismissal.

Refusal to Reinstate

  • It is established that the employer can refuse to reinstate the worker by paying the full severance through a parallel procedure whenever the worker:
  • has less than one year of tenure with the employer;
  • works for, and is in direct contact with, an employer who is an individual;
  • is considered a trusted employee;
  • is a household worker; or
  • is a temporary employee.
  • If the employee does not agree with the procedure or with the amount of the severance, he/she can file a lawsuit against the employer. If the Court determines that the worker does not fall into the above categories, the deposit of the severance will be left without effect and the Court will apply the deposit amount to the final ruling, and is authorized to order the employer to pay the difference and interest that may apply.

Final Remarks

The project to reform the Law may face some modifications during its revision by the Senate. Since this proposal was driven by the parliamentary group with majority in the Congress, and has the approval of the Ministry of Labor and Social Welfare, we expect any modifications to be minor.

Most of the provisions contained within the last version of the project are a result of political and legal requirements founded on international treaties and the Constitution itself; therefore, the general direction of this reform will not be modified.

In accordance with Mexico’s current political agenda, it is expected that the final approval of this decree will occur before April 30, and will be published in the Federation’s Official Gazette on May 1, within the observance of Labor Day (to enter into force and effect the day after its publication) as occurred with the announcement of the construction of the refinery to be set in Dos Bocas, Tabasco on March 18, the day in which oil expropriation day is commemorated.

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Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.