Key Bill of Amendments to the Mexican Federal Labor Law and Its Potential Impacts on Employers in Mexico

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On September 1, 2012, President of Mexico Felipe Calderón submitted to the Mexico House of Representatives a bill of amendments to the Federal Labor Law (FLL), which was thereafter approved almost in its entirety by the House of Representatives and the Senate. This proposed bill of amendments is expected to become effective within the coming days and is highly significant for the legal labor framework of Mexico. If approved, it would have a major impact on all employers in Mexico, including foreign companies that have operations in Mexico.

An amendment to the FLL currently in effect became an urgent matter given that such law was enacted in 1970 and had its last material amendment merely on procedural matters in 1980. Meanwhile, Mexico and the international scenario have changed substantially, leaving certain relevant provisions of the FLL impractical and burdensome, and some even obsolete. The international and Mexican business community have insistently requested throughout the years to the Mexican government an amendment to the FLL, which this administration is finally pursuing.

Among the topics most relevant to employers and employees in the bill are the following:

Hiring and Individual Labor Relations

  • Inclusion of new hiring patterns, such as:
    • Seasonal work, which would allow certainty in the hiring process of employees who perform seasonal work activities, such as sales people and agricultural workers.
    • Trial periods and training periods for new employees for up to six months. The current FLL does not provide for this type of training and trial work.
    • Telecommuting benefits. The current FLL does not contemplate telecommuting.
  • Including workplace and sexual harassment against any person as a cause for justified termination of employment. These conducts are not contemplated in the current FLL as a cause for justified termination of employment.
  • Strengthening of the rights of working mothers, providing flexibility to elect maternity leave periods (before/after birth), allowing shorter shifts for mothers breastfeeding their children, among others.
  • Prohibition of all types of discrimination in the workplace in accordance with international standards.
  • Sanctioning underage labor (below 14 years) as a crime.
  • Including the right to paternity leave (for three days), for childbirth or adoption, which is not contemplated in the current FLL.
  • Requiring companies with more than 50 employees to adapt their facilities to allow access to handicapped employees, which is not contemplated in the current FLL.
  • Improving working conditions for household, agricultural and mining workers, providing for more adequate labor shifts and ensuring they have the same benefits granted by the FLL to all other types of employees.
  • Providing clear rules for employers hiring employees to work abroad.
  • Encouraging the training of employees by providing clear rules on the training obligations, which would require employers' compliance.

Work Under the Subcontracting Regime

Over the years, certain groups have used work under the subcontracting regime (outsourcing of personnel) as a mechanism to avoid full compliance of labor obligations toward employees. The bill of amendments contains certain restrictions for the employers of the personnel, as well as for those companies that benefit from the services of such personnel in order to avoid a wrongful practice of this subcontracting regime.

In the event the outsourcing of personnel is used as a mechanism to avoid employer obligations, the contracting party (the true beneficiary of the services rendered by the contractor's personnel) would be considered a true employer for all legal purposes under the FLL, making it responsible for all labor obligations, including Social Security obligations.

Additionally, the outsourcing of personnel will not be allowed when employees are transferred from one company to another with the purpose of reducing the labor rights of the employees. Penalties are imposed for breach of these provisions.

Procedures at the Labor Courts

The revised provisions under the bill:

  • Contain rules making the delivery of the notice of termination of the labor relationship in accordance with the FLL an easier procedure for the employer.
  • Limit to one year the payment of accrued salaries in trial procedures for unjustified termination that exceed this term. Currently, in trials initiated for unjustified termination, a favorable judgment to the employee may contain accrued salaries from the date the employee was terminated without cause, as of the date of payment of the award, without any limitation.
  • Include expressly the possibility to submit evidence in the trial procedures using the different available information and communication technologies. This is not currently provided in the FLL, making it challenging for defendants to prove their case.
  • Set forth the professionalization and ongoing training for civil servants of the Federal and Local Labor Courts, whereas this is not provided in the current FLL.

Labor Union Related Topics

Certain union-related topics that were originally included in the bill submitted by President Calderón, such as limitations to the strike proceedings, the delivery of the financial information of the unions to their members and the classification of the information related to the registration of the collective bargaining contracts as public information, are still under discussion. Uncertainty remains on whether these proposed amendments will be approved.

The Mexican government has indicated that the bill being submitted has two main goals: (1) to promote the creation of new and better-paying jobs by encouraging the productivity of companies; and (2) to develop labor relationships under regulated conditions (not street or informal trade), fostering the means to enforce the labor rights provided by the FLL.

This long-anticipated amendment to the FLL is likely to provide more legal certainty conditions for those companies investing in or planning to invest in Mexico and would also promote a more expeditious, modern and efficient administration of justice by the Labor Courts. It could eventually contribute to the improvement of conditions for creating a more internationally competitive productive market.

If approved, the new hiring patterns and the revisions to the existing procedural provisions proposed in the bill may contribute toward preventing abuse by those employees taking undue advantage of the current employee-oriented provisions of the FLL.

Should the proposed amendments be approved, all employers may want to review and update their current hiring programs, policies and documents in light of the new provisions in order to comply with the requirements and benefit from them.

About Duane Morris

Duane Morris will continue to monitor and report on any new developments arising from the proceedings for the approval of this bill, as well as on the final outcome of those proceedings and the implications of the new provisions of the FLL.

About Duane Morris and Miranda & Estavillo

International law firm Duane Morris LLP and Mexico City law firm Miranda & Estavillo, S.C. have entered into an agreement creating an alliance that formalizes and strengthens a longtime referral and networking relationship between the two firms. The firms have provided clients with legal counsel on U.S. and Mexican legal issues, particularly in the area of international corporate transactions. The firms will now offer clients expanded geographic reach and practice strength in cross-border matters.

For Further Information

If you would like more information about this Alert, please contact any of the members of the Mexico Business Group, any of the members of the Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Published In: Administrative Agency Updates, Elections & Politics Updates, International Trade Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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