Top Ten Recent Mexican Labor Law Amendments

By Karina Angel and Rafael Mercado, Cuesta Campos Abogados

Recent amendments to the Federal Labor Law Act were published on November 30th, 2012 in the Official Gazette, and became valid since the following day. This Top Ten is a summary of the ten main amendments as well as some corrective actions proposed.

I. Subcontracting Services

"Subcontracting services" are defined as the legal relationship by which an entity, known as a "contractor", carries out works or renders services through its own employees in favor of a contracting party/client (individual or entity), which specifies and supervises the activities to be carried out by the contractor.

These type of services must comply with the following requirements:

1. Cannot be outsourced 100% of the same or similar activities developed at the work center. A specialization of activities or knowledge should be needed and duly justified. Outsourced activities cannot be same or similar to the activities performed by the actual employees of the client.

In case the subcontracting services do not comply with all above conditions, the contracting party/client will be considered as employer for all legal effects, including social security obligations.

In addition of the above, contractors and clients must comply with the following requirements:

• The subcontracting services agreement shall be in writing. The contractor shall comply with all labor and social security obligations. Subcontracting services shall not be used with the purpose of reducing labor rights of employees. The client shall verify that contractor has the appropriate documents and that it is sufficiently economic solvent as employer to comply with obligations derived from labor relationships. The client shall permanently verify that the contractor complies with all the applicable provisions relating to work environment, health and security matters.

II. New Individual Employment Agreements

Amendments establish additional information to be incorporated in employment agreements such as: federal taxpayer registry number (RFC) and Unique Code for Population Registry (CURP), for both employee and employer.

The new types of employments agreements are the following:

1. Probationary Agreements
   • Executed with the purpose of verifying that an employee is qualified for the position. Applicable only for a maximum term of 30 days for regular employees, or 180 days (in case of general directors or managers). Contract periods cannot be extended or applied for more than once for the same employee. The granting social security rights shall be guaranteed. Employees shall always enjoy the salary, labor and social security benefits inherent to their job position. Labor agreement can be terminated without liabilities for the employer if at employer's criteria and considering the opinion of the Mixed Commission of Productivity and Training, at the end of the probationary period, employee did not prove to have the capacity, knowledge and skills necessary for the position.

   Initial Training Agreement

   • Applicable when an employee will provide services in order to acquire the knowledge and skills necessary to perform a specific future position. Applicable only for a maximum term of 3 months, or 6 months (in case of general directors or managers). Contract periods cannot be extended or applied for more than once for the same employee. The granting social security rights shall be guaranteed. Employees shall always enjoy the salary, labor and social security benefits inherent to their job position. Labor agreement can be terminated without liabilities for the employer if at employer's criteria and considering the opinion of the Mixed Commission of Productivity and Training: at the end of the training period employee did not prove to have the capacity for the position.

   Season or Discontinuous agreements

   • Applicable for periodic works, fixed jobs with a discontinuous character, seasonal activities or activities that do not require services for a full week, month or year. Employees that provide their services under this modality shall have the same rights and obligations as the employees hired under continuous basis, in proportion to the time worked in each period.

III. Salary

New amendments allow payment of salary under hourly basis, providing that: (i) worked hours do not exceed the legal maximum hours, and (ii) labor and social security rights of employees are respected. Under no circumstances hourly basis payment must be less than the minimum daily wage.

The amendments also allow the common practice of paying the salary through bank deposit, debit card, wire transfer or any other electronic mean.

IV. National Fund Institute for Workers' Expenditures (INFONACOT)

Employers are obliged to register the work center (in which the employees render their service) in the Fund within a period of one year as of the date of becoming law of the amendments to the Federal Labor Law. The INFONACOT is a government dependency with the purpose to promote the development and the increasing of employee's economic family patrimony through the granting of credits to acquire goods and services.

V. New employer's obligations

The new amendments obligate employers to:

• Provide adequate job sources or work center facilities for handicapped people, when number of employees is higher than 50. Deduct the applicable withholdings to wages in cases of alimonies, and to inform to the judicial authority and the alimonies beneficiaries within the following 5 days after the termination of the labor relationship with the employee. Provide adequate training to employees in order to encourage and improve level of expertise, knowledge and life status in accordance with Federal Labor Law provisions. Create and integrate the Mix Commission of Productivity and Training. Install and carry out the services in compliance with the safety measures and applicable regulations in order to prevent accidents and illness. Eliminate all conditions involving discrimination on grounds of ethnic or national origin, gender, age, disability, social status, health status, religion, immigration status, political opinions, sexual orientation, marital status or any other that threatens the human dignity.

VI. New termination causes

The new amendments incorporate certain new causes under which an employer can terminate employees without responsibility:

• Offenses or bad conduct with clients and suppliers. Harassment (including sexual) to any person in the work place. When the employee does not provide the documentation required by law, and needed for rendering the services, provided that is a fault of the employee, and a period of two months has past. The law provides a new mechanism for the notice of termination in which the employer has the option to notify the termination notice through Labor Board.

VII. Back or lost wages indemnification

Back or lost wages cannot exceed a 12-month period. If this period elapses and the labor procedure has not been solved or the final award has not been enforced, the employer shall pay the employee, in addition to back wages, interest accrued at a monthly rate of 2% calculated over the amount equivalent of 15 monthly salaries until the effective payment date.

VIII. Profit Sharing Benefit

Regarding the profit sharing benefit, the amendments also provide a new section of Article 127 that "all employees of a certain business establishment form part of the same for the effects of calculating the profit sharing".

IX.- Maternity and paternity leave permits

• As a consequence of an express request from a female employee, subject to a written authorization from the doctor of the social security institute or from the health service granted by the employer, considering the opinion of the employer and the type of services render by the employee, it could be transferred up to four of the six weeks of rest before the childbirth to be used after it (the birth). Likewise, it is contemplated to extend periods for maternity leave in case of newborn disabilities or in case that the newborn needs special medical hospital attention. In case of adoption of a child the employees will enjoy of a rest period of six weeks with salary payment, as of the day in which the child is received for the employee. The employer should grant female employees during the nursing period (a maximum period of six months) two rest periods of 30 minutes each, to nurse her child, in an adequate and hygienic place appointed by the employer or, as agreed with the employer, the work shift will be reduced one hour during the six-month period. The employer should grant to the male employees a paternity leave permit of five paid days (applicable also to adoption).

X.- Hearings simplification

The structure of the first hearing within the ordinary process is modified and shall consist on two stages instead just one: (i) the stages of settlement, demand and exceptions; and (ii) a second hearing for the offering and admission of evidence.

Conclusion

The amendment to the Federal Labor Law is a historical change, which aims to generate more jobs all over the country and the modernize labor regulations, allowing the employers to have certain flexibility regarding the engaging of the services for an employee and in case of termination of labor relationship. This Top Ten provides a brief overview of those changes and their potential impact.