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Country snapshot

Key considerations

Which issues would you most highlight to someone new to your country?

Mexico must ensure that foreign investors understand cultural differences and expectations, as well as legal differences and implications.

Navigating the business world in Mexico should always be done with the advice of serious legal counsel, as foreigner investors are often subject to corruption and fraud.  Large companies and public companies in stock markets should rely on attorneys that advise clients with the highest international compliance practices and US Foreign Corrupt Practices Act knowledge.  

What do you consider unique to those doing business in your country?

Investors recognise Mexico as a site where opportunities for doing business are prolific. Extremely successful investors never lose site of the vicissitudes of corruption, workers’ unions, legal implications and the scope of responsibilities while they take advantage of cultural differences that allow for production, stable labour and employment conditions, and maintaining healthy profit margins derived from naturally low costs. 

Is there any general advice you would give in the employment area?

Only one Federal Labour Law which is historically employee protective. All statutes set forth by law are compulsory for employers and must be met at all times. All investors should be trained and have minimal working knowledge of employment norms and all companies should be prepared for collective (unionised) working conditions with stable and healthy negotiations with unions that are pro-production and company oriented. 

Emerging issues/hot topics/proposals for reform

Are there any noteworthy proposals for reform in your jurisdiction?

On October 13 2016 the Senate passed a reform meaning that the labour justice administration system is now bound to be renewed as a whole. By 2018 the administration of justice in labour and employment will resemble civil courts instead of labour boards, and will aim to cut corruption and make the justice system more professional. Important changes are also being made which seek to make workers’ unions more professional in order to benefit both employers and employees.

What are the emerging trends in employment law in your jurisdiction?

Alongside the new administration of justice in labour and employment, the management of human resources and collective relationships is becoming more important daily. The Constitution has put more weight and importance on human rights and international standards, which translates into more professional human resource management, better workplaces, collective bargaining focused on productivity and win-win strategies for employers and employees. 

The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

The Federal Labour Law is the only governing law in Mexico for labour and employment relationships in the private sector.

Who do these cover, including categories of worker?

Mexico does not admit a distinction between employees. All employees, foreign or national, are guaranteed all statutory benefits in accordance with Federal Labour Law.

Misclassification

Are there specific rules regarding employee/contractor classification?

Misclassification is a longstanding issue in Mexico. Third-party service providers claim to be the sole employers of any given employee rendering services to a third party. The Supreme Court has stated that due to abuse in misclassification, regarding labour relationships there can be a joint liability principle, whereas both the third-party service provider which pays the salary and the third party as beneficiary of the work being performed are equally liable for all statutory benefits and severances. All employers should be careful when employing staff through outsourcing companies and must always comply with the following three rules:

  • An entire workforce must not be employed through outsourcing companies;
  • Key employees that fulfil roles necessary to obtain company objectives must not be hired through a third-party service provider; and
  •  The same positions and roles must not be treated differently (one role cannot be outsourced while another remains part of the company). 

Contracts

Must an employment contract be in writing?

Yes, all contracts and provisions must be in writing. Nevertheless, a labour relationship is not contingent on the existence of a written agreement due to the principle of the implied contract. Employees can claim at any time, even without an agreement, and the employer has the burden to prove and substantiate factual legal benefits and the nature of the relationship. Precisely for this reason, it is advisable to keep and update written labour contracts with all employees.

Are any terms implied into employment contracts?

Yes, all employees are guaranteed all statutory benefits in accordance with the minimum rights set forth by Federal Labour Law. No employer can reduce, negate or dispute mandated benefits such as:

  • minimum wage;
  • vacations;
  • vacation premiums;
  • Christmas bonuses;
  • Sunday bonuses;
  • working hours;
  • overtime pay; and
  • salary deductions. 

Are mandatory arbitration/dispute resolution agreements enforceable?

Yes, all resolutions handed down by local or federal labour boards may be enforceable by securing property to guarantee payment without need for further or diverse court interference to enforce a ruling. 

How can employers make changes to existing employment agreements?

Changes may be made when agreed on by the employee and employer and must be in writing and signed by both parties. 

Foreign workers

Is a distinction drawn between local and foreign workers?

Pursuant to the Federal Labour Law, at least 90% of a company’s employees should have Mexican nationality, except for directors, administrators and managers.

When dealing with foreign workers, each company must determine who will be the employer so as to avoid bilateral employment liabilities in two countries.

All foreign workers must enter Mexico with appropriate migratory status; once status is granted by the National Migration Institute, there is no distinction in terms of statutory rights and obligations in an employee-employer relationship.

Recruitment

Advertising

What are the requirements relating to advertising positions?

Employers have the right to freely advertise vacancies and positions. Recruitment processes must be done carefully so as not to create a labour relationship while making assurances and provisions in writing. Offer letters must always be contingent on written acceptance by both parties and background checks. Even though solicitation is permitted, it is important not to advertise positions establishing requirements which are not essential (eg, race, religion, gender, social status, physical appearance or any other category that could fall under a suspicious practice of corporate discrimination).

Background checks

What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

 Employers can freely ask any candidate and can also conduct legal searches with applicable authorities. 

(b) Medical history?

Employers can freely ask any candidate.

(c) Drug screening?

Employers may require screening and would be obliged to secrecy. If positive, the employer must be careful not to deny employment solely on the basis of a positive result. 

(d) Credit checks?

Credit checks are applicable. 

(e) Immigration status?

It is an obligation to inquire about immigration status and to resolve all migratory issues before hiring a foreign candidate. If the Migration Institute realises that foreign nationals are working without permission, employees may be subject to deportation and the employer would be liable to pay penalties and fees. 

(f) Social media?

This is private information and direct involvement by an employer could be considered an offence. 

(g) Other?

Employers can use any information that is publicly available, but must never pry or infiltrate social media, email or other closed personal accounts. Before offering employment, employees may be subject to drug screening and must sign a waiver. While recruiting, employers need to maintain objectivity and must never deny employment due to race, sexual preference, appearance, colour, religion or other aspects that may imply discriminatory practices. 

Wages and working time

Pay

Is there a national minimum wage and, if so, what is it?

National minimum wage changes yearly; for 2016 it is Ps73.04 per hour. 

Are there restrictions on working hours?

In accordance with the Organisation for Economic Cooperation and Development, Mexico has an average working week of 43 hours, which is legally capped at 48 hours per week. Everything above 48 working hours in a week is considered overtime, which is also capped at nine hours per week (maximum three extra hours over three days). These hours must be paid at 100% of the normal rate and should an employee work over the nine hours, each subsequent hour must be paid at 200% of the normal hourly rate. 

Hours and overtime

What are the requirements for meal and rest breaks?

Federal labour law establishes that during a continuous working day (eight hours per day), the employee must be given a rest or meal period of at least 30 minutes. If the employee cannot leave the workplace during the rest or meal period, the time corresponding to such periods is to be counted as time worked and included as part of the working day.  

How should overtime be calculated?

Overtime is capped at nine hours per week (maximum three extra hours over three days). These hours must be paid at 100% of the normal rate, and if in any case an employee works over the nine weekly hours, each subsequent hour must be paid at 200% of the normal hourly rate. 

What exemptions are there from overtime?

In case of emergency or imminent risk at the workplace, the employee must work regardless of overtime. 

Is there a minimum paid holiday entitlement?

After one year of employment, an employee is entitled to a vacation period of six working days. This increases by two days over the next three years until the employee reaches 12 vacation days per year. Thereafter, the vacation period increases by two days for each additional five years of service. Vacations must be enjoyed during mandatory working days.

 

Years of service

Number of vacation days

1

6

2

8

3

10

4

12

5 to 9

14

10 to 14

16


Compulsory holidays are observed on January 1, February 5, March 21, May 1, September 16, the third Monday of November, December 1 (every six years), December 25 and any day that election law mandates to exercise the right to vote.

Employees that work a mandatory holiday are entitled to 200% of the normal rate per working day.

What are the rules applicable to final pay and deductions from wages?

As a general rule of law, deductions in wages are prohibited unless the following applies:

  • reimbursement of balance owed by the employer for anticipated wages;
  • a calculation error has occurred and the employer has overpaid;
  • acquiring goods are produced by the employer;
  • the resultant balance is a result of slip-ups, misplaced equipment or errors; and
  • other deductions, including union payments, maintenance or child support as mandated by applicable courts.

In all cases, deductions must be warranted and in writing. In no case can any deduction be for more than one month’s salary.

Record keeping

What payroll and payment records must be maintained?

All records must be kept by the employer as procedural burden of proof. Responsibility for employment conditions lies exclusively on employers. Payment records must be signed by the employee on receipt and kept safely in the workplace. Any and all payments made for statutory benefits must also be signed on receipt and kept by the employer.

Discrimination, harassment & family leave

What is the position in relation to:

Protected categories

(a) Age?

Anyone under the age of 15 is prohibited from employment. Anyone over the age of 15 and under 18 can be employed with parental permission, which must be ratified before the labour boards. 

(b) Race

The Constitution heavily promotes equality and prohibits all kinds of discrimination. It is prohibited to deny employment without just cause solely on the basis of race, gender, sexual preference, colour, religion or medical history. Certain jobs that require a particular level of physical activity may be reserved for people without disabilities. Nevertheless, employers must always be careful so as to avoid denying employment without just cause. 

(c) Disability?

There are special jobs or tasks that may be reserved for people with disabilities. All employers should encourage and practise hiring people with disabilities to perform certain tasks. Denying employment solely on the basis of disability without a reason may be subject to a claim for discriminatory practices. 

(d) Gender?

The Constitution heavily promotes equality and prohibits all kinds of discrimination. It is prohibited to deny employment without just cause solely on the basis of race, gender, sexual preference, colour, religion or medical history. Certain jobs that require certain level of physical activity may be reserved for people without disabilities. Nevertheless, employers must always be careful so as to avoid denying employment without just cause. 

(e) Sexual orientation?

See above comment.

(f) Religion?

See above comment.

(g) Medical?

See above comment.

(h) Other?

The Federal Labour Law strictly prohibits discrimination against employees based on race, sex, age, origin, religious or political opinions, disability, sexual preferences or ethnicity. The law also requires that employees performing equal work must receive equal pay. If at any time an employee has the means to prove discrimination or a violation of rights, he or she can terminate employment while suing for statutory benefits. Employers must not interfere with personal preferences, beliefs or any other form of subjective measures that any employee might have and cannot deny a job due to these circumstances.

Family and medical leave

What is the position in relation to family and medical leave?

All employers must register with the Mexican Social Security Institute (IMSS), which provides full medical care through the government, as well as out-patient, maternity, disability and injury care to all registered workers. Social security quotas are paid by both employee and employer (capped at 25 times the minimum wage).

The IMSS maintains free-of-charge medical clinics, hospitals, childcare and eligible services to employees and their families. It pays 100% of an employee’s salary in the event of a job-related accident, illness or temporary disability. It also pays a percentage of an employee’s salary when there is a permanent disability and gives benefits to heirs in case of work-related death.

The IMSS certifies medical visits and justifies medical leave. All absences that are not justified with IMSS endorsement can be deemed as unwarranted unless previously agreed on. 

Harassment

What is the position in relation to harassment?

All employers must register with the Mexican Social Security Institute (IMSS), which provides full medical care through the government, as well as out-patient, maternity, disability and injury care to all registered workers. Social security quotas are paid by both employee and employer (capped at 25 times the minimum wage).

The IMSS maintains free-of-charge medical clinics, hospitals, childcare and eligible services to employees and their families. It pays 100% of an employee’s salary in the event of a job-related accident, illness or temporary disability. It also pays a percentage of an employee’s salary when there is a permanent disability and gives benefits to heirs in case of work-related death.

The IMSS certifies medical visits and justifies medical leave. All absences that are not justified with IMSS endorsement can be deemed as unwarranted unless previously agreed on. 

Whistleblowing

What is the position in relation to whistleblowing?

There are no provisions in Mexico regarding whisteblowers and their protection. When a workplace violation exists, employees have the right to claim individually at federal or local labour boards. 

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

Computers, email addresses, networks and mobile phones provided for professional and company use remain under the use and care of each individual employee, while the proprietary and revision rights remain with the employer. Any employer has the right to assess and monitor the activity of its property and take action accordingly. Regarding personal data and information, employers are considered data managers by the Personal Data Protection Law. This law guarantees that any and all information held by employers will be stored and maintained for workplace means only. The law stipulates that all personal information of employees is strictly personal and all disclosure and use thereof is subject to previous written consent by employees or job applicants, except in emergencies or if data or information is publicly available

To what extent can employers regulate off-duty conduct?

Employers cannot interfere in the personal, off-duty conduct or acts of any of employees. 

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

Employers have the right to control the use of all computers and technological devices, including restrictions of certain websites and social media. Personal passwords and information relating to private social media accounts must remain free from interference, meddling or intrusion by employers. 

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

IP rights are governed by the IP Law and the Mexican Institute of Intellectual Property. Employers and employees have the right in labour contracts to specify all provisions in regards to inventions and new developments. Normally all contracts state that everything that is developed during employment will remain the property of the employer. If the labour agreement has no provisions regarding IP rights, the creator of the invention or development will hold all natural rights. 

Restrictive covenants

What types of restrictive covenants are recognised and enforceable?

Not applicable.

Non-compete

Are there any special rules on non-competes for particular classes of employee?

There is a constitutional individual right to undertake any profession or work without restriction unless it is against the law. No individual can inhibit this freedom and therefore non-competes are hard to enforce legally. In some cases, it is possible to prohibit the use of trade secrets and development, but enforcing these contractual clauses is difficult. 

Discipline and grievance procedures

Procedures

Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

The Federal Labour Law includes a substantial list of compulsory benefits for employees, but no set of disciplinary actions. After negotiating with employees, the employer and employees may give themselves a set of in-house rules that must be approved by the labour board. These board-approved agreements are actually the only standards of conduct and operations that may contain compulsory disciplinary actions, which can include a period of up to eight days of unpaid suspension.

Once rules are approved, employees must be granted the right to speak for themselves (in-house due process) before being penalised. It is advisable to always conduct investigations and document the facts with an administrative record containing testimony and an employee statement. 

Industrial relations

Unions and layoffs

Is your country (or a particular area) known to be heavily unionised?

Yes, Mexico as an industrial country is heavily unionised and represented by two main federal unions, CROC and CTM.

What are the rules on trade union recognition?

Freedom of association is fundamentally granted by the Constitution. All employees are guaranteed the right to organise in defence of their interests by forming a union. Nevertheless, a group or association of employees is not officially a union, since there is an administrative authorisation called ‘toma de nota’ which is granted by the authorities and is essential to be able to operate as a union. Consequently, organising in Mexico does not qualify as unionising; in fact, it is challenging to form a new union. New reforms are set to change this as we enter into a new era with numerous changes in the union sector. 

What are the rules on collective bargaining?

Collective bargaining must be performed once a year to revise salary and compensation, and twice a year to revise the entirety of benefits granted.

Termination

Notice

Are employers required to give notice of termination?

Employment at will does not exist in Mexico, therefore employers may not terminate employment relationships without just cause. There is a list of causes and a set procedure to terminate employees at any time without incurring liability, which includes:

  • vandalism;
  • sexual harassment;
  • false statements about work qualifications;
  • revealing company secrets;
  • refusing to comply with safety procedures; and
  • four unexcused absences in a 30-day period.

If an employer has just cause to terminate an employment relationship, there is an obligation to give notice to the employee and the board and to prove the cause for termination. If there is no substantial motive or evidence, labour relationships can be terminated via a voluntary agreement where the employee is entitled to statutory benefits and possibly some form of compensation (each case must be treated individually through human resources).

If in any case there is no termination with just cause or a negotiated exit for an employee, the employee is entitled to claim for wrongful termination and sue either for substantial statutory benefits or reinstatement to the job.

Employees must claim within 60 days following alleged wrongful termination. 

Redundancies

What are the rules that govern redundancy procedures?

There are no redundancy rights that govern labour relations in Mexico.

Are there particular rules for collective redundancies/mass layoffs?

There are no redundancy rights that govern labour relations in Mexico.

Protections

What protections do employees have on dismissal?

The Federal Labour Law is employee protective. Its provisions are generally much more specific than protections provided to workers under US or UK law.

All employee relationships in Mexico are based on the premise that employees must be guaranteed permanency and longevity in the workplace. Thereafter, employers are restrained in terms of termination policies (no termination at will). Maximum statutory benefits that any employee may claim on dismissal include:

  • three-month salary severance pay;
  • 20 days of salary for every year;
  • seniority and statutory benefits, which include a Christmas bonus, vacation and vacation premium and worked days. 

Courts/tribunals

Jurisdiction and procedure

Which tribunals or courts have jurisdiction to hear complaints?

In Mexico there are federal and local labour boards where jurisdiction is not set by geographic standards, but rather by industry. The Federal Labour law lists all industries in which all related claims related can be submitted at the federal level. Industries listed in Article 520 of the Federal Labour Law include:

  • textiles;
  • electricals;
  • cinema;
  • rubber;
  • sugar;
  • mining;
  • metal;
  • petrol;
  • cement;
  • food processing;
  • beverages;
  • wood;
  • railways;
  • glass;
  • tobacco;
  • banking and credit services;
  • paper;
  • oil;
  • automobiles; and
  • pharmaceuticals.

What is the procedure and typical timescale?

Procedurally, all trials start with an employee claim and are divided into three main parts:

  • claim and counter arguments, where the dispute is set;
  • evidence, where all proof must be brought forward, rebuked and analysed by the board; and
  • final arguments, where the trial comes to an end and the labour board hands down a resolution.

Due to workload excess, labour boards in Mexico cannot keep to the statutory terms for the duration of trials, and in practice a normal trial period can take from one to two years, though it is not uncommon to have trials that linger for more than three years. It is a serious liability for employers that up to one year in back pay can be accrued during the duration of the trial.

Appeals

What is the route for appeals?

Appeals are classified dependant on the nature of the plaintiff’s claim. Any individual in Mexico can file an appeal against:

  • an administrative act that inhibits an individual right (eg, the right to form a union or unionise);
  • laws that are unconstitutional or hinder constitutional rights;
  • acts against personal freedom; and
  • procedural violations incurred by a judicial authority during trial or in final resolution. 

In procedural labour law, any judicial act during trial and the final resolution of the labour board may be subject to appeal in court. The general rule of law is that any individual has 15 days upon notification or upon acknowledging any act that affects constitutional rights and that are subject to appeal.