All questions

Discontinuing employment

i Dismissal

It is not easy to terminate an employment relationship in Mexico owing to the principle of 'employment stability' governing employment relations. This principle shall be understood to mean that no employment relationship can be terminated at an employer's will unless it is for one of the causes for termination foreseen in Article 47 of the FLL. Regardless of these causes, the contracts of employees with more than 20 years of seniority can only be terminated when the causes are particularly serious (although the FLL does not provide what can be classed as serious), or when they have repeatedly violated their obligations or committed different violations.

There is also cause for termination when it comes to trusted employees, particularly when the employee commits any act that leads to the employer losing confidence or trust in him or her.

When lawfully terminating an employee's contract under a statutory cause, the employer must provide him or her with a written notice stating the causes for termination and the dates in which the actions were carried out, or file it with the corresponding labour boards within five days of the termination date for said authority to deliver it to the employee. In this case, the employer has the burden of proof regarding the causes for termination stated in the corresponding notice.

When terminating an employee's contract with sufficient cause, the employer has to pay only the accrued benefits. If the employer fails to prove the causes for termination or the delivery of said notice to the employee, the termination shall be deemed unjustified as a matter of law regardless of the cause, and the employer must reinstate the employee in his or her role or tender severance pay, consisting of: three months' integrated salary; 20 days' integrated salary for each year of service; a seniority bonus, equal to 12 days' salary for each year of service; and accrued benefits owed to the employee, such as Christmas bonus, holiday earned and holiday premium.

As proving the causes for termination and the delivery of the termination notice is difficult, it has become common practice for employers to negotiate settlements with their employees, which can be documented in one of the following ways:

  1. having the employee address a unilateral communication to the employer advising his or her voluntary separation from the job (i.e., a resignation letter). A signed payment quitclaim with the breakdown of the benefits paid to the employee should also be obtained from the employee upon payment by the employer of the amount agreed; or
  2. a termination agreement may be executed. This document can be ratified by the parties with the corresponding labour board, however it is not mandatory.

The second option provides the parties with added legal security since the document issued as a result of ratifying the termination agreement with an authority has the effect of an official judgment.

ii Redundancies

Whenever an employer wishes to make an employee redundant it has to follow the same process of dismissal or termination without cause described in subsection i. There is no need to notify the government or the employee's union about the redundancy (unless otherwise provided in the CBA), and no social plan, offers of alternative employment or notifications to the employees are required. In a redundancy, the common practice is to offer the employee full statutory severance pay in exchange for the execution by the latter of the corresponding termination documents (termination agreement or resignation and quitclaim).

For collective redundancies, based on the principle of employment stability governing all employment relations in Mexico, the FLL foresees this kind of redundancy in the following scenarios:

  1. force majeure or acts of God not attributable to the employer, or, where the employer is an individual, his or her physical or mental disability, producing the necessary, immediate and direct termination of the employment relations;
  2. unaffordability of the business;
  3. exhaustion of the subject matter of the extraction industry;
  4. causes foreseen in Article 38 (mining-related causes); and
  5. legally declared bankruptcy of the employer, if the authorities or creditors resolve the definitive closure of the company or the definitive reduction of their activities.

Carrying forward any collective redundancy would have to be performed through the corresponding special proceeding provided by the FLL and the severance payment would be limited to three months' integrated salary leaving out the 20 days' integrated salary payment per year of work. However, it is important to take into consideration that any collective redundancy can be carried forward outside the special proceeding provided by the FLL, in which case a full severance payment must be paid, including the three months' integrated salary, 20 days' integrated salary per year of work and a seniority premium.

When redundancies are the result of implementation of new production processes involving new automated technologies or installation of new machinery in the workplace, employees are entitled to four months' integrated salary plus 20 days' integrated salary for each year of service, along with the salaries and benefits accrued.