Introduction Supreme Court of Justice decision Comment

Introduction

Under the Federal Labour Law, fixed-term employment agreements can be validly entered into only when:

  • the temporary and extraordinary nature of a job requires it; or
  • an employer must temporarily replace an employee.

As such, there is no legal basis for an employer to execute a fixed-term employment agreement when it needs to hire a permanent, rather than a temporary, employee.

Fixed-term employment agreements are not agreements for probationary purposes, although they have been erroneously used across Mexico for the initial hiring of personnel as a means to evaluate if they will be offered a permanent position.

Failure to apply fixed-term agreements in accordance with the Federal Labour Law may result in a temporary employment relationship being classified as an employment relationship for an indefinite term.

Supreme Court of Justice decision

This was recently confirmed in the Supreme Court of Justice Second Chamber's October 5 2016 binding resolution (170/2016) regarding a discrepancy among criteria implemented by two collegiate circuit courts in labour matters, which was published on December 9 2016.

According to the resolution, conciliation and arbitration boards must analyse the validity of fixed-term employment agreements when employers allege that an employment relationship has ended due to the expiration of a fixed term established therein. The reason behind the resolution is that employment agreements, as a general rule, must be for an indefinite term, based on the job stability principle that governs Mexican employment relationships. Therefore, fixed-term agreements are an exception to this rule and their use is authorised only in the cases explicitly provided for in the Federal Labour Law.

Accordingly, the fact that parties agree on a fixed term for an employment relationship does not render the agreement valid. Rather, employers must justify the temporality of the relationship with regard to the Federal Labour Law and establish in the agreement the reason for hiring the employee on a temporary basis.

Comment

In light of the above, if an employee demands in a labour trial severance pay or reinstatement in his or her job as the result of an alleged wrongful dismissal and the employer denies the dismissal, claiming instead the expiration of a fixed-term employment agreement, it is insufficient to demonstrate the existence of the temporary agreement and the expiry date. Rather, the employer must prove, reasonably and objectively, that the fixed-term employment relationship was justified in accordance with the exceptions established in the Federal Labour Law. Failure to fulfil this requirement will lead to a finding that:

  • the employment relationship was for an indefinite term; and
  • its termination was unjustified (ie, wrongful dismissal).

For further information on this topic please contact Nadia Gonzalez Elizondo at Santamarina y Steta by telephone (+52 81 8133 6000) or email (ngonzalez@s-s.mx). The Santamarina y Steta website can be accessed at www.s-s.mx.

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