On September 1st, 2012, the President of Mexico, Felipe Calderon Hinojosa, sent a bill to the Lower House of Congress regarding a much needed labour related reform.

The current Mexican Federal Labour Law in force was enacted 42 years ago and apart from amendments made on 1980 to certain procedural aspects there have not been substantial reforms to the Law since it was enacted.

By virtue of recent authority granted to the Mexican President, the bill had to be discussed within the next 30 natural days starting from the date in which the bill was sent to the Lower House of Congress.

On September 29th, 2012, the bill was approved with some modifications made to the one originally sent by the President.

The most relevant aspects of the bill as approved by the Lower House of Congress are described as follows in a very general manner:

  • Incorporation of the concept of “decent work”. This concept refers to aspect related to the dignity of all employees as human beings, as well as non-discrimination issues, and the right to social security to all employees, among others. The inclusion of this concept was in line with International Treaties of the International Labour Organization ratified by Mexico.
  • Outsourcing provisions. The concept of outsourcing is defined for the first time in Mexican Labour Law as the sub hire of personnel in order to perform activities in favour of a beneficiary of the services; however, the following deadlocks were included in order to consider outsourced services to be rightfully contracted: (i) they cannot relate to substantial activities which are necessary in order to fulfill the company’s main corporate purpose; (ii) they cannot cover the entirety of activities of the company; (ii) they cannot be similar or analogous to activities already performed by the company’s own employees and; (iv) the reason for contracting outsourced services must be clearly justified. Should any of the aforementioned deadlocks not be complied with, the beneficiary of the outsourced services will be considered for all labour and social security legal effects, as employer of the personnel rendering the outsourced services.
  • Agricultural workers. They will be considered as season worker’s and will enjoy all related labour benefits, including social security, as well as to receive the corresponding teaching and training in order to perform their duties.
  • Work of minors. In the event labour authorities detect any minor aged 14 years or less, the authority will order to terminate his/her activities and the employer will incur in a fine equal to 250 to 5000 days of Minimum General Daily Wage in Mexico (“MGDW”). Current MGDW is of approximately 5 US Dollars, therefore depending on the circumstances of each case, the fine would range between 300 and 25000 US Dollars.
  • Employment Modalities. Current modalities of employment relationships for a Definite, Indefinite and Specific Job are unchanged. Seasonal and initial training employments were added. In this regard, Mexican Labour Law would also recognize three new kinds of Employment Contracts, (i) For a Trial Period of no more than 30 days for regular employees and for 6 months regarding managing or technical positions, (ii) for initial training and teaching for a period of no more than 30 days for regular employees and for 6 months regarding managing or technical positions and (iii) for seasonal activities. These new Agreements cannot be extended and employees hired under such schemes will have to enjoy the same labor conditions as permanent employees on a pro rata basis.
  • Back pay derived from labour trials. A cap of 12 months is placed on back pay staring from the alleged dismissal date. From the 13th month, an interest rate of 2% will have to be observed over a 15 month’s basis, considering the initial 12 months and 3 more months corresponding to mandatory severance.
  • Equal employment conditions. For similar or analogous services, the same employment conditions should apply. No difference should be made by virtue of ethnical origin, nationality, gender, sexual preference, age, disability, social condition, religion, political opinions and or marital status.
  • Sexual Harassment provisions. These provisions would be included for the first time and they are also being considered as sufficient grounds for dismissal.
  • Productivity provisions. A new chapter on productivity would be included which could open the door for Unions to have a say on the material operations of the company.
  • Mexican nationals expatriate personnel. Provisions for the Protection of Mexican expatriates are acknowledged.
  • Grounds for Dismissal attributable to the employee. The following additional grounds for dismissal are included without incurring the employer in liability: (i) Violent acts against employer’s clients and/or suppliers, unless the employee was taunted; (ii) sexual harassment; and (iii) Lack of documentation required by Mexican legislation in order to perform certain activities.
  • Termination Notice. The employer may notify the dismissal either directly to the employee or through the corresponding Labour and Arbitration Board.
  • Grounds for Dismissal attributable to the employer. Incurring the employer during working hours, or any of its relatives or representatives in acts of dishonesty, violence, threats, sexual harassment, mistreating or any other similar or analogous acts against the employee, spouse, parents, children or brothers.
  • Payment of salary. Current provisions only acknowledge payment in cash. Payment through bank deposits, checks, debit accounts, electronic transfers or any electronic meaning are being acknowledged for.
  • Alimony protection. The employer will have the obligation to notify competent authorities and alimony beneficiaries of any terminated employee.
  • Protection for women. New provisions for the protection of women are included such as maternity periods, pregnancy tests, sexual harassment, dismissals while being pregnant, among others.
  • Commission agents. The concept of subordination is included in the definition of commission agents.
  • Telework. This concept would be incorporated and acknowledged as long as communications and information technology is involved.
  • Household /Domestic. The following provisions are added to the corresponding chapter: (i) Household employees living at the workplace will have to enjoy at least 3 hours of rest between morning and evening activities and; (ii) at least a 9 hour sleep period.
  • Death Indemnity. The amount in favour of the beneficiaries of any given deceased employee is raised to 5,000 MGDW, which represent an amount of approximately $25,000 US Dollars.
  • Promotion preferential rights. In order to choose one employee over another to be promoted, the employer would have the obligation to prefer the employee which concluded mandatory education, as well as the employee who has been trained for the job and that shows better attitude.
  • Paternity leave. This leave is considered for the first time. New fathers would be able to enjoy a paid leave-of-absence of three days.
  • Procedural provisions. For the first time, technological related circumstances would be considered as evidence in labour related proceedings, such as: audio and video recordings, fax documents, e-mal transmissions, electronic signatures, and in general all information technology devices and related information. Also, (i) the figure of Conciliation Officials is created; (ii) it is provided that only certified lawyers or students will be able to participate in labour trials; (iii) all officials of the Conciliation and Arbitrations Boards will have to be certified professionals; (iv) a new summary proceeding is included; (v) the amount for fines incurred for labour related breaches is raised from 350 to 5000 MGDW.

Provisions related to Union transparency which were initially included in the project sent by the President, were not approved by the Lower House of Congress. This by virtue that the majority of Congress is held by “PRI” political party (for its acronym in Spanish) and by political allies of PRI, which is the party of the elected president Mr. Enrique Peña Nieto, and whose members include former and current Union leaders, as well as that for years the most important Unions have supported PRI. Therefore, it was expected that Union related provisions would most likely be untouched.

Notwithstanding the foregoing, the bill to reform Mexican Federal Labour Law was passed for approval to the Upper House of Congress (Senate). In this regard, there is an omission in the legislation as it is not provided for a timeframe in which the Senate would have to approve or disapprove the bill, whereas it was provided that the Lower House had a 30 natural days’ period.

Even though Union related provisions were not included in the current bill’s project, as well as that some Senate members will try to enter into discussions to this regard, the bill will be approved before the new President takes office next December 1st, 2012.

On the other hand, once the bill is approved by the Senate, the President of Mexico could exercise his veto right in order to stop the reform; however, it is most unlikely that this will happen as it was his proposal in the first place.

Finally, it is not a perfect reform, but it represents a much needed one as there were practical aspects of the employment life in Mexico which were already happening but were not formally addressed in any labour legislation.