“you were hired because you met expectations, you will be promoted when you exceed them”.

There is naturally an intimate bond between human resource management and the principles set forth by labor law. The beginning of a labor relationship like all human relationships is stamped by optimism, reliability and an inclination to benefit mutually from a positive agreement. Nevertheless, not a lot is said about terminations and the psychological, social, legal and economic implications thereof.

The above mentioned quote is a great way to view the positive side of initiating a labor relation, whilst not mentioning: when however, can I, or will I be terminated?

Employment at Will USA.

In the United States the employment at will principle states that when an employee does not have a written employment contract and the term of employment is of indefinite duration, the employer can terminate the employer for good cause, bad cause or more importantly no cause at all at any time.

Not a lot must be argued or said before one can imagine that this principle is controversial at best due to the fact that some view it is a foundation in the success of US economy whilst others argue that it is unreasonable to allow employers to summarily and arbitrarily terminate employees at their own resolve and that this is a cause for injustice. Even though it must be culturally expected to act in good faith and not harm employees or their rights whilst terminating labor relations it must be said that the days of sticking to a corporation for a life time and retiring therein are over. In the era of communication and the internet, changes in all areas of life are expected and even deemed as ordinary in a workplace where effectivity could be valued over experience, resolve over loyalty and profit over anything else.

Common law has found a natural way to prevent harmful practices and abusive usage of this principle by coining some exceptions whilst also taking into account principles such as non discriminatory matters. At a quick glance, exceptions include:

1.- The Public Policy exception which states that an employee is wrongfully terminated when the termination is against an explicit, well established public policy of the State for example:

Am employee who is terminated for declaring a certain truth under oath that harms the employer in a certain way. In this case the employee can’t be terminated on the basis that he did not commit perjury on behalf of the employer.  Peterman V. international Brotherhood of Teamsters.

2.- Implied contract exception which states that even though a written contract is not in place, if an employer makes tacit, written or oral representations to employees regarding job security or procedures, these representations may create a contract for employment (much like the presumption of a labor relationship per Mexican law.)

A common occurrence is finding certain representations in employee handbooks that will create a de facto expectancy which will create an implied contract, absent a clear and express waiver that guidelines and representations in handbooks do not create contractual rights.  From this exception we learn the importance of provisions such like terminating only through the existence of just cause, or disciplining/terminating only through a certain procedure. Toussaint V. Blue Cross & Blue Shield of Michigan.

3.- Covenant of good faith exception which also relates to the way Mexican legislation is structured, which states that rather than narrowly prohibiting terminations based on public policy or an implied contract, this exception at its broadest, reads a covenant of good faith and fair deal into every employment relationship. It has been interpreted to mean either that employer personnel decisions are subject to a “just cause” standard or that terminations made in bad faith or motivated by malice are prohibited.

This for example is to avoid that an employee that has been working for a company successfully for over 18 years is terminated close to retirement without just cause.  Cleary V. American Airlines Inc.

As per the legal make-up of the United States, not all exceptions are recognized at state level, nevertheless for comparison sake and more importantly, for business decision making it always serves to have working knowledge.

Mexican Legislation:

Mexico has no state governing labor laws, just one Federal Labor governing body which is the compound of norms and regulations that manage employee relations nationwide and which provides many statutes that are not available under U.S provisions such like inability to terminate without just cause (no employment at will) due to the stability workplace principle. As a side note, readers should not be thrown off by the inexistence of employment at will or inability to terminate at will because, even though it might seem ironic, in spite of heavy legal protection, due to penalties, costs, insurance, compensation packages, severance and wage levels, the economic burden of employees and exposure can be even considered low when comparing Mexico to U.S standards.

Since employment at will does not exist, there is a list of motives and a set procedure to terminate employees at any time without incurring in liability which include: vandalism, sexual harassment, false statements about qualifications for work, revealing company secrets, refusing to comply with safety procedures and 4 unexcused absences in a period of 30 days amongst others. If there is no substantial motive or no evidence thereof, labor relations may terminate via a voluntary agreement where employee is entitled to statutory benefits listed below and possibly some form of compensation (each case must be treated individually through HR and legal teams).

Statutory benefits (finiquito):

.- Pay for labored days and accrued extra hours if applicable.

.- Proportional Christmas bonus (1.25 days of pay per month)

.- Proportional accrued vacation pay and premium

.- Proportional vacation premium if applicable.

As has been mentioned, all employee relations in Mexico are based on the premise that every employee must be guaranteed permanency and longevity in the workplace, thus the rule of law states that all labor relations unless stated and proven otherwise are for an indefinite amount of time. This creates the need to have grounded and successful human resource training and legal knowledge due to the fact that preventing claims and labor costs consists mainly in how we treat our human resources as employers and how we treat or go about exit processes in our workplace.

As a conclusion it is safe to say that in the XXI Century arising from human rights movements and exceptions to the rule, every termination must be treated with dignity and respect. The rule of common law in regards with unfair or undeserved terminations and the principles of a coded legal system teach us that as employers, good faith and constructive Human Resource strategies and legal knowledge help to reduce costs and legal exposures in the workplace.