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Mexico

Last Verified on Tuesday 7th January 2020

    • Mexico

      To comply with Mexican labour and social security legislation, it is advisable to hire employees through a local subsidiary or a service entity; addition­ally, hiring personnel from a Mexican entity reduces the risk for a foreign employer to exposure, which could lead to the authorities taxing the business as though it were a permanent establishment, independently of the obligation for the foreign employer to be registered at Mexican social security as employer. If the employees are hired directly by a foreign employer to have the employees working in Mexico, it can be considered a permanent establishment depending on the kind of activities to be performed by such personnel. If tax authorities consider that a permanent establishment exists, different tax obligations will exist.

      Foreign companies may engage the service of workers through an outsourcing process, but subcontracting conditions must be fulfilled. Otherwise, the foreign company would be considered the employer of such employees as is expressly described in question 31.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Employers are able to hire foreign workers in Mexico to make up to 10 per cent of their personnel; however, regarding hiring of directors, administrators or general managers, up to 100 per cent of such personnel (staff personnel) could be foreign, so there are no hiring limitations for the employer in that regard.

      Last verified on Tuesday 7th January 2020

    • Mexico

      According to the Mexican Constitution, employment relationships, including employment agreements, placed in Mexican territory must be governed by the Mexican Federal Labour Law (FLL); therefore, employees and employers are obligated to comply with the obligation and rights considered in such legislation. Termination of those agreements is included in this regulation.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Employment is generally defined as the execution of an individual employment agreement, whereby a person undertakes to render a personal, subordinated service to another individual or entity in exchange for payment of a salary or wages. This agreement does not need to be registered to be enforceable. In the event that an agreement is not made in writing, the employer is held responsible for that omission; the employee shall, nevertheless, have all the rights that stem from the work rules and services rendered to the employer.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Owing to the protectionism of the FLL, in the case of a claim, the employer always carries the burden of proof regarding work conditions, so it is recommended to have clear employment agreements for the employees in order to have the best evidence in case of litigation. The document in which the work conditions must be stated is the individual employment agreement. Therefore, one of the most important documents for employment is the agreement in which the work conditions are stated. In all events, the employers must prove, in the event of a trial, the following:

      • date of contracting;
      • seniority;
      • absences;
      • causes of termination of the labour relationship;
      • termination of the employment contract executed to perform a specific work or for a specific period of time;
      • furnishing the employee with a written notice of dismissal;
      • employment contract;
      • duration of labour shift;
      • payment of weekly days off and holidays;
      • enjoyment and payment of vacation;
      • payment of Sunday, seniority and vacation premiums;
      • amount and payment of salaries;
      • payment of profit sharing; and
      • registration and payment of quotas to the National Housing Fund.

      Regarding social security or tax issues, the lack of a written employment agreement does not necessarily have an adverse impact on the employer, as the social security dues and the amount of the income tax are calculated considering the amount that has been paid to the employee, independently of whether there is a written employment agreement or not, so the employer will be able to withhold any amount.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The employer’s obligations, according to the FLL, Mexican Social Security Law and Safety and Hygiene regulation, include:

      • complying with labour and social security legislation;
      • executing the employment agreement in writing;
      • paying the corresponding salary (in a weekly basis to hourly personnel and biweekly to salaried employees);
      • retaining the corresponding tax and social security contribution from the salary of the personnel;
      • providing to the personnel hired with the required work tools and security equipment (if is applicable) to render services;
      • granting the minimum benefits stated by the FLL;
      • registering as employer before the Mexican Social Security Institute (IMSS);
      • affiliating employees to the IMSS five days after their hiring;
      • retaining and pay social security, housing and retirement contributions;
      • providing training to the personnel; and
      • participating in the safety and hygiene commissions to reduce the exposure of the personnel and work centre visitors to suffer accidents.

      Any social security and related benefits granted to the employees deriving from the services rendered should be tax deductible, although some social or welfare benefits are tax deductible only in some percentage of their cost.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The minimum mandatory benefits that the employers must grant to the personnel are:

      Weekly day off

      As a general rule, for every consecutive six days of work, employees are entitled to one paid day off. It is also stated that the employer and the employee should try to agree on Sundays as the day off. If not, the employee is entitled to receive a Sunday premium equivalent to at least 25 per cent of the daily wage.

      Holidays

      The FLL states that the following days are mandatory holidays:

      • 1 January;
      • the first Monday of February (commemorating the 5 February);
      • the third Monday of March (commemorating the 21 March);
      • 1 May;
      • 16 September;
      • the third Monday of November (commemorating the anniversary of Mexican Revolution);
      • 1 December, every six years, corresponding to the transfer of the Federal Executive Power;
      • 25 December; and
      • days determined by federal and local laws in the event of local or federal elections.

      Vacation and vacation premium

      The days of vacation an employee is entitled to enjoy, with payment of salary, are contemplated in the law and are determined by the seniority according to the following table:

      More than one year of service 6 working days
      More than two years of service 8 working days
      More than three years of service 10 working days
      More than four years of service 12 working days

      Afterwards, vacation days will increase by two days for every five years of service. Employees will be entitled to receive a ‘vacation bonus’ of at least 25 per cent of the salary for the vacation days, independently of the salary for those days.

      Christmas bonus

      In order to enable employees to meet Christmas expenses, the FLL obligates employers to pay employees, before 20 December of each year, at least 15 days’ additional salary.

      Profit sharing

      The FLL provides that employees are entitled to participate in the employers’ profits in the percentage determined by the National Profit Sharing Commission, which is currently 10 per cent. For purposes of profit sharing, profit is defined as taxable revenue. It also establishes that profit-sharing payments shall be made to employees within 60 days of the date on which income tax was paid.

      The above-mentioned benefits are the minimum mandatory benefits included in the FLL, although many employers pay benefits higher than the minimum ones.

      Indemnities/severance

      Employer and employee may terminate the labour relationship without liability only if one of the parties incurs any justified cause established by law. If the employee terminates the labour relationship arguing a justified cause, he or she will be entitled to receive, as severance pay, three months' salary, 20 days of salary for each year worked, seniority premium, plus the accrued and proportional benefits owed to him or her by the employer. If the employer terminates the labour relationship arguing a justified cause, which is expressly included in the FLL, it will not be obligated to any payment except the accrued benefits owed to the employee.

      Notwithstanding the above, in the case of a trial, if the labour court resolves that the termination of the employment was not justified, the employee could be entitled to the payment of severance, of three months’ salary, 20 days’ salary for each year worked seniority premium as well as to back pay wages, which is the salary that the employee would have been entitled to receive from the termination date until the date severance is paid.

      There is a legal cap of up to 12 months’ payment in the calculation of back pay wages, and if litigation does not conclude in such term, a 2 per cent monthly interest for 15 months of wages should be added to this payment until the date severance is paid.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The union will have the right to affiliate employees working for a national or foreign employer in Mexico. If the foreign employer opens a working facility in Mexico, the employees hired by the employer could become unionised, so the union will be able to request the employer to sign a collective bargaining agreement. The foreign employer will have the same obligations as any Mexican employer, including the obligation to review the collective bargaining agreement once a year to increase the salary and every two years for negotiation of benefits increase. Foreign employees can be affiliated to the unions but they are not allowed to be part of the executive committee of the union.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The FLL recognises employees’ right to unionise and to create a specific union to defend their interests. A union is defined as the association of employees established for the study, aim and defence of their respective interests. In the same way, unions are entitled to create federations and confederations. An employee’s union may be:

      • craft unions, consisting of persons of the same occupation, trade or craft;
      • employees’ union of certain employer, consisting of persons employed by the same employer (company union);
      • industrial union, consisting of persons who are employed in two or more corporations devoted to the same branch of industry;
      • national industrial unions, consisting of persons employed in one or more corporations devoted to the same brand of industry established in two or more states; and
      • unions formed by employees devoted to different professions.

      Employees are free to decide if they will be part of a union or if they will continue working as non-unionised personnel.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Unions have the right to represent the unionised employees affiliated to the union, but union and non-unionised employees have the right to handle any controversy against the employer, and the union could be independent to that conflict without any participation in the conflict. Unions will have the right to represent union employees in collective labour issues and the unionised employees are linked to any agreement entered by the union and the employer.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Unions have the right to represent employees working for an employer and FLL grants the right to unions to call to strike if the objective of the strike is any of the following:

      • to obtain equilibrium between the production factors, harmonising the rights of labour with the rights of capital;
      • to obtain from the employer the signing of a collective bargaining agreement and to request its review every two years;
      • to request a salary review every year;
      • to demand the compliance of the collective bargaining agreement in the enterprises or establishments in which it has been violated;
      • to demand compliance with the legal provisions for profit sharing payment; or
      • to support a strike handled by any other union against other employers.

      Any stoppage other than a strike would be illegal.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Employees who render services in Mexico (regardless of whether the employer is located abroad) are protected by the Mexican Constitution and the FLL; therefore, in the case of a labour conflict, Mexican labour courts will be the only tribunal with jurisdiction in Mexico and will resolve under the FLL.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Regarding international treaties or conventions, according to the Mexican Constitution, all treaties and conventions ratified by the Mexican Senate are applicable in Mexican territory and must be considered by the courts as law. There are a lot of international treaties and conventions ratified by Mexico (ie, International Work Organization Resolutions, Vienna Convention, etc), applicable in our country as part of the FLL. Mexico has denounced treaties numbers 34, 32, 63, 62, 107, 7, 6 and 23 due to the ratification of treaty numbers 96, 152, 160, 167, 169, 58, 90 and 166.

      In 2018, Mexico ratified Employment Agreements Nos. 35, 36 and 98 of the International Labour Organization.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Private arbitration is not admitted by the FLL, so these agreements would not be enforceable. The only arbitration governed by the FLL is the one to be handled before Mexican labour boards.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Mediation mechanisms are not enforceable in Mexico, as private mediation is not admitted by the FLL. Conciliation is part of the litigation proceedings in Mexico and it is conducted by labour boards.

      Last verified on Tuesday 7th January 2020

    • Mexico

      All labour disputes related to an employment relationship placed in Mexico must be resolved through the labour authorities, specifically through conciliation and arbitration boards. To accomplish this goal, the boards are basically divided into federal and local boards. Jurisdiction is decided considering the industrial branch in which the employer is classified. Thus, there is a local conciliation and arbitration board in each state and a Federal Conciliation and Arbitration Board in Mexico City, which has offices in each state. According to the FLL, federal authorities are responsible for applying the aforesaid law in the following cases:

      Industrial and service fields

      • textile;
      • electrical;
      • cinematography;
      • rubber;
      • sugar,
      • mining;
      • metallurgic and steel, covering the exploitation of basic minerals, their benefit and smelting, as well as obtaining iron and steel in all their forms and alloys, and laminated plate sheet and rolled products of the same;
      • hydrocarbons;
      • petrochemical;
      • cement;
      • lime-kiln;
      • automotive, including mechanical or electrical auto parts;
      • chemical, including pharmaceutical chemicals and medicines;
      • cellulose and paper;
      • oils and vegetables grease;
      • food production, exclusively covering the manufacture of those that are packed, canned or bottled, destined for such procedures;
      • manufacture of beverages that are bottled or canned or that are destined for such procedures;
      • railways;
      • wood products, including the production of sawdust and the manufacture of plywood and particle board;
      • glassmaking; exclusively the manufacture of plate, flat or carved glass, and glass bottles;
      • tobacco, covering the benefit or manufacture of tobacco products; and
      • banking and credit services.

      Corporations

      • those that are administered directly by the federal government or by one of its decentralised organisations;
      • those operating under federal contract or concessions and those industries connected thereto; and
      • those that execute works in federal zones or that carry out their work in federal jurisdictions, in federal territorial waters or in waters included in the exclusive economic zone of the nation.

      Any other activity not considered in the above list shall be regarded as local. As Spanish is the national language in Mexico, all procedures before labour courts must be carried out in Spanish.

      Last verified on Tuesday 7th January 2020

    • Mexico

      There are no class actions in Mexico in labour or employment matters at the labour boards; however, it is possible to file a massive claim against the employer. In the event that different employees claim the same benefits or actions from the same employer it is possible to ask for the consolidation of the proceedings to the labour court. The FLL was amended ito give employees the right to have a worthy and decent job and that no discrimination should be accepted.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Yes, foreign lawyers may serve as counsel in labour or employment proceedings if they have the appropriate immigration status that would allow them permission to work in Mexico and they will need to have specific registration as lawyers before the Public Education Ministry. They will be subject to local taxation if they are tax residents in Mexico.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Only in the event that homologation of award treaties will be enforceable in Mexico, foreign labour awards or resolutions could be honoured in our country. In our experience, there are no precedents that refer to this specific case in Mexico.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Labour courts grant interim relief in some specific circumstances, so the president of the labour court may order the temporary attachment to guarantee the amount claimed in a labour suit filed. The owner will be named depositary of the attached goods. If the court condemns the defendant to pay and if the defendant does not comply with the award, the temporary attachment will become permanent and the attached goods would be sold through auction proceedings at the labour court. This would also be valid against unions if they were sued and forced to pay.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The FLL allows the employees acting as plaintiffs in labour suits to request that the employer exhibit documents at the labour proceeding. They may be compelled by labour courts to exhibit such evidence. Labour courts will also compel third-party witnesses to appear before them, and if they refuse to appear after having been notified by the court, the witness will be presented through the police after a court order.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The plaintiff may request labour courts to seek interim relief against the employer if there are presumptions or clear evidences that the defendant would not honour a condemned award. The plaintiff has to submit a request to the president of the labour court, and if he or she finds it appropriate, will order the temporary relief of goods in order to guarantee the employee’s claim.

      Last verified on Tuesday 7th January 2020

    • Mexico

      If the award has not been issued in terms of FLL or if the valuation of the evidences rendered by the parties has not been properly made, the losing party has the possibility to file a constitutional action at federal courts against the award. This action has to be filed within the following 15 days after the award was notified to the party.

      Last verified on Tuesday 7th January 2020

    • Mexico

      As private arbitration is not recognised by the FLL, labour courts will not accept suits where this kind of request would be claimed. Even if the labour suit is accepted, labour courts would not resolve in such terms as there is no base to handle private arbitration in the FLL. The right to sue at labour courts or boards is not waivable.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Yes, the FLL considers that when an award is issued, the plaintiff has the right to obtain the condemned amount as well as the interest accrued if the resolution is not complied with by the employer within the following 12 months. Attorneys’ fees are not awarded in a resolution filed by labour courts.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The FLL allows probationary as well as initial training periods.

      The probation period can be up to 30 days and may be extended by up to 180 days long for direction or management positions or for those employees performing technical or professional activities.

      Initial training period can be up to three months or six months long for direction or management positions or for those employees who need professional knowledge for their activities to be performed.

      Last verified on Tuesday 7th January 2020

    • Mexico

      Outsourcing is lawful, but there are special rules that must be complied with by the contracting entity, including:

      • that the totality of the same or similar activities to the ones performed in the working facility are not included;
      • that their specialised nature should justify them; and
      • that it cannot include the same or similar duties to those performed by the rest of the employees hired by the contracting entity.

      If these conditions are not complied with, the beneficiary will be considered employer for all legal effects, including social security obligations.

      Outsourcing will not be allowed if the employees are transferred with the purpose of reducing their labour rights. Strong economic penalties would be imposed on those that using the outsourcing for deceitful or for fraud purposes.

      Last verified on Tuesday 7th January 2020

    • Mexico

      According to the Mexican Constitution, any person would be allowed to render his or her services or perform any other activity only if such activity is lawful. If a restriction exists and the person would not be allowed to perform or render his or her services, the agreement would be null and void.

      Nevertheless, non-compete and non-solicitation agreements would be legal in Mexico only if some specific requirements are fulfilled. They would be accepted only if a payment is made during the time the agreements are in force in order to justify a restriction to perform the corresponding restricted activity. If no payment is made, these agreements could not be enforced.

      Last verified on Tuesday 7th January 2020

    • Mexico

      The FLL is a protectionist law that favours the employee’s interests, so it is be highly recommended to comply with all labour issues and to be sure that any decision taken is according to Mexican law. It is not recommended to handle labour relationships as if the employees would be working in any other country, because labour regulations and normal labour advice given in other countries do not necessarily have the same implications in Mexico. The recommend­ations are to get advice from a Mexican labour counsel to be sure that the decisions to be taken comply with Mexican law and that no adverse consequences would arise if the decision is taken. Labour relationships need to be handled in Mexico according to Mexican law and practice and not according to the laws and practice of any other country.

      Last verified on Tuesday 7th January 2020

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