Keeping it simple and being productive in Mexico.

Keeping it simple and being productive in Mexico. A basic guide to the legal principles of Mexican labor and employment law.

Understanding Mexican Federal Labor Law requires recognizing two undisputable facts:   1) It is part of a coded legal system (opposed to common law) where all regulations and by-laws are contained in one central governing statutory law, and 2) it is intrinsically an act that was passed in post-revolutionary Mexico (1900´s) when serious offenses, abuse and exploitation of workers occurred. Thereafter, it must be viewed and explained in lieu of historic circumstances that help vindicate the employee protective nature of its content.

Despite the heavy codification and an employee protective nature of Federal Labor Law, foreign investors and executives must not be erroneously influenced or alarmed regarding employee costs, severance packages, seniority rights, unions or profit sharing. Ironically, due to penalties, insurance costs, compensation packages and wage levels, the economic burden of employees and legal exposure therewith, can even be considered low when comparing Mexico to U.S standards. For all businesses and executives, it is essential to understand this economic tradeoff and what labor and employment compliance in Mexico looks like in terms of costs and exposure. Thereafter, all investments require consulting and training to understand and take advantage of every edge that Mexico has to offer

Rightfully so, when considering Mexico as an option or when trying to understand labor and employment requirements, one must fathom the following principles under which all employment norms and regulations are established.

The workplace stability principle: All labor relations in Mexico are centered on the premise that all employees must be guaranteed permanency and longevity in the workplace. Employers are fairly restrained in terms of available types of contracts, and termination procedures for there is no termination at will. Avoiding labor contingencies requires smart Human Resource strategies upon hiring and terminating as to avoid claims whilst building stable and productive workplaces.

The burden of proof principle: Any given individual may claim against any given employer without evidence or just cause. The employer has the procedural burden to disprove or prove otherwise unless the existence of a relation is denied in which case the burden will fall on the alleged employee. This creates the obligation as an employer to document and have command over all elements that govern an employee-employer relation such as:  contracts, payment receipts, releases, and any all covenants including resignation papers or termination agreements.

Minimal benefits principle: All statutory benefits must be met. Employer can grant further benefits or expand on legally mandated ones but may never decrease legal benefits. Some examples include 15 days Christmas bonus, 6 days of paid vacation after one year of service and a 25% premium on wages for vacation periods.

Acquired rights principle: Any expanded, additional or granted benefit beyond minimal ones set forth by law (see minimal benefit principle above) statutory benefits become acquired rights and compulsory for both parties. This is important to take into account when negotiating collective bargain agreements or employee benefit packages. All employers must be conscious when granting compensation or offer letters.

Equal liability principle: Employers may utilize third party service providers but will be equally liable for any provision that is not met by employer. No attorney, consultant or advisor should maintain that when utilizing outsourcing companies or third party service providers, labor contingencies may be avoided. Reality is that all businesses with outsourced employees have the obligation to audit providers to make sure that minimal rights principle is met and that all employment obligations are being fulfilled. Failure to do so may result in huge contingencies and legal responsibilities derived from the equal liability act.

Undeniable rights principle: Under no circumstance may an employee waive the minimal rights principle and statutory benefits set forth by Federal Labor Law. Employer may never negotiate or accept an employee relinquishing labor rights. All mandated benefits are non-negotiable and compulsory in all labor and employment relations.

In Dubio Pro Operario: When there is doubt, the law is not clear enough or there is room for interpretation, employees must be granted the benefit of the doubt. This principle that consolidates the protectionist approach of the federal labor law is the cornerstone for all employer obligations. All employers must have impeccable employee records and must have excellent Human Resource strategies to be able to avoid contingencies derived from this principle and all of the above.

It takes a lot for foreigners to navigate the legal world of Mexico and more so with a coded and protectionist employment system. Advisors of all sorts must be conscious of all the cultural and legal differences that this system offers as to guarantee stable conditions that may translate into productive and long term relations and not frustrated would be positive interactions.  Per all of the above-mentioned principles, specifically the minimal rights standard, it is a must that all investors, advisors and employers know the minimal facts that will allow them to be successful as far as employment relations go. Transparency, information and minimal working knowledge of these principles may serve to avoid corruption, fraudsters and contingencies, whilst guaranteeing the realization of all businesses upon more productivity, simplicity and transparency in the workplace

Juan José Díaz Mirón.

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