As a result of the negotiations of the US-Mexico-Canada Agreement and the amendment to the Constitution on 1 May 2019, a decree amending, supplementing and derogating from several provisions of the Federal Labour Law on labour justice, freedom of association and collective bargaining was published in the Federal Official Gazette (the reform). While the reform was passed in 2019, some of its most significant changes will become effective in 2020 and the coming years.
In addition, two different initiatives are currently under discussion in Congress, which would create a second amendment to the Federal Labour Law intended to modify regulations in connection with the subcontracting of personnel, including new requirements and penalties.
Reform to the Federal Labour Law
The most relevant aspects of the reform to the Federal Labour Law include the following.
Pre-trial conciliation procedure
A mandatory pre-trial conciliation procedure to be followed before the newly created conciliation centres has been established. Such conciliatory procedure must be completed in order to start a judicial procedure before the labour courts, subject to the exception cases provided in the law.
Conciliatory activities will be carried out by the following newly created authorities:
- local conciliation centres, which will begin operations by 1 May 2022; and
- the Federal Labour Conciliation and Registration Centre, which will begin its conciliatory activities by 1 May 2023.
Labour courts
The conciliation and arbitration labour boards will be replaced with labour courts of the judicial branch, either local or federal, to resolve individual or collective labour conflicts. This represents a substantial change in the Mexican labour justice system since the labour boards (which are currently the competent authorities to resolve all employment disputes in Mexico arising from employment relationships between private parties) are tripartite bodies which derive from the executive branch of the government, while the labour justice system will migrate to labour courts that will be part of the judiciary system.
The local labour courts will begin operations by 2 May 2022, whereas the federal labour courts will begin operations by 2 May 2023.
Litigation procedures
The procedures that will be followed before the labour courts has been amended, with the aim of expediting litigation.
Union transparency
The reform highlights that the confidential, direct and free voting rights of individual union members and employees is required for most union activities and on all issues relating to collective bargaining.
Representativeness certificates
The reform highlights the existence and procedure to obtain a representativeness certificate, which is an essential requirement for unions that are seeking to:
- enter into a collective bargaining agreement; or
- exercise a strike call in order to achieve the execution of a collective bargaining agreement.
In order to obtain a representativeness certificate, the relevant union must follow a process before the labour authority and comply with several requirements, including demonstrating through the confidential, direct and free vote of employees that it represents at least 30% of the employees subject to be covered by the collective bargaining agreement. Moreover, the reform includes certain rules to be observed in the event that several unions request a representativeness certificate.
Review of collective bargaining agreements
A new requirement to review collective bargaining agreements was included in the reform, whereby the majority of employees covered by such an agreement must approve the content of the corresponding renewal. Collective bargaining agreements that are not reviewed during the next four years will, following the aforementioned process, be terminated by law.
Strike calls
The reform sets out new requirements to exercise the right to strike, seeking to eliminate strike calls by unions that do not represent employees of the relevant workplace.
Prohibition of employer interference in union matters
The reform expressly forbids and penalises employers from carrying out any action:
- to control the union to which their employees belong; and
- with the aim of promoting the formation of workers organisations controlled by such employers.
Initiatives to amend the Federal Labour Law in connection with the subcontracting of personnel
Late in 2019, two initiatives to amend the Federal Labour Law and the Social Security Law in connection with the subcontracting of employees were presented before Congress (the initiatives).
On 24 October 2019 the first initiative was presented before the Senate. It proposed:
- to prohibit and penalise the subcontracting of personnel, including outsourcing and insourcing employment structures; and
- that employees participate in the real profits generated by companies (pursuant to the legal obligation of Mexican companies to distribute 10% of their annual net taxable income among their employees as profit sharing) and that such are not limited through service companies (whether related parties or not) with controlled profits.
On 5 November 2019 the second initiative was presented before the Chamber of Representatives. It proposed to:
- achieve a better regulation of subcontracting schemes in order to guarantee employment and social security rights for employees; and
- provide legal certainty and establish the scope of contractors' and contracting parties' obligations in case they are considered to have a subcontracting regime in place as per the Federal Labour Law.
While both initiatives were presented in 2019, neither of them were actually discussed and they have been carried over into 2020 for Congress to review.
Effects of the reform to the Federal Labour Law
As previously mentioned, the reform substantially modifies labour relationships in Mexico and seeks to strengthen union representation and prohibit employer intervention in union matters, which has been a longstanding practice in the country. These changes will significantly modify the labour environment in Mexico, which is likely to become more active than it has been in recent decades.
On the other hand, the Mexican labour authorities have openly expressed that they are working to get the new authorities and procedures established by the reform up and running before the deadlines included therein. Therefore, some progress may be seen on these fronts in late 2020.
Initiatives to amend the Federal Labour Law in connection with the subcontracting of personnel
While the initiatives are already under analysis in Congress and the Senate and the Chamber of Representatives have conducted 'open Parliaments' where representatives of employers, unions, labour authorities, labour lawyers and academics gave their opinions on the initiatives, their implications and suggested adjustments thereto, at the time of writing, the initiatives have not been voted on and consequently have not been approved. While there are no official indications as to which of the initiatives may be approved (if any), whether it will be passed under its current terms or if it will be modified (and, if so, under which terms), this remains a key topic of discussion in Congress and it is likely that Mexican lawmakers will modify regulations in connection with the subcontracting of personnel in the short and medium term.
Notably, both initiatives provide that, if accepted, they would become effective on the day following their publication. Thus, the initiatives grant no period for employers to correct their current employment structures to comply with the new regulations; therefore, companies should be informed of this potential legislative change in advance.
