By: Lics. José Díaz & Eumir Quintero
After a lot of waiting, the much-mentioned Labor Reform in Mexico has arrived. Published by the Ministry of Labor and Social Welfare on May 1st 2019 in the Federal Official Gazette, the decree reforms, adds and repeals various provisions of the Federal Labor Law.
The decree modifies a large percentage of the various provisions of interest to the country’s economy and especially for workers, unions, companies, as well as the legal community. It establishes rules governing the individual right to work, collective law (the free and secret vote of the members of unions is a highlight) and a big procedural reform, of which the intervention of the Judicial Power stands out, before whom the trials will have to be held (Labor, Federal or Local Judges). With these changes, the Labor Boards (Federal or local) will gradually disappear.
The labor reform in Mexico comes from the requirements to be in compliance with the Annex 23-A of the USMCA labor chapter. At an international level it can be considered to be an advanced and revolutionary reform for Mexico, in which gender equality, labor democracy and several workers’ rights are consolidated. Coincidentally, these issues have been driven by the USMCA and its realization is due mainly to the political agenda of the current government. It is possible that the main problem for this labor reform is the current political and social environment of our country.
On summary, the main changes to the Federal Labor Law (LFT as its known in Spanish) that concern the companies and that are in force starting May 2, 2019, are the following:
Regarding outsourcing or subcontracting they added on Article 5, subsection XIV, the following:
XIV. Cover up an employment relationship with simulated legal acts to avoid labor and/or social security obligations, (…)LFT (2019)
Sure enough, as it is our understanding, the provisions of the LFT are of public order, so whether is written or verbal, any stipulation that establishes or pretends to simulate a working relationship will not produce any legal effect, nor will it prevent the enjoyment and exercise of rights.
Because the burden of proof continues to correspond to the employer, it must not be forgotten that the company in which the service is provided (beneficiary of the service), must have its written contract. Additionally, it must ensure that the outsourcing company complies with its obligations in regard of social security, environment and health conditions at work, under penalty of being considered the “Employer” (it may be convenient to update contracts with suppliers to include clauses in this regard).
2. Termination Agreement by Mutual Consent
As it is tradition, in a termination agreement of an employment relationship, its approval is required by the labor authority, who will check that it does not contain a waiver of workers’ rights. However, the reform also contemplates the possibility of doing it among parties without intervention of the authority, since a last paragraph is added to article 33 of the LFT, which says:
When the agreement is executed without the intervention of the authorities, the nullity before the Court will be subject to claim, only that to which contain a waiver of the workers´ rights, keeping the validity of the rest of the agreed clauses.LFT (2019)
It also contemplates the possibility that the employee promotes the nullity of the part of the agreement that may be considered as a possible waiver of rights. Such has to be submitted before the Labor Judge.
3. Discounts on Salaries
One modality, in terms of discounts on salaries provided for in Article 110, was modified and now states that:
Art. 110.- Discounts on employees´ salaries, are strictly prohibited unless the following situations with its requirements:
VI. Payment of ordinary union fees provided on the Union Bylaws.
The employee could express in writing his/her wish for the union fee to no be applied, in which case the employer should not discount it.LFT (2019)
In this order of ideas, one can contemplate the possibility that an employee does not agree with a discount for union fees. In addition, companies must be extremely careful that there is no interference in issues that have to do with union life, including quotas.
Furthermore, according to the protective norms of the salary, the employee must be informed about the deductions in their payment. In all cases, the worker must have detailed access to the information of the concepts and deductions of their payment. Therefore, the receipts will have to be delivered to the employee in printed form or by any other means. The foregoing according to the provisions of the amended article 101 of the LFT.
Art. 101.- In all cases, the employee must have access to detailed information on the concepts and deductions for its payment. The payment receipts must be delivered to the employee in printed form or by any other means, notwithstanding that the employer must deliver it in a printed document when the employee so requires.
The printed receipts must contain an autograph signature of the employee for its validity; the payment receipts contained in digital tax receipts over the Internet (CFDI) can substitute the printed receipts; the content of a CFDI will be tested if it is verified on the Internet portal of the Tax Administration Service (SAT), if validated, it will be subject to the provisions of section I of article 836-D of this Law.LFT (2019)
4. Priority of Discounts in Salaries
Another aspect in relation to discounts on payments has to do with their order, since Article 132 speaks of the obligations of the employers, and in its XXVI section now establishes the following:
XXVI. Make the deductions provided in sections IV of Article 97 and VII of Article 110, make the discounts in order of priority, first to the Institute of the National Fund for the Consumption of Workers (FONACOT) and after, the other institutions. This obligation does not make the employer a joint debtor of the credit that has been granted to the employee;LFT (2019)
In this manner, you must first cover the credits linked with the FONACOT and then any other creditor/provider of the employee (banks, institutions, etc.). Bearing in mind that the company does not become a joint debtor.
5. Employer Obligations
Another aspect in relation to employer obligations provided for in article 132, section XXX, is the one that talks about the obligations of the employers who have a Collective Labor Agreement. It establishes the obligation to give their employees a free of charge, printed copy of the initial collective bargaining agreement or its revision.
Likewise, various obligations are imposed that must be implemented in the companies in agreement and in conjunction with the employees, such as: a protocol to prevent discrimination on the grounds of gender and attention to cases of violence, harassment or sexual harassment, as well as to eradicate forced and child labor.
It must also be set and disseminated within the company, the true text of the convening and other documents requested by the Federal Center for Labor Conciliation and Registration (CFCR) for the development of the consultation procedure (free and secret vote on collective matters), now established in articles 390 Bis, 390 Ter and 400 Bis. This authority, called CFCR, is still to be constituted under the terms established in the transitory articles of the new reform.
6. New Labor Justice System
As of May 2, 2019, the rules regarding the new labor justice system come into force, in which the Labor Boards disappear gradually and the new lawsuits that are generated at the time must be resolved by the Local or Federal Judicial Power (Judges), as appropriate according to the labor competency rules.
The procedures/trials that are in process before the Federal or Local Labor Boards prior to this new reform will be concluded by them until their completion.
For the matters initiated as of May 2, 2019 (a date subsequent to the decree), the new law imposes on the Federal and Local Labor Boards, as appropriate, the obligation to continue handling all individual, collective and registration matters. That is, until the Federal and Local Courts (Judges) come into office. In a few words, for procedural purposes to this date, it can be said that the procedural labor reform does not apply yet.
7. Domestic Work
Besides the business issues, but important nonetheless and worthy of discussion, is the matter in relation to the concept of Company or Employer, and if these ideas can be applied to a home where domestic employees work. That is because, in this new law, the concept of “domestic workers” now with the obligation to provide social security (IMSS) is created (there will be a requirement to register as an employer before the IMSS or any other equivalent modality). It also establishes that they must be provided with a special schedule of rest, especially the staff that sleeps in the premises (house), with an intermediate break of at least three hours between the morning and evening shift and a minimum night’s rest of 9 hours.
Also they should be granted a day and ½ weekly rest. The ½ day can be accumulated every two weeks. On the other hand, we must remember that there is no employer obligation to affiliate them to INFONAVIT, according to articles 136 and 146 of the LFT.
The purpose of this newsletter is to provide an informative summary of the new provisions related to companies in the reform of the Federal Labor Law, which will be updated in due course. We will be in touch with the best disposition for specific consultations or tasks.
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