MEXICO AND COMPETITIVENESS

Mexican Federal Labor Law of 1970

• Obsolete• It was characterized by its inflexibility• Discouraged growth and productivity• Lack of legal certainty• Unlimited wages in case of litigation

Legislative Process 2012

September 1 Preferred bill to reform the Federal Labor Law (“FLL”)President Felipe Calderón Hinojosa

September 28

Approval of the House of Deputies

October 23 Approval of the House of Representatives with modifications for union freedom and transparency.

November 13

Approval from both Chambers

November 30

Publication in the Official Daily Gazette

December 1 In effect

New Employment Agreements

1. Initial training 2. Probationary period3. Seasonal agreementsEmployment agreements for an indefinite and definite term are still valid according to the Labor Law.

Individual Employment Agreements(art. 35 y 39)

1. Initial training– Objective: That employee acquires knowledge and

skills to perform the activities he will perform.– Effective term: • Three months - general rule.• Six months - managerial positions that require

professional and specialized capabilities.

Individual Employment Agreements(art. 35 y 39)

2. Probationary Period:– Objective: Verify that the employee has necessary

skills to perform the job. – Effective term: • 30 days - general rule• 180 days – managerial positions

– Termination: • Employer shall consider the opinion of the Employee –

Employer Productivity and Training Committee.

Individual Labor Agreements(art. 35 y 39)

3. Seasonal Agreements: – For indefinite term; fixed, periodic and

discontinuous work.

Hourly salary payment (art. 83)

• Conditions:– Must not exceed the legal maximum working shift.– Employer must comply with all labor and social

security obligations.– Employee’s salary shall not be

less than the minimum daily wage.

Home Office (art. 311)

• “Home Office” is considered as work at distance by using information and communication technologies.

• Recommendations:Implement home office policy Written agreement with employeesCommunication and training

FLL Reform – art. 15 - A

• Subcontracting (“Outsourcing”) is the work or services performed through employed by and working under a contractor’s control, for the benefit of a customer, whether a legal or natural person, and the customer sets the tasks for the contractor and supervises the contractor in rendering the services or performing the contracted work

Subcontracting / Outsourcing (art. 15-A)

• This type of work must comply with the following conditions:– It cannot cover the totality of the activities, whether equal or similar in

totality, undertaken at the workplace.– Outsourced activities shall be specialized.– It shall not include equal or similar tasks to the ones performed by the

employees of the contracting party (customer).

• If these conditions are not met, contracting party (customer) will be considered to be the employer for purposes and effects under the Law, including social security obligations.

Limit to Back Wages (art. 48)

• If the employer does not prove the grounds for dismissal: cap to back wages: 12 months.

• Monthly interest rate: 2% over 15 months capitalized at the payment date

• It will apply only to labor suits started as of December 1, 2012 (art. 11 transitory)

Productivity (art. 153 – I)

• Optimize human, material, financial, technological and organizational resources.

• Purpose:Promote competitiveness and sustainabilityImprove capacity, technology and organizationIncrease salaries Welfare Distribute benefits equitably

Employee – Employer Committee for Productivity and Training (art. 153 – E y K)

• Obligation for companies with more than 50 employees

• Correlation between wages and productivity• National Productivity Committee

- advisory agency

Questions & Answers

Oscar de la VegaShareholder

Littler de la Vega y CondeMexico City, Mexico

Tel: +52.55.5955.4501odelavega@littler.com

Presented by:

International Seminar of TST, CUT, UGT & CNI August 20, 2013