Monday, July 3rd 2023
Labor Laws in Mexico
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Labor Laws in Mexico
It’s daunting enough running a business, but it’s even harder to do in another country like Mexico. One of the most difficult aspects is managing your employees. Navigating foreign labor laws can be challenging, so those of us at Expat Insurance thought a brief overview of labor laws in Mexico would help.
The first thing to understand is that the Mexican Revolution was fundamentally a labor revolution. Much like the Russian Revolution, the Mexican peasantry were serfs working on the haciendas as ancestral lands were slowly appropriated by these wealthy elites.
Why am I mentioning this? Because the Mexican constitution is basically a labor document. It was the first country to specifically outline the rights and provisions (like having super duper insurance) of Mexican workers in their constitution—and those laws still apply today, as does the spirit behind them.
In general, Mexican laws are more heavily regulated, and Mexican employees have more provisions than those in the US. For example, you cannot fire an employee on a whim. There is a certain set of conditions, which we’ll go into later in this article.
Don’t get me wrong, many rules are made to protect the employer as well. These laws aren’t meant to be overbearing; they’re just more precise.
A Brief History of the Labor Laws in Mexico
Labor Laws in Mexico
An Outline of the History of Labor Reform in Mexico:
- 1917 A constitutional provision for basic rights for employees is adopted
- 1932 The Mexican government adopted the Federal Labor Law, which creates Boards of Conciliation and Arbitration
- 1970 The Federal Labor Law is expanded to cover more areas of employee welfare
- 1980 Further changes to the Federal Labor Laws allowing employers to hire outside of labor unions
- 2012 Another round of reforms to the Federal Labor Law to include sanctions for sexual harassment and regulations for teleworking
- 2017 Government phases out Conciliation Boards, now jurisdiction falls to judicial courts
- 2019 Reforms for union democracy, empowering employees to vote in union representative elections and have a say in collective bargaining agreements
- 2021 Mexican government abolishes outsourcing employment or subcontracting
- 2022 Mexican National Minimum Wage Commission increases daily minimum wage by 22%.
More About Each Date:
1917 – Article 123: Workers have the freedom to form labor unions, collectively bargain, and strike collectively. It also outlines women’s rights, children’s rights, the 8-hour workday, and minimum wage.
1931– The Mexican government adopts the Federal Labor Law (Ley Federal del Trabajo). The Mexican government also founded Juntas de Conciliacion y Arbitraje (Boards of Conciliation and Arbitration—which was composed of representatives from the government, employers, and Mexican labor organizations.
1970 – New provisions concerning occupational hazards are introduced to the Federal Labor Law of 1931, which overall increases working conditions. Regulations of airline and maritime industries as well as other specific occupations are also outlined. The new Labor Law now covers issues of overtime pay, work on Sunday, housing, salaries, bonuses, vacation, profit-sharing, and a multitude of laws are passed overall increasing the employee well-being regulated by the law.
1980 – The Federal Labor Law (FLL) is updated again allowing employers broader hiring options that are outside labor unions.
2012 – New provisions are made regarding telecommuting, outsourcing, contractual employment regulations, and employee rights for Mexicans working abroad, as well as detailed definitions of—and sanctions for—sexual harassment in the workplace.
2017 – An amendment to the FLL establishes that judiciary courts will handle employer/employee issues, not the board of conciliation and arbitration. (It only took effect in fall of 2019, after new procedural rules were outlined.)
2019 – This expansion of the FLL focuses on union democracy, such as providing unionized employees the right to vote to choose their union leaders. These changes also guarantee Mexican union rights and approve their collective bargaining agreements.
2021 – Mexico approves legislation prohibiting firms from outsourcing or subcontracting employment, thereby combating abusive practices in outsourcing and encouraging direct hiring. The amendment also contained new guidelines outlining work-from-home arrangements, how they qualify, and law-backed teleworking.
2022 – Mexican Minimum Wage is increased to $172.87 (8.45 USD) per day, and $260.34 (12.77 USD) per day in the Free Zone along the border—a 22% increase.
What’s the Difference between Labor and Employment Laws?
- Employment laws govern the relationship between an employer and an employee
- Labor laws govern the relationship between an employer and a labor union
Standardized Provisions for Mexican Labor Laws
Labor Laws in Mexico
Mexican employment laws cover one-on-one elements between an employer and an employee—including contracts and provisions for the standards of:
- Mandatory Training
- National Minimum Wage
- Paid Leaves
- Working Hours
- Social Security Rights
- Maternity/Paternity Leave
- Right to Unionize (to strike, lockout, and to collectively bargain)
- Workplace Safety
- Right to Profit-Sharing
- Diversity, Inclusion, and Equality
- Mandatory Training
- Christmas Bonus (Aguinaldo)
Recently, these Labor Laws in Mexico were extended to worker unions, preserving their rights to equal participation in setting their work conditions. These Mexican labor laws exist to outline the essential rights, statuses, and privileges of workers and their employers. They’re necessary to make sure that companies adhere to a specific standard, that workers are treated fairly, and that they have humane working conditions.
The Mexican constitution sets the Federal Labor Law and Social Security Law in place. The Mexican Federal Labor Law defines the criteria that qualify labor/working relationships, and the Mexican Social Security Law covers the various benefits available to employees in a labor relationship.
Three Types of Employment Contracts in Mexico
Labor Laws in Mexico
There are three types of employment contracts in Mexico: indefinite contracts, definite contracts, and seasonal contracts:
Indefinite Contracts – These types of contracts align with the Mexican principle of job security. These types of contracts are only terminated when both parties agree or one breaches the contract.
Definite Contracts – Definite Contracts are only for temporary projects and also have a finite time period.
Seasonal Contracts – These contracts are for Definite Contracts (fixed work) that only occur at a specific time of the year.
In Mexico, there’s no such thing as “employment at will”, where an employer can fire an employee for any reason, with or without cause, as long as the reason isn’t illegal. In Mexico, every employer must have a written agreement with each employee that clearly states the conditions of the agreement.
Employer contracts must contain:
- Name, nationality, age, sex, civil status, tax ID number, and address of both employee and employer
- Amount of rest and vacation days and any other conditions agreed to by the employee and the employer
- Nature and duration of the employment, as well as training/probationary period outlined
- Places employee will work
- Work schedule
- Salary amount and fringe benefits
- Job description
- Date of salary payment
Labor Union agreements, where both parties enter into a written Collective Bargaining Agreement (CBA), must include:
- Names and addresses of the parties executing the agreement
- Nature and duration of the employment
- Work schedules
- Rest days and holidays
- Addresses of the facilities where the CBA will be applicable
- Salary amounts
- Initial training for new hires
- Integration and operation of the Employee/Employer Committees as established by law
An employer must have a good reason to terminate an employee as defined by the FLL. If not, the employer must compensate the unjustly-terminated employee according to the FLL stipulation on severance payments.
If the employment relationship exists without a written agreement, the employee’s constitutional and statutory rights are not waived or affected. They stand.
**- Indefinite contracts ** Indefinite-period contracts are most common in Mexico. They only expire when both parties agree. Or one can act independently. For example, an employer can legally terminate an indefinite contract if an employee resigns or is fired for misconduct.
- Definite contracts Typically, employers only use definite contracts when the nature of the job requires it. Such as for a specific project or to temporarily replace another employee who is absent for an extended period.
- Seasonal contracts Seasonal contracts cover fixed, limited work that solely occurs during a specific period of the year, like tourist season, harvest, or a holiday event.
Minimum Working Conditions in Mexico
Minimum salary Since January 2022, Mexico’s minimum wage is $172.87 MXN (8.45 USD) per day, or $260.34 MXN (12.77 USD) per day in the Free Zone along Mexico's borders. (The above amount could change in the future, as it’s set annually)
Work Week All employees can legally work six days per week, and are entitled to one day a week off (typically Sunday). Employees can work no more than 48 hours per week. Some employers limit this to 40 or 45 hours.
Mexican Labor Laws Recognize Three Shifts:
- 8-hour shifts, at any point between 6am and 8pm
- A 7-hour night shift at any point between 8pm and 6am
- A swing or mixed shift lasting 7.5 hours, divided between the day and night shifts, provided that less than 3.5 hours is during the night shift.
All Mexican employees are entitled to a 30-minute break during a shift.
An employee can work up to 3 hours of overtime pay, for up to 9 hours per week—paid at double the standard hourly rate. Employers must compensate employees for working more than 9 overtime hours at 3x the hourly rate.
It’s illegal for anyone to work under the age of 16, or if they’re pregnant/nursing mothers—they cannot work if it endangers the child’s life.
Termination and Severance
Mexican employees can quit on the spot and they don’t have to offer notice. They can resign without penalty under Mexican labor law.
Still, most labor contracts include a notice period. Employees are entitled to any back pay when they resign, and a seniority subsidy if they’ve worked for the company more than 15 years. (It’s usually the cost of 12 days of pay for every year the employee worked for the company.)
Legal Reasons for Firing an Employee
- Being sentenced to prison
- Dishonesty at work
- Misrepresentation of qualifications for a job
- Threats or acts of violence at work
- Causing intentional damage to an employer’s property
- Committing immoral acts at work
- Causing severe damage to an employer’s property through negligence
- Compromising the safety of the workplace
- Being absent from work without permission or excuse for more than three days in 30 days
- Disclosing trade secrets or other sensitive information about the employer
- Following safety protocols incorrectly
- Coming to work drunk or under the influence of nonprescription drugs
- Bullying and acts of sexual harassment
If an employer fires an employee without cause, the employee is entitled to:
- Payment for all hours worked
- 3 months worth of salary payments
- 20 days of pay for every year worked
- A seniority subsidy—where applicable
- Payment for outstanding vacations
- A percentage of their annual salary based on the number of months they worked during the year
Paid and Unpaid Leave in Mexico:
According to Mexico’s unemployment law, employees are entitled to six days of paid leave per year—provided they’ve worked with the employer for at least a year. Employees get an extra two days off each year they work until the fifth year of employment. After the fifth year, employees get an extra two days off every five years they work.
New mothers are entitled to 12 weeks of maternity leave, starting 6 weeks before the medically confirmed due date. Mothers get six weeks of maternity leave after adoption starting on the day of adoption. New fathers get 5 days of paternity leave in any case, whether it’s through adoption or birth.
Employees with a non-occupational illness or injury are eligible for paid sick leave, assuming they’ve paid into the social security system for at least 4 weeks before the illness or injury. Sick leave is paid at 60% of an employee’s normal salary from the fourth day of the illness or injury, and may be extended for 52 weeks.
Labor Laws in Mexico
If Mexican labor laws are daunting, don’t be frightened. Many of them are common sense, and most of them are designed to protect both the employer and the employee. These are just the processes that have become necessary when you’re living and working in this wonderful country: Mexico.
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