After much debate before Mexico's House of Representatives and Senate, as well as public demonstrations both in support and in opposition, on November 13, 2012, Congress approved an initiative to reform the Federal Labor Law (FLL). The bill, which was initially introduced by President Calderon under a "preferred status" fast-track, and was modified in part by both the House and the Senate, has now been sent back to the President for review. It is expected that President Calderon will approve the reform before his presidential term ends on December 1. If the reform is promulgated, the FLL, which has not been subjected to any substantial modifications since 1970, will be transformed in significant ways that will have extensive implications for employers with operations in Mexico.
Summary of the Law Reform Initiatives and Their Potential Impact
If approved, the bill will add seasonal employment agreements and initial training agreements as new types of employment contracts, in addition to those already permitted under the statute (i.e., employment contracts for specific work and for a definite or indefinite period).
The initial training employment agreements must establish a time period of three months, as a general rule, and six months, for executive positions. Additionally, a probationary period of 30 days, generally, and 180 days, for executive positions, will apply to employment agreements for an indefinite term.
Notably, the bill will add the requirement that, in order to avoid employer liability, the opinion of the Joint Commission for Productivity and Training must be taken into consideration before terminating an "initial training employment agreement" or an employment agreement subject to a probationary period. Requiring the opinion of the Joint Commission for Productivity and Training will likely result in a bureaucratic and potentially conflictive process.
Having modified the President's bill substantially, Congress's bill, if enacted into law, will heighten the regulations on outsourcing (subcontracting) with severe implications to many employers.
Under the new law, "outsourcing" will be defined as follows:
The subcontracting regime occurs when work is performed or services are rendered through workers hired 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:
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 center of the workplace. It is justified due to its specialized character. It cannot include tasks equal or similar to the ones carried out by the customer's workers. If these conditions are not met, the customer will be deemed to be the employer for purposes and effects under the Law, including as it applies to obligations related to social security. The reform initiative also establishes new requirements, including that the contract must be in writing and that the customer (or beneficiary of the services) must ensure that the contractor complies with its obligations under the labor law. It further provides that the subcontracting regime will not allow the transfer of workers from a customer to a contractor, for purposes of undermining any right under the labor law.
The wording of these regulations is ambiguous...