December 10, 2019

December 09, 2019

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Mexico’s Overhaul of Federal Labor Laws: Updates, Timelines for Employers

Substantially overhauling its labor law, Mexico has enacted legislation that prohibits employer interference with workers’ rights, protects employees’ right to join or not join a union, and requires unions to secure employee support. In order to implement these changes, Mexico must create new courts, a new federal agency, and even more regulations in a short time.

(For details of the legislation, see our article, Revamp of Mexico’s Federal Labor Laws: What U.S. Employers Need to Know.)

Background

For at least 50 years, a company in Mexico could recognize a union and sign a contract with the union without any input or approval from workers. These agreements, referred to as “Protection Agreements,” often set employer-friendly contract terms before the company even hires workers at its worksite. With limited accountability, transparency, and no democratic elections, most unions in Mexico accommodated the needs of the companies. As a result, while foreign direct investment in Mexico skyrocketed, employee wages remained low. Unions were present in workplaces, but often in name only. While there were independent unions in Mexico in some industries (such as in the mining and airline industries), most unions were non-confrontational and did not provide consistent democratic processes to their members.

What’s in the New Law?

The law requires democratic unions and overhauls the investigation — and enforcement — of Mexico’s labor laws. Under the new law, a union in Mexico may be recognized as the exclusive bargaining representative with just 30 percent of employee support. However, ratification of a collective bargaining agreement (CBA) requires majority support of all represented workers. The intent behind this is to ensure the eradication of Protection Agreements.

The law creates the Federal Center of Conciliation and Labor Registry, a new administrative body to oversee union elections and contract ratification. Inspectors from the Registry have authority to verify that employees work at the covered site and support the CBA. Over the next four years, all CBAs must be ratified before the Registry.

The law also contains provisions that aim to increase employee awareness of their new rights. Previously, many employees did not realize a CBA was in effect. The new law requires all CBAs be scanned and transmitted to the Registry, and unions must make physical or electronic copies available to its members. A designated office at the Federal Center for Conciliation and Labor Registry will provide free information to workers about their rights.

Before any labor lawsuit may be filed, the parties must attend mandatory conciliation. Employers that fail to attend will be subject to fines. These new requirements likely will increase the number of labor disputes as employees begin to understand their rights and have their grievances promptly addressed.

The law also overhauls adjudication of labor disputes. Previously, disputes were resolved by a tripartite commission comprised of employers, the employer-dominated union, and administrative governmental officials. Under the new law, all labor disputes will be transferred to new state and federal labor courts that are part of Mexico’s judiciary branch, which are expected to be more impartial (and inherently less employer-friendly) than the tripartite commissions. The new law abolishes formal requirements for service of pleadings, which caused significant delay in litigation. After the initial summons, service will be completed through e-filing. Impartial adjudicatory bodies and streamlined litigation are likely to increase litigation risks for employers.

Increased Independent Union Activity Coming

Passing the law is only the beginning of Mexico’s labor reform. The new Federal Center for Conciliation and Labor Registry and labor courts require more guidance, staffing, training, administration, and, most important, money.

The law sets the following critical deadlines (measured from the law’s effective date):

  • Publish regulations to verify CBAs have majority support – 90 days (July 31, 2019);

  • Publish transition plan to transfer lawsuits to new labor courts – 120 days (August 30, 2019);

  • Publication of the Federal Center for Conciliation and Labor Registry procedures and operations (the “Organic Laws” of the Registry) – 180 days (October 29, 2019);

  • Secretary of Labor publishes audit procedures and regulations for union bylaws and democratic elections of union leaders – 240 days (December 28, 2019);

  • Secretary of Labor publishes auditing regulations for collective bargaining elections – one year;

  • Federal Center for Conciliation and Labor Registry starts CBA registration – two years;

  • All CBAs must be transferred to the Federal Center – three years;

  • State labor tribunals begin operations – three years;

  • Federal Center for Conciliation and Registration begins conciliation operations – four years; and

  • All existing CBAs must be ratified (or extinguished) – four years.

Independent union activity is expected to surge once the regulations governing the Federal Center are published, which must occur by October 29, 2019.

The successful implementation of the reforms (and the actual effects on employers) will depend on the budget approved by the Mexican government and the resources allocated to the Federal Center and the labor courts.

U.S. Unions Paying Attention, Working to Ensure Labor Reforms Take Place

The United States is by far Mexico’s largest trading partner, and Mexico must secure ratification of the United States-Mexico-Canada Trade Agreement (USMCA) to protect this critical trade relationship. In the United States, Democrats and the AFL-CIO have made Mexico’s labor reform, and enforcement, a main impediment to ratifying the USMCA. House Democrats are using the USMCA to ensure labor reform within Mexico. Pressure from the U.S. could ensure Mexico’s labor reforms succeed.

What This Means for Employers

The changes in Mexico’s law likely will spur greater, and more meaningful, independent unionization than Mexican employers have experienced in the past. Companies seeking to maintain the flexibility necessary to respond to a changing global marketplace should evaluate their labor relations strategy and seek legal counsel on how to comply with Mexico’s new labor laws.

Jackson Lewis P.C. © 2019

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About this Author

Philip B. Rosen Jackson Lewis  Preventive Practices Lawyer & Collective Bargaining Attorney
Principal

Philip B. Rosen is a Principal in the New York City, New York, office of Jackson Lewis P.C. He is a member of the firm's Board of Directors and co-leads the firm's Labor and Preventive Practices Group. He joined the firm in 1979 and served as Managing Partner of the New York City office from 1989 to 2009.

Mr. Rosen lectures extensively, conducts management training, and advises clients with respect to legislative and regulatory initiatives, corporate strategies, business ethics, social media, reorganizations and reductions-...

212-545-4000
Jonathan J. Spitz, Jackson Lewis Law Firm, Labor Employment Attorney, Atlanta
Shareholder

Jonathan J. Spitz is a Principal in the Atlanta, Georgia, office of Jackson Lewis P.C. He is Co-Leader of the firm’s Labor and Preventive Practices Group.

Mr. Spitz lectures extensively, conducts management training, and advises clients with respect to legislative and regulatory initiatives, corporate strategies, business ethics, social media issues and the changing regulatory landscape. He understands the practical and operational needs of corporate America, helping design pragmatic strategies to minimize risk and maximize performance. He has represented management in dozens of counter-organizing drives and participated in countless unfair labor practice proceedings, discrimination charges and other matters before the National Labor Relations Board, the Equal Employment Opportunity Commission and other federal and state administrative agencies, as well as in collective bargaining, arbitration and in employment litigation before state and federal courts. Mr. Spitz regularly counsels employers in employee relations and discipline and discharge matters, and also assists employers in drafting employment policies and in complying with the Family and Medical Leave Act, drug testing laws and regulations, the Americans with Disabilities Act and other federal and state employment laws.

404-586-1835
James M Stone, Litigation Attorney, Negotiator, Jackson Lewis Law Firm
Office Managing Principal

James M. Stone is Office Managing Principal of the Cleveland, Ohio, office of Jackson Lewis P.C. With more than 25 years of experience in labor and employment law, he has conducted more than 120 negotiations with unions, defended hundreds of employment discrimination, wrongful discharge, and other claims in court and before administrative agencies such as the EEOC, NLRB, and Department of Labor.

Mr. Stone has defended companies against a broad range of challenges including wrongful discharge claims, wage and hour actions, large multi-plaintiff discrimination...

216-750-4307
James Verdi employment litigation lawyer Jackson Lewis
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James Verdi is an Associate in the Cleveland, Ohio office of Jackson Lewis P.C. James focuses his practice on representing employers in employment litigation and labor relations matters including collective bargaining, unfair labor practice charges, unlawful discrimination, accommodation, and leave issues.

Prior to joining Jackson Lewis, Mr. Verdi worked for the United States Postal Service, the nation’s second largest employer, where he first-chaired more than 20 administrative employment hearings and national arbitrations. He provided advice on various...

216-750-0404