Mitigation of strategic occupational risk in Mexico

Von Wobeser | Labor reforms in Mexico demand strategic solutions. The 2017 constitutional amendment to Article 123, Section A, established a framework that transformed labor relations. The 2019 and 2021 amendments to the Federal Labor Law (LFT), the ratification of ILO Conventions, and the signing of the USMCA further structure this strategic legal framework for labor matters.

Prevention tools require five essential keys:

1. Optimization of Pre-Trial Conciliation: Strengthen representation and resolution strategies at the Federal Center for Conciliation and Labor Registration (CFCRL) and the State Conciliation Centers (CCL). Prioritize conflict resolution during the mandatory pre-trial stage to avoid the costs and time involved in the new Labor Courts. Ratify settlement agreements at the CFCRL and the CCL.

Training and capacity building for lawyers handling administrative conciliation stages at the Conciliation Centers is crucial to overcome the previously ineffective labor dispute management model and establish new, effective, and robust risk mitigation strategies.

The procedural advantage of ratifying a settlement agreement before the Conciliation Centers is greater than that of a private agreement. The Federal Labor Law (LFT) establishes that ratified agreements acquire the status of res judicata—unchallengeable. Therefore, during a trial, the judge lacks the power to review any defects in consent, content, or the validity of the termination.

In contrast, if the agreement was not ratified, the judge has the power to analyze the agreement, its validity, the circumstances under which it was signed, and rule on its nullity and ineffectiveness.

2. Deposit of Severance Payments with Labor Courts: Depositing the payment of severance pay corresponding to an unjustified dismissal—three months’ salary plus twenty days per year of service, both calculated with integrated salary, plus seniority bonus—with the court is a right of the company to terminate the employment relationship.

The Federal Labor Law (LFT) allows this strategy in specific cases. It is particularly applicable to management personnel.

When the employee refuses to accept their severance payment, the company can initiate an informal legal procedure and deposit the payment. The court must notify the employee that the company has deposited the severance pay in their favor.

The main advantage is that even if the employee sues the company for wrongful dismissal, the payment of back wages is avoided, reducing the cost of litigation.

3. Rapid Response Protocols: Establish a due diligence monitoring system to identify and promptly remedy any alerts of violations of collective rights, acts of discrimination, harassment, and workplace violence.

The objectives are:

• To ensure the well-being of staff in a safe workplace;
• To mitigate the risk of a complaint before the Labor Rapid Response Mechanism (LRRM) before it escalates to an arbitration panel; and
• To avoid labor and criminal lawsuits for acts of discrimination, harassment, or violence committed by employees.

The Federal Labor Law (LFT) establishes some of these procedures as a business responsibility, but their creation must be agreed upon with both the workers and the employer. Examples include: a protocol to prevent discrimination based on gender and address cases of violence, harassment, or sexual harassment, as well as to eradicate forced and child labor; the Internal Work Regulations; and the Joint Safety and Hygiene Committee, which must monitor compliance with NOM-035-STPS-2018.

Implementing these protocols and ensuring their strict adherence to daily operations are key to mitigating workplace risks.

4. Union Democracy Audit: Prioritize the verification and adaptation of collective bargaining agreements (CBAs) to the principles of freedom of association. Conduct consultations with personal, free, direct, and secret ballots in collective bargaining processes. This non-compliance is the greatest risk under the USMCA’s Multilateral Agreement on Labor Relations (MLRR).

The company must guarantee union activity and create the legal and operational framework to oversee compliance with union activity without engaging in acts of interference.

The decision made by the majority of workers in consultations for the approval of the creation and comprehensive review of the CBA is irrevocable; it must be respected by the company.

Workers have the right to decide not to pay union dues to the union holding the CBA and inform their employer. The company must immediately cease deductions.

The company cannot question affiliation with a union other than the one holding the CBA. The coexistence of unions under the majority and minority figures, with differentiated rights and obligations, must be respected.

The principle of neutrality in the processes of acquiring or signing a collective bargaining agreement (CBA) is key to mitigating labor risks.

It is essential in the strategy to train the legal team on issues of freedom of association and union membership, maintaining neutrality in labor disputes, and managing the coexistence of unions within the company during disputes over CBA ownership.

5. Control Processes for Labor Subcontracting: Establishing mechanisms for business oversight of both the provision and receipt of specialized services is vital.

Inspections carried out by labor authorities and the resulting liabilities for non-compliance require a system of recurring information review.

Failure to pay social security contributions or income tax, and failure to meet labor obligations by a specialized service provider, makes the recipient jointly liable for all workers under the contract.

The absence of a contract that meets the requirements of the Federal Labor Law (LFT) or the lack of oversight regarding the quarterly payments and notifications to the social security systems (IMSS and INFONAVIT) will result in a fine for the recipient of the specialized services.

Subcontracting personnel for the company’s core business and evading costs through this scheme increases labor risks and can even have criminal consequences if the authorities determine that it was used as a sham.
Providing specialized services also entails the obligation to submit quarterly reports to social security institutions. Failure to do so, in addition to generating fines, may lead to the cancellation of registration with the Registry of Specialized Service Providers or Specialized Works (REPSE).

Compliance under the REPSE model requires constant monitoring, both for companies that provide and those that receive specialized services.

For legal leaders and decision-makers, these are the essential action points:

1. Prioritize conciliation and ratify termination agreements before conciliation centers.
2. Use the deposit of severance payments before labor courts.
3. Implement practical protocols for immediate action in response to labor complaints, with continuous monitoring.
4. Generate collective bargaining processes that guarantee freedom of association.
5. Establish mechanisms for detailed oversight of the subcontracting of specialized services.

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