On December 1, 2021, the Board of Representatives of the National Minimum Wage Commission unanimously agreed that as of January 1, 2022, a 22% increase in the minimum wage will become effective, comprised of an "Independent Recovery Amount" that seeks to contribute to the recovery of the purchasing power of the minimum wage and an "Adjustment Factor" corresponding to the rounding of year-end inflation plus two percentage points:

Therefore, the minimum wage will be $260.34 pesos per day in the Northern Border Free Zone and $172.87 pesos per day in the rest of the country, such percentage increase will also be applied to the professional minimum wages listed by the National Minimum Wage Commission.

The decision was taken considering the drop in Gross Domestic Product and inflation caused by the suspension of activities derived from the COVID-19 pandemic and seeks to support Mexican workers, especially the most disadvantaged groups, and to help the recovery from the economic crisis we are going through.

It should be noted that the National Minimum Wage Commission clarified that the Independent Recovery Amount should not be considered as a reference for setting wages in collective bargaining.

Los invitamos a leer nuestra participación en la revista Industria Legal, donde nuestro socio Cristian Lamas redactó el articulo “Teletrabajo durante la emergencia sanitaria por Covid-19”. Siendo los representantes en derecho laboral, agradecemos el esfuerzo de nuestros abogados y la invitación por parte de la revista

“Teletrabajo durante la emergencia sanitaria por Covid-19. El 11 de enero de 2021, se publicó en el Diario Oficial de la Federación el decreto por el cual se reformó el artículo 311 y se adicionó el capítulo XII Bis de la Ley Federal del Trabajo (LFT), en materia de Teletrabajo.  Esta reforma contribuye a la seguridad jurídica de las relaciones laborales que se desempeñen bajo esta modalidad permitiendo a las empresas eficiencia y calidad en los servicios prestados, generando derechos y obligaciones tanto para los empleadores como para los empleados.  El gobierno había emitido desde marzo de 2020 una Guía de acción para los centros de trabajo ante el Covid-19, la cual se fue actualizando en los meses de abril y mayo de ese mismo año, en los cuales en términos generales establecía suspender actividades no esenciales, flexibilizar el trabajo, permitir la reorganización y el escalonamiento de las jornadas laborales, así como el uso de las tecnologías para minimizar el contacto directo entre las personas, incluyendo desde luego el trabajo en casa. En consecuencia, la mayoría de los empleados, se encontraban impedidos para asistir a sus centros de trabajo, por lo que laborar en casa, al amparo de dichas restricciones del gobierno desde nuestra perspectiva no los hacía teletrabajadores, ya que se estaba en casa por cumplir la normatividad del gobierno.  Sin embargo, de acuerdo con el semáforo de riesgo epidémico correspondiente del 1 al 14 de noviembre de 2021, veintinueve Entidades Federativas incluida la CDMX se encuentran en semáforo verde https://coronavirus.gob.mx/semaforo/ con lo cual dependiendo de los lineamientos de dichas Entidades, en la que se establezca que ya no hay restricciones para regresar a laborar a los centros de trabajo, los empleados deberán de presentarse a las instalaciones del patrón como lo venían haciendo hasta antes de la emergencia sanitaria. Si los colaboradores continúan realizando sus labores en un lugar distinto al centro de trabajo en más de 40% de su jornada laboral, ya sea por su voluntad o por instrucciones del patrón se considerará Teletrabajo y el patrón estará obligado a: proporcionar, instalar y encargarse de los equipos de cómputo, sillas ergonómicas, el pago de los servicios de telecomunicación y parte proporcional de electricidad, respetar el derecho a la desconexión de los colaboradores y demás obligaciones establecidas en el Capítulo XII Bis de LFT. En caso de incumplimiento la autoridad podrá sancionar con multas que van desde las 50 a 5000 UMAs.”

El volumen se encuentra disponible en el siguiente Link: https://www.flipsnack.com/cejchile/industria-legal-mx-vol-3-nov-2021/full-view.html

As consequence of the approval of the Decree which amends, adds and derogates those provisions of the Federal Labor Law, Social Security Law and other regulations, in regard to subcontracting (outsourcing) and profit-sharing, the established models for contracting have been modified, thus impacting all employment levels, employee compensation and, in general, the outsourcing industry.subcontracting.) y reparto de utilidades, se modifican modelos establecidos de contratación que afectarán los niveles de empleo, la compensación de los trabajadores y en general la industria del subcontracting..

Content of the Amendment

The approved text prohibits subcontracting of personnel, considering such term as the assignment of employees to a beneficiary of the service. Historically, this subcontracting scheme has been carried out by (a) companies which hire personnel to be assigned to carry out inherent activities of the services beneficiarysubcontracting.and (b) between companies of the same corporate groupinsourcing).

Regardless the general prohibition of outsourcing, the amendment allows outsourcing, provided that the following conditions are complied: (i) the provision of specialized services or the execution of specialized works that are not included in the corporate purpose nor in the core business activity of the beneficiary; and (ii) that the subcontracting company that will be rendering the specialized services is duly registered before the public registry created for such purposes by the Ministry of Employment and Social Welfare –registry that will be effective for a term of three years–.

The second exception to the prohibition of subcontracting of personnel allows complementary or shared services to be rendered between companies of the same corporate group.

The text of the amendment is not precise in the definition of the abovementioned concepts, so we consider that they should be construed as follows:

• Specialized services are those unrelated to the corporate purpose or core activity that justify hiring a third party. Furthermore, from our perspective, those complementary services that provide aggregate value or technical knowledge, may be deemed as specialized.
• For better understanding of the scope of the activities that may be considered as core activity or business, article 45 of the Federal Tax Code Regulations establishes that the business activity for which the greater income is obtained, with respect to any other activity, is considered as the main or core business.
• Regarding the obligation to be registered before the Ministry of Employment and Social Welfare, we estimate it will apply exclusively to those subcontracting companies that offer specialized subcontracting services. Therefore, it would not be applicable to services rendered between companies of the same corporate group. The argument is based on , the express differentiation for this type of services, referring to them as “complementary or shared services”, equating them to a specialized service, but without binding them expressly to the subcontracting regime.

For compliance purposes, the companies, within the following three months as of the effective date of the amendment, may carry out a “special employer substitution”, without transfer of goods, for social security purposes, provided that all acquired labor rights are recognized. We estimate that such mechanism should be analyzed prior to its implementation, since it may result risky for the companies that will undertake as their own the personnel through the employer substitution, since those companies would acquire, in addition to the labor obligations, the social security obligations of the transferred personnel for the last five years.

Subcontracting services shall also be reported quarterly before the Workers' National Housing Fund Institute (“INFONAVIT”, for its initials in Spanish), considering the above-mentioned information, as well as the amounts of the contributions and amortizations before said Institute.

Profit Sharing

The prohibition to outsource personnel implies that the companies shall hire their employees directly, being obliged to share profits with them. The Decree contains a modification to the model of profit sharing, establishing as a maximum limit for the payment of profit sharing to the employees, the amount of three months of salary or the average of the profit sharing amount received by them during the last three years, whichever results the most beneficial for the employee.

The fact that a maximum limit is established for the payment of profit sharing does not modify the proceeding for its determination, nor the limits referred in section II of article 127 of the Federal Labor Law that establish as a maximum salary cap for employees of trust, the salary of the unionized employee or higher equivalent increased by 20%, so, in all events, the daily base salary will be taken into account for the determination and calculation of the amount to share.

Fines and Penalties

In order to ensure the compliance of the measures established in connection with outsourcing, fines are set forth for those who breach the content of the amended provisions. Those fines will range from 2,000 to 50,000 Measure and Update Units (“UMA”, for its initials in Spanish) (each UMA is currently equivalent to $89.62 Mex.Cy.) The fines would be applied to both the beneficiary and subcontractor.

With regard to the foregoing, in accordance with article 992 of the Federal Labor Law, when one sole act or omission affects several employees, a penalty will be imposed for each of the affected employees, so such penalties may be calculated based on the number of employees under the subcontracting regime multiplied for the value of the imposed penalty for each one of them, which may result in costly penalties.

Aside from the applicable fines, the Federal Tax Code has been amended, among other laws and regulations. Specifically, article 15-D of such Code establishes that the payments or compensations carried out under subcontracting of personnel to perform activities related to the corporate purpose and core business activity of the contracting party, will not be deductible nor credited.

Terms for Compliance

The transitory articles of the amendment foresee the following terms:

Rendering of Independent Services

The Decree does not compromise the possibility to hire services under a scheme of independent services. The derogation of Article 13 of the Federal Labor Law does not impede the execution of services agreements between independent companies. The hiring of independent services shall not imply the assignation of personnel, nor authorize the beneficiary of the services to control, direct and supervise the employees or individuals that render the services. It is important that the services under this scheme are carried out with the provider’s own material resources, which, with material and human solvency, provides the services in accordance with the standards and levels of service in the corresponding industry.

In view of the foregoing, and except the Ministry of Employment states otherwise, the companies will be responsible to identify if it is necessary to carry out the registration to perform their activities. In the last scenario described, no scheme of outsourcing of personnel is constituted, and therefore, there would not exist any obligation to carry out the enrollment before the implemented registry for such purposes.

An overview of the legal framework applicable to telework and remote working in Mexico, and what this could mean for employees and employers alike.

Since 2019, Mexico’s Congress has been working on an amendment to the legal framework applicable to teleworking and remote working. On 8 December 2020, the legislative chamber discussed and approved the draft of an amendment to article 311 of the Federal Labor Law (FLL) and the addition of Chapter XII BIS. These new provisions became mandatory on 12 January 2021 during the labour emergency declared due to the covid-19 pandemic, a time in which most, if not all the companies had established home office programs to prevent contagion. The integration of “home office” into the FLL in 2012 was incorrect and incomplete, however. Through a technical mistake, teleworking was equated with home working. In the new legislation, the distinction between these concepts is that home office is work carried out at the domicile of the employee, without being under the control and direction of the employer. Teleworking, by contrast, applies under the following conditions: that the work is rendered in a different place to the workplace of the employer; that it is not required for the employee to be in the employers’ facilities; and that technology is used for the administration of the labour relationship and supervision of the performed service. Before the amendment came into force, we identified at least three relevant forms of work concerning the rendering of services under the home office scheme or remote working. These forms of services are rendered through information technology and have been established in general under the labour rights and obligations of the FLL, in agreements whereby the parties set forth the terms and conditions of the service. First, for convenience and efficiency, employees have their employer’s authorisation to work, in extraordinary circumstances, one or two days per week remotely, performing their services by technological means, but, because of their roles, they must render their services in the employers’ facilities in normal circumstances. Second, employees that may render their services remotely or in their employers’ facilities and, due to the nature of their role, have the freedom to determine where they perform their duties. Finally, employees that render their services in their home, or a place freely chosen by them, and who will be subject to the new legal framework. Pursuant to the new regulations, these workers must meet additional requisites to be considered as teleworkers: (i) their services are not necessary in the employer’s facilities; (ii) they render their services constantly out of the employer’s premises, and fulfil more than 40% of their work away from the office. As a special work regime, an agreement must be entered into between the employer and the teleworker, in which the obligations, rights, and responsibilities of a labour relationship under such conditions are established, including equality in the treatment to teleworkers and employees. Among others, it shall contain: a description of the equipment and work supplies; contact and supervision mechanisms between the parties; working hours, including connection and disconnection periods; the employer’s and teleworker’s compliance with obligations and responsibilities in matters of health, security, and workplace welfare; how the modality of teleworking may be revoked according to the existent labour relationship; the collective bargaining agreements and internal work regulations, which must include the terms and conditions of teleworking, providing a communication system for employees; and employers must provide supplies and equipment, and pay the proportional costs of connectivity and electric energy services. The law expressly refers to computer equipment, ergonomic chairs and printers, among others. The amendment foresees the creation of a Mexican official standard in health, security, and workplace welfare, for activities outside the workplace using information and communication technologies within the next 18 months. In the same manner, the amendment establishes that the authorities will integrate a national network of advice regarding, and promotion and development of, teleworking referred to in the draft of the amendment, as well as establishing guidelines related to accidents and illness while teleworking. In general terms, we anticipate that the amendment will contribute to the security of labour relationships that are performed under these conditions. Companies will be able to guarantee the efficiency and quality of services rendered through remote or teleworking. Under the special obligations and rights, we predict additional conditions in labour agreements between employer and employee to include: an obligation to perform the services using a tool, such as a laptop, assigned by the company; an obligation to maintain the equipment for the performance of the entrusted activities (hardware as well as software); an employee must comply with all the obligations, work, activities, and projects that must be carried out physically in work facilities or other places; limits to working hours, availability of schedule, supervision, digital connectivity, and disconnection; the company reserves the authority to determine the activities, deadlines, works, projects, and tasks carried out by the employee, indicating the necessary requirements and specifications; the mode of remote or home working may be modified, suspended, or cancelled, in certain circumstances when the company considers it necessary, provided that the employee’s rights are not affected; protection of personal data and privacy of the employee; and the maintenance of the company’s confidential information. It is important to differentiate the telework regime from the pandemic home office prevention programme. Agreeing to the provision of services from home does not imply that services are unnecessary in the company’s facilities, and does not transform the employees’ status to teleworkers. Once the health emergency has concluded, employees shall once again provide their services in the workplace as they did before the covid-19 pandemic. Employers need to review the terms and conditions of their labour agreements to verify that the cause of modification to the labour relationship was caused by the health emergency, and that the company has full authority to terminate the agreement so employees can return to the workplace. This article was first published at here.

Increase to employers’ contributions, reduction of contribution weeks for the guaranteed pension and limitation to the management fees of pension fund managers.

On July 22, 2020, the Executive Branch announced the initiative proposal of amendment to the Social Security Law (“SSL”) and to the Retirement Savings Systems Law (“RSSL”), which, as informed, was discussed and agreed with the Business Coordinating Council and the Employees Confederation of Mexico (CTM).

In September 2020, the initiative was filed before the Legislative Chamber, and once the draft was discussed, the Congress approved the initiative for its enactment, which decree was published in the Official Gazette of the Federation on December 16 of this 2020.

This amendment’s purpose is to: (i) increase the contribution to the savings for the retirement of the employees for concept of old-age severance, being the employer who will assume such increase; (ii) modify the social fee granted by the Federal Government; (iii) reduce from 1,250 to 1,000 contribution weeks for the obtention of a guaranteed pension; (iv) modify the amount of the guaranteed pension; and (v) limit the management fees of the Pension Fund Managers(“AFORES” for its initials in Spanish).”).

(i) Increase to the Employers’ Contribution

Before this amendment, employers were obliged to contribute (i) for concept of retirement, the equivalent amount to 2% of the base salary of contribution of the employee, and (ii) for concept of old-age severance, 3.150% of the base salary of contribution.

As of the date in which the amendment will enter into force, the employers will temporarily continue to contribute for concept of retirement 2% of the base salary of contribution of the employee and shall increase the contributions for concept of old-age severance, from 3.150% to 11.875%.

The percentage of this contribution will depend on each employee’s income, from 3.150% of base salary of contribution for the employees with an income of 1 Minimum Wage(for its initials in Spanish, “SM”)until 11.875% of the base salary of contribution for employees with income of 4.01 Updating Measurement Units(for its initials in Spanish, “UMAs”)and forward, as described below:

The increase to the employer’s contribution will not be directly effective as of the date the amendment enters into force. In the transitional articles thereof is foreseen a progressive application in time, gradually as of January 1, 2023 until year 2030, in accordance with the following table:

(ii) Government Contributions and Social Fees

In accordance with the approved amendment, the Government contribution of 7.143% of the total of the employers’ contributions for concept of old-age severance is eliminated and the way to calculate the amount of the social fee in charge of the Federal Government is modified.

Previously, the Federal Government granted on a monthly basis, to such employees that earn until fifteen time the minimum wage in force in Mexico City, a social fee for an initial amount equivalent to 5.5% of the minimum general wage of Mexico City, for each day of contribution wage of the employee.

As of January 1, 2023, the amount of employees with access to such fee is reduced, and the way to calculate such amount is modified. In the new legal framework, the Federal Government will monthly contribute, to the employees that have income until four UMAs, a social fee from $10.75 Mex.Cy. for the employees with a base salary of contribution of 1 Minimum Wage and until $6.25 Mex.Cy. for such employees with a base salary of contribution of 3.51 to 4 UMAs. These amounts will be modified quarterly in accordance with the National Consumer Price Index(for its initials in Spanish, “INPC”).”).

The provisions related to the social fee hereinbefore described will enter into force as of January 1, 2023. Notwithstanding the foregoing, from January 1 to December 31, 2023, the Federal Government for concept of old-age severance, will monthly contribute an amount for each day of salary of contribution, as social fee for the employees that have income from 4.01 to 7.09 UMAs, in accordance with the following table:

(iii) Guaranteed Pensions

Regarding the guaranteed pensions, the provisions are modified with the principal purpose to allow a greater number of employees to have access to such pensions, in view that the contribution weeks are reduced from 1,250 to 1,000 to be entitled to receive such pension. Furthermore, the amount of the guaranteed pension is modified and will be calculated based on: (i) age, (ii) average of the base salary of contribution during the affiliation of the employee in the Mexican Institute of Social Security(for its initials in Spanish, “IMSS”), and (iii) the contribution weeks of the employee. Such guaranteed pension will be from $2,622 Mex.Cy. until $8,241 Mex.Cy., amounts that will be updated annually on February in accordance with the INPC. The calculation will be carried out based on the following table:

As of the date in which the reform will enter into force, 750 contribution weeks will be the minimum to be entitled to obtain the guaranteed pensions, and 25 weeks will be annually increased until achieving those set forth in the amendment, in accordance with the following table:

(iv) Limitation to Management Fees of the AFORES

In addition to the foregoing, the AFORES management fees are limited based on the international standards of the United States of America, Columbia and Chile, and in accordance with the policies and criteria to be issued by the Government Board of the National Commission of the Savings Fund for Retirement in such regard. This Commission will have a term of 30 business days as of this amendment, to modify the general provisions in order to comply with this new provision.

(v) Relevant Provisions and Conclusion

Finally, pursuant to the new legal framework, authority is granted to the IMSS to dispose of the resources contributed as of 10 years as of its enforceability, without judicial resolution needed, provided that constitutes a sufficient reserve to attend refund applications to employees, pensioners or beneficiaries. We consider that this authority granted to the IMSS breaches rights, having considered that the pension rights are imprescriptible.

The modification to the financial regime of old-age severance impose additional economic burdens to the employers, that we estimate shall be absorbed and assumed as part of the compensation load that from time to time will be negotiated with the employees and/or unions. Doubtlessly, this represents an improvement to the retirement system in attention to the demographic curves of the economically active population, considering that the positive curve finalizes in 2030 and, therefore, after such breaking point, the possibility to fund the pensioners by the active employees will no longer be viable.

Hiring third parties to engage individuals is a common practice in Mexico. Since President Andrés Manuel López Obrador took over office in December 2018 it was expected a labor reform limiting the alternatives to outsource personnel. From October 2019 on, Congress has received 9 initiatives to reformsubcontracting.”.

Subcontracting is nowadays enforceable pursuant to the Federal Labor Law. It implies the ability of the contractor to engage another employer which in turn assigns its employees to render services for the contractor, who has the ability to control and direct the services provided.

This alternative is controversial, as it may deprive employees from receiving profit share amounts and similar benefits to those benefits received by employees directly hired. The current government has continuously challenged this contractual alternative. The President presented an initiative to reform subcontracting, or more precisely, to eliminate the alternative to subcontract, leaving with very small room the companies to outsource services. It is basically forcing the companies to hire directly all the employees involved in their core business.

We believe this is a critical initiative, which may harm substantially the economics of the country. While the President holds reasonable control of the Chamber of Representatives, he has not the same level of influence at the Senate. We expect to see in the near future (weeks) substantial discussions with respect this and the other initiatives. For the most important features of the initiative, please read our previous bulletin..

The day after the Initiative was filed, the President announced that the proposed amendment would be subject of analysis and negotiation with the economic actors –namely representatives of the workers–, and entrepreneurial chambers and associations. After several days of discussions, including the formal invitation of the National Commission for the Profit Share Distribution to review the terms of the current distribution formulae of the profits accrued by the companies and paid to the employees, the Government announced this morning that the discussions of the potential reform of the laws involved in the Initiative would be carried out next February, when the ordinary legislative term resumes.

Basically, the rationale behind the delay is described in the agreement signed by the Government (including the President), as well as representatives of the workers and the companies. The document defines four basic principles:

1. The parties are committed to eliminate the abuses in connection to outsourcing.
2. The profit share system requires a review and eventually a modification.
3. The proposed Initiative implies major changes and challenges and therefore the parties thereof respectfully request the Legislative Branch to postpone its review.
4. The parties jointly request those companies incurring in malpractice to cease and formalize their employment contracts.

This delay implies that the initiative originally filed, and which expressly prohibited subcontracting, will likely change as a result of the discussions. It is also possible that a new determination of the formulae to share profits in a fiscal year arises.

In the meantime, under the current legal system, subcontracting is enforceable. We suggest also exploring the possibility of executing business to business contracts, in which the subcontractor renders services with its own means, without control of the contractor, under certain business standards as agreed upon.

Since 2019, the Congress has been working in the amendment to the legal framework applicable to teleworking and/or work from distance. On December 8, 2020, the Legislative Chamber discussed and approved the draft of amendment to article 311 of the Federal Labor Law (“FLL”) and the addition of Chapter XII BIS that will regulate the figure of “Teleworking”, which was referred to the Senate on December 9, 2020, and the latter, in such date, approved in general and particular terms to regulate with greater detail this figure.

The integration of “home office” in 2012 was incorrect and incomplete. By a technical mistake, teleworking was equated to home office. As of the new legislation that will be in force, the distinction between these concepts is that home office is such work carried out at the domicile of the employee, without being under control and direction of employer. By comparison, for teleworking, as established in the new legal definition, is indispensable that the services comply with the following conditions:

• (i) That the works are rendered in a different place to the workplace of the employer.
• (ii) That it is not required nor indispensable the physical presence of the employee in the facilities of the employer; and
• (iii) That the resources of the new information technologies are used for the administration of the labor relationship and the supervision of the performance of the service.
• (iv) Before the legal amendment that will be in force, we identify at least three relevant forms of work with regard to the rendering of services under the scheme of Home Office or work from distance. These forms of services are rendered by means of information technologies and have been established in general under the labor rights and obligations of the FLL, in agreements whereby the parties set forth the terms and conditions of the service.

Firstly, the employees that for convenience and efficiency have the employer’s authorization to work, in an extraordinary manner, one or two days remotely, performing their services by technological means, but, in view of the nature of their functions, have the obligation to render their services in the employers’ facilities.

In second place, we can identify those employees that in view of the nature of their functions may render their services within or out the facilities, indistinctly, and that have the professional liberty to determine if they perform their duties physically or not in the employer’s facilities.

Finally, those employees that render their services in their domicile or in a place freely chosen by them, using the information technologies, will be subject to the new legal framework, that include the following conditions:

• Those who, in addition to complying with the three requisites, render their services constantly and fulfill more than 40% of their work shift under such modality will be considered teleworkers. Those who work sporadically or occasionally from a different place to the employer’s facilities will not be considered as teleworkers.
• As special regime of work, an agreement must be entered into by and between the employer and the teleworker, in which the obligations, rights and responsibilities of a labor relationship under such modality are established, including the equality in the treatment to teleworkers and employees. Among others, it shall contain:

1. Description of the equipment and work supplies;
2. Contact and supervision mechanisms between the parties;
3. The work-shift, connection and disconnection periods;
4. The compliance of the obligations and responsibilities of the employer and teleworker in matters of health, security and welfare of professional risks;
5. The manner in which the modality of teleworking may be revoked pursuant to the existent labor relationship.

• The collective bargaining agreements and the internal work regulations must include the terms and conditions of teleworking, providing a communication system for the link and contact of the employees.
• The employers will be obligated to provide the supplies, equipment and pay the proportional costs of the connectivity and electric energy services. The ruling expressly refers to the computer equipment, ergonomic chairs and printers, among others.
• Regarding the controversial concept of security in work, the amendment foresee the creation of a Mexican official standard in health, security and welfare of professional risks matters, for the activities to develop outside the workplace using information and communication technologies within a term of 18 months. In the same manner, the amendment establishes that the authorities shall integrate the national network of counsel, promotion and development of teleworking referred in the draft of amendment, as well as to establish the guidelines related to accidents and diseases with teleworking.

In general terms we anticipate that the amendment will contribute to the legal security of the labor relationships that are performed under this modality, in view that it will allow the companies to assure the efficiency and quality of the services rendered from distance, allowing the elaboration of agreements, either of telework or in a flexible modality in which the employee and the employer may agree that, from time to time, and without exceeding the 40% limit, may be rendered the services from distance. In accordance to the special obligations and rights, we estimate that it may be included to the agreements additional conditions in connection to:

• The obligation to perform the services using as a tool a laptop assigned by the company;
• The obligation of the employee to take care and maintain the assigned equipment for the performance of the entrusted activities (hardware as well as software);
• The obligation of the employee to take care and maintain the assigned equipment for the performance of the entrusted activities (hardware as well as software);
• Limits to the work-shifts, availability of schedule, supervision, digital connectivity and disconnection;
• That the company conserve the authority to determine the activities, date of deliverables, works, projects and tasks to carry out by the employee, indicating the necessary requisites and specifications;
• That the modality of work from distance or home office may be modified, suspended or canceled, from time to time, at any moment that the company considers necessary, provided that the employee's rights are not affected;
• Protection of personal data and privacy of the employee;
• Use and confidentiality of the company’s information.

For the purposes of measurement of potential impact in the operation of the companies, we shall analyze, those who rendered or not its services in the workplace at the moment of the emergency health declaration.

For the purposes of measurement of potential impact in the operation of the companies, we shall analyze, those who rendered or not its services in the workplace at the moment of the emergency health declaration.

Agreeing to the rendering of services from home pursuant to the referred agreements and recommendations of labor authorities, does not imply from our perspective, the recognition that the services are not necessary in the facilities of the company, and does not transform the employees by definition in teleworkers for the simple circumstance that until today they fulfill their tasks from home, in view that, once concluded the health emergency, the employees shall provide their services in the work place as they have done until before the emergency, since their appearance in the employer’s facilities results indispensable, as it is agreed.

For such purpose, it is important to review the terms and conditions of the labor agreements of home office that were implemented, to verify that the cause of modification to the labor relationship has its causality in the health emergency, and that the company has full authority to terminate the agreement in order for the employee to attend to its work in the domicile where he had once attended.

It is relevant to refer that this amendment will be in force during the health emergency by the Covid-19. The amendment was sent to the Federal Executive Branch for its enactment and publication in the Official Gazette of the Federation and come into force as of the following day as foreseen in the transitory articles, which we estimate will be in the following days.

On November 12th, 2020, the Executive Branch proposed to the Legislative Chamber an amendment initiative to the Federal Labor Law (“FLL”), the Social Security Law, the Institute of the National Fund for Workers’ Housing Law (“INFONAVIT Law”), the Federal Tax Code, the Income Tax Law and the Added Value Tax Law, with regard to subcontracting and more generally, outsourcing. This amendment initiative pretends to prevent companies from subcontracting services inherent to their corporate purpose, by engaging third party services providers for the allocation of personnel and, only if applicable, enter into specialized service agreements. The aim is for companies to directly hire the personnel involved in the exploitation and production of the goods and services they offer to their respective markets.

The initiative, in line with the initiative submitted on October 2019 by senator Napoleón Gómez Urrutia, is aimed to be justified under the argument that the transfer of employees in the subcontracting scheme (i) harms and impedes employees from accessing adequate levels of welfare, (ii) promotes the omission of payment of profit sharing, (iii) allows for employers to hire personnel under inferior conditions and breach employers’ labor tax and social security obligations regarding the outsourced employees, (iv) promotes the simulation of operations, through the issuance of invoices with virtual operations, thus affecting the tax administration, and (v) affects the right to “organize and collective bargaining”.

Nevertheless, the scope of this initiative submitted to the Joint Commissions of Work and Social Welfare, and the Finance and Public Credit for the opinion of Social Security and Housing is significantly more ambitious. Even when in the explanatory statements the Executive justifies the necessity to prohibit subcontracting schemes, the proposed amendments leave a minimum margin to subcontract services.

Indeed, the amendment initiative pretends to eliminate the possibility to subcontract services under the scheme of independent services, in which one company with its own resources renders services to another company, under an independent scheme, without administration or control of the beneficiary, pursuant to certain standards of service.

The initiative expressly prohibits subcontracting and derogates articles 15-A. to 15-D.- of the FLL. In the proposed legal framework, subcontracting is defined as the scheme in which a person or legal entity allocates its employees for the benefit of another party.

Furthermore, it stipulates specific regulations for the engagement of services with third parties, under a regime that is exception to the rule.

The provision of services under the regime of “specialized services agreement or for the execution of specialized works” will not be considered as subcontracting and will only be enforceable provided that (i) the services hired are specialized and will not constitute part of the corporate purpose or the economic activity of the beneficiary; (ii) the contractor has the authorization of the Ministry of Work and Social Welfare (for its initials in Spanish, “STPS”) as provider of specialized services (this authorization is obtained and endorsed after three years, and the provider needs be up to date in its labor, tax and social security obligations); and (iii) the services need to be hired in writing, describing the services to be provided and the number of employees involved.

In order to avoid the simulation of employers’ substitutions, the amendment pretends to establish as requirement for validity the transfer of goods between the former (substituted) and the new (substitute) employer. From our point of view, this clarification is adequate, since it includes several criteria issued by the Federal Department of Justice, in addition to the fact that, in the past, various employer substitutions were implemented without complying with the necessary legal requirements for them to be valid.

Pursuant to LFT if amended in terms of the initiative, if the contractor does not comply with the employer obligations, the beneficiary of the services would be jointly responsible for them. Furthermore, in case of blocking a work inspection, employers will be required by means of a notice to submit certain documents and, in case of non-compliance, it will be deemed that they did not have the required information, this being subject to a fine between 250 and 5000 times the Actualization Measure Unit (“UMA” by its acronym in Spanish). It should be noted that the potential sanction is up between 2,000 and 50,000 times the UMA for those that subcontract personnel.

Similarly, the initiative amends the Social Security Law and the INFONAVIT Law to implement the regime of “specialized services agreement or for the execution of specialized works”. The amendment establishes (i) jointly liabilities for the services beneficiary; and (ii) a general obligation to register and inform the agreements executed under such regime.

In order to deter third party subcontracting services, the initiative also proposes amendments to the Federal Tax Code, the Income Tax Law and the Added Value Tax Law. The stated amendments condition the deductibility and accreditation of the expenses of the company when (i) it is regarding subcontracting agreements; (ii) the employees assigned to the beneficiary by the contractor were employees of the beneficiary and were transferred to the provider of services; and (iii) the assigned employees cover all of the predominant activities of the contracting party.

In order to have the possibility to deduct and credit the expenses and VAT inherent to the subcontracting of services, it will be necessary that the contracting party obtains from the contractor (i) copy of the issued authorization of the STPS, (ii) tax receipts of the salaries of the assigned personnel; (iii) statement of the withheld taxes and payments of employer-worker fees; and (iv) receipt of the payment of the corresponding relocated VAT.

We place special emphasis on this initiative submitted by the Executive because it reflects the objectives originally set out in its labor policy, but there are eight (8) other proposed amendment, which have been submitted since October 2018 to the date and should be analyzed in the same way.

In our opinion, this initiative will be subject to great discussion particularly in the Senate of the Republic, where the Executive has less room for maneuver and political control.

In the context of the “New Normal”, and in light of the expectation of certain companies to resume activities in September, we share the most relevant guidelines and the additions that have been made to such guidelines by local authorities in the main cities of the country.

As we have informed in previous newsletters, on the occasion of the resumption of activities in the workplaces, the federal authorities established guidelines according to which each local community has issued certain rules and requirements to avoid risks of contagion of SARS CoV- 2.

In general terms, at the federal level, the “Technical Guidelines for Health Safety in the Workplace” were published, which establish the principles and strategies related to health promotion measures, health protection and care for vulnerable people, which should be considered in the development of the Health Safety Protocol.

As of June 1, the “Health Alert System” was implemented, in which the federal authorities have defined the degree of risk of contagion, distinguishing different levels according to a traffic light system that consists of four levels: red, orange, yellow and green - from highest to lowest risk of contagion.

With respect to Mexico City, on May 29th, the Guidelines for the Execution of the Gradual Plan towards the New Normal were published in the Official Gazette, in terms of which the New Normal will be implemented in a gradual and progressive way in the economic, labor, social, educational, cultural, transportation and governmental activities in Mexico City.

However, on July 28 and 31, several modifications to the Guidelines for the Execution of the Gradual Plan towards the New Normal were published in the Official Gazette, highlighting the following special obligations at the local level:

Those responsible who resume work must obtain a Letter of Commitment, for which it is necessary to register on the platform http://covid19.cdmx.gob.mx/medidassanitarias, entering the general identification data requested by that platform. In the case of multi-plant companies, each plant needs to be registered individually.

- In addition to the previous requirement, medium and large companies must have a policy of non- discrimination for coronavirus (or, if appropriate, include a wording in this regard in the code of ethics).

- Before resuming physical work, employees must carry out a self-assessment to identify any signs of contagion; the different means through which one can carry out the assessment are as follows:

• Free text message (SMS) with the word “covid” to the number 51515;
• On the website https://test.covid19.cdmx.gob.mx/;
• By calling the Locatel telephone number 5658- 1111; or
• By sending a direct message to the official account of the Government of Mexico City on facebook (https://www.facebook.com/GobiernoCDMX/) with the word “covid”.

- The testing obligation only applies to companies with a workforce of more than 100 employees, physically present at the workplace.

• For the purposes of the foregoing, a workplace is understood as the place, such as buildings, premises, facilities and areas, where exploitation, development, production, marketing, transport and storage or service provision activities are carried out, and where persons who are subject to a formal employment relationship;
• In this situation, a test must be applied bi-weekly to 3% of the employees who are physically providing services in the workplace;
• The results of each scheduled test must be reported to Locatel (please note that this service is not accepting the results of the “rapid tests”, since only the result of the RT-PCR type test will be considered valid);
• In order for the employer not to assume the cost of each individual test, there is the alternative of doing “group tests”, which consist of taking samples from up to 15 employees and combining them to be processed in a single test;
• They must ensure that each employee in the tested group performs a self-assessment to identify any symptoms of covid-19; and in the event that a group test is positive, they must order home quarantine for the entire group and test each employee in this group individually;
• When the obligation to carry out tests applies, the company must report the information regarding the workplace and the results of the tests performed every Monday of each week through the following website: https://empresaresponsable.covid19.cdmx.gob.mx/. Once this process is completed, a covid-19 test report will be generated through the platform itself, accrediting compliance with this obligation.

In certain states, such as Nuevo León, the established guidelines are aligned with those issued by the federal authorities, and to date they remain in effect without any modification or addition according to the stage of socioeconomic reopening in which they are. This is in accordance with the Weekly Health Alert System by Regions.

In the case of the State of Jalisco, the state authority issued the General Guidelines for Safety and Hygiene in the Workplace for Economic Reactivation in relation to the Health Emergency caused by COVID-19, which are in accordance with the federal authorities. These can be consulted using the link: https://periodicooficial.jalisco.gob.mx/sites/periodicooficial.jalisco.gob.mx/files/05-17-20-ter.pdf.

In particular, a “Surveillance Model and Application of Tests for Companies” (or “MOVAPE”, by its Spanish acronym) was established, that obliges companies to register on the SIRA platform: sira.jalisco.gob.mx., in order to designate a link that will maintain communication with the Government of Jalisco. If the company has less than 100 workers per workplace, a sampling will be done according to which the authority will select certain companies, based on epidemiological surveillance criteria, to apply the ordered PCR tests to certain employees.

Companies with more than 100 employees per workplace will be notified by e-mail of the start of the epidemiological surveillance program, and the company must select at least 1 person every 15 days to carry out a PCR test, following the instructions of MOVAPE. This process must be repeated in 15-day cycles and different people must be chosen each time.

At MGGL we adapt to our clients’ needs to design protocols that fit their operational and commercial objectives, acting as strategic allies throughout the implementation of measures applicable in every industry sector and region.

In April 2019 we published a newsletter entitled "Structural effects of the constitutional reform and employment perspectives 2018-2024". In this issue, after following up on the extraordinary conditions caused by the COVID-19 pandemic, we return to the structural labor issues that will surely define a new model for labor and employment matters.

NAFTA and now the USMCA (“TMEC” in Spanish) are international treaties with specific commercial objectives, without any further intention of integrating the countries beyond those. As a result, migration, environmental and labor issues were initially relegated or marginalized within the scope of the treaty. NAFTA and its parallel labor agreement NAALC (North American Agreement on Labor Cooperation) were governed on the following basis: (i) that each country would have an obligation to comply with and enforce its legal framework, (ii) that this legal framework should uphold the eleven core labor principles recognized and protected by the three countries, and (iii) that the means of dispute settlement allowed for, on the basis of the subject matter, the possibility of reaching an arbitration panel and the loss of rights under the treaty.

Thus, only issues of minimum wage, protection of minors, prevention of occupational risks and diseases could reach this last instance, so that the violation of the remaining eight rights could only obtain an assessment by appointed experts. More than thirty violations were denounced before the Labor Cooperation Commission in the first ten years of its existence, without finding that the claims had consequences for the signatory countries.

One of the lessons of globalization is that labor costs are one of the greatest factors of international competitiveness. For this reason, the USMCA reinforces the protection of labor rights and expressly includes the 1998 ILO Declaration on Fundamental Principles and Rights at Work and grants equal protection to all the labor rights protected by the treaty. Chapter 23 of the USMCA provides for specific substantive rights, mechanisms for cooperation, review, dialogue and consultation in the event of a dispute. Although each country retains full responsibility for compliance with its own laws, the cooperative scope between countries includes issues such as "systems of remuneration and mechanisms for the enforcement of labor laws…” and “the institutional capacity of the administrative and judicial labor authorities”, which proves a greater scope of supervision between the parties.

In addition, during the negotiation of the Treaty, the United States imposed Annex 23-A on Mexico, which obliges our country to :

• I) Establish in its labor laws, the right of workers to participate in concerted activities and collective bargaining and to organize, form and join a union;
• II) Prohibit employer dominance or interference in union activities, discrimination or coercion against workers;
• III) Establish and maintain independent and impartial bodies to register union elections and to resolve disputes related to collective bargaining agreements and unions;
• IV) Establishing: (i) an independent entity for the conciliation and registration of trade unions and collective bargaining agreements, and (ii) independent Labor Courts for the resolution of labor disputes;
• V) Provide for an effective system to verify that elections of union leaders are conducted through a personal, free and secret vote; and
• VI) Adopting legislation that required: (i) verification that collective contracts are supported by workers; (ii) majority support for the registration of an initial collective bargaining agreement, through the exercise of personal, free, and secret voting; (iii) existing collective contracts be reviewed at least once during the four years following the entry into force of the legislation verifying that workers are aware of the contract and support the review; and (iv) contracts be publicly accessible.

The obligations contained in the referred Annex are proof of a sensitive change in the perception of labor within the Treaty. The commitments of a collective nature, relating to unionization, union democracy and collective bargaining, as well as the administration of justice through the judiciary, are substantial and may represent risks to the status quo. From our point of view, there are several sensitive factors that should be addressed because, surely, they will be the subject of immediate appeals, namely:

• (I) The experience of the NAALC during the first years of its existence;
• (II) The number of collective management contracts with no union activity or representation;
• (III) The lack of appetite for unionization and adherence to collective activities on the part of the worker base;
• (IV) The criticism and discredit of our wage practices;
• (V) The participatory spirit of North American labor organizations, and the formation of regional or international labor alliances, particularly in the automotive, metallurgical and mining sectors;
• (VI) The new dispute resolution procedure, which allows, through preliminary cooperative dialogues, consultations, ministerial consultations, and in accordance with the dispute resolution procedure of the Treaty, through the reports (resolutions) adopted by panels made up of experts from the three countries, to resolve whether or not certain labor practices are compatible with the standards of the USMCA; and
• (VII) The greater scope of the dispute settlement procedure of the USMCA, which allows for the suspension of tariff benefits for a country if it fails to address the incompatibilities determined by the panel, representing a terrific opportunity for exerting pressure.

In accordance with the above, Mexican companies will have to implement strategic decisions in a very short term. In the area of collective relations, it will be necessary to evaluate, in accordance with the national legal framework and the USMCA, the convenience of legitimizing, through consultation and majority approval of the workers, the collective bargaining agreements, or not.Even though the legal term provided by the reform of 1 May 2019 is four years, it is foreseeable that in high-profile industries and companies with intensive interaction and potential regional competition, the level of scrutiny will be much higher. At MGGL we are ready.