Another Day in Paradise magazine

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Archives: Volume 7 - January 2006
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Mexican Labor Law or what you don’t know can hurt you
By Catherine Krantz

Every year in México, 90% of labor lawsuits filed are lost by the employer—some with grave consequences, closing of companies, bankruptcy and the loss of investments. This is in large part due to the deficiency of legal advice in the preventative stages, says Moles & Associates, S.C., a Mexico City Consulting Firm that provides legal advice and information on labor relations to Mexican Companies. Isabel SS Moles y Escobar and Adriana Jimenez Moles of the firm were in Zihuatanejo in early December presenting a Labor Relations Workshop. Held at Coconuts Restaurant, the six-hour workshop was attended by Mexican and foreign business owners and managers who wanted to know more about the often complicated situations caused by Mexican Labor Laws. There is a lot to know.

“The Mexican labor law of today is a direct result of wide-spread exploitation of the Mexican worker prior to the Revolution of 1910,” says Lic. Isabel S.S. Moles y Escobar, opening the workshop. Taken within that historical framework, the lengthy, extremely comprehensive and very pro-employee statutes of Mexican law pertaining to the worker begin to make a little more sense. Most laws are designed to rightly protect an often undereducated worker from being taken advantage of, but their extensive mandated-by- law requirements leave tremendous power to the employee, resulting in a huge amount of employee litigation annually, which in turn leads to anxiety for foreign investors.

As pointed out by Mexican Attorney David Connell, in the January 2005 edition of Another Day in Paradise:
“In a 2004 World Bank study that ranked nations on how easy it was to hire and fire employees, Mexico was not only in last place [as the hardest], but on a scale of one to 100 (one being easiest nation in which you can hire and fire employees and 100 being hardest) it received a score of 72 while the second hardest nation to hire and fire employees (India) scored a 48.”

Many of the perks required for Mexican workers by Mexican law are the stuff American Union members and temporary workers can only dream of: guaranteed and highly regimented paid vacations; 25% of salary year-end and Christmas bonuses; triple time for all holidays; daily food requirements; required continuing education courses and sport training; strict employee termination and payout procedures; plus a whole bevy of laws and policies that puts the power in the hands of the employee, the burden of proof on the employer. This can be very surprising and overwhelming to a foreign business owner trying to wade their way through these—depending on which country they come from—largely foreign concepts, such as putting the employee above the business.

The pros and cons of which can be debated on many levels. Think globally, act locally goes the ecological directive. And thus the question becomes how to balance the rights and requirements of human labor with the needs of a highly competitive global economy. One could argue that the more rights you give the workers, the less competitive you are, locally and globally. It costs a lot to treat your employees well, at the business level and at the national level. But what is far harder to quantify is the cost of not treating your employees well. A history lesson on the cost of revolution, perhaps? Or something altogether more slippery, like a backward slide into a society less civilized. A balance seems in order.

Here in Mexico, the balance swings very heavily towards the employee. The pros are better treatment of workers, the cons and one of the undeniable costs, are the many heated and expensive labor disputes and lawsuits across the country in every type of industry. It has led to worry and frustration on the part of large and small business alike but thus far the laws have not been substantially altered since the early 1900’s. “The laws are outdated, but it has been politics that have kept the laws from being changed, the politicians fear losing the popular vote,” explains Moles y Escobar. It is then the employer’s responsibility to know the law and come up with creative solutions, “Until the laws change, we give business owners the tools to protect themselves in court.”

Ms. Moles y Escobar has 35 years’ experience in Mexican labor law and offers workshops and seminars to business owners and human resources department heads offering preventative advice for healthy labor relationships and mediation and litigation support in the event such relationships break down. The course held in Zihuatanejo was a very informative seminar that gave an introductory overview of the rights and obligations of employees and employers, and briefly touched on all the main points and pitfalls of the employee/employer relationship in Mexico. The topics included: The elements of the labor relation; The types of labor contracts; Terms used for general work conditions; Necessary Documents; General files / procedures in the work place; General Rules and regulations for the work relationship with domestic workers; General Rules and Regulations of the labor relations with workers in the Restaurant and Hotel industry; Obligations of the Employer in México; Obligations of the Employee in México; Mixed Commissions; Terminating labor relations with employees; The Union; and Preventive forms of administrating human resources departments.

For anyone who has or is considering having even one employee in Mexico, a basic understanding of the law is essential. An employer in Mexico has many obligations, an employee many rights. It should not be assumed that labor practices that work in other countries and/or that are legal in other countries are legal in Mexico. In the absence of a seminar available, a consultation with a legal professional is advisable before engaging in any hiring practices in Mexico.

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