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LEXPERT MAGAZINE | JANUARY 2013 69 BY JULIUS MELNITZER THE BORDER | IN-HOUSE ADVISOR: MEXICAN LABOUR LAWS | Mexico's Labour Law Overhaul FORTY YEARS OF labour-law stagna- tion ended in Mexico when, in November, the country's congress and president ap- proved a wide-ranging labour-reform bill composed of some 1,000 articles. Most im- portantly for Canadian and other foreign companies, the legislation allows for regu- lations that will dictate how companies can hire Mexicans to work abroad and creates additional obligations for mining employ- ers. e law also makes it easier to hire and fire workers and creates a process for sim- plifying and shortening labour disputes, partly by restricting the right to strike. e legislation creates six categories of labour contracts: job-specific contracts; contracts for a determinate period of time; seasonal jobs; indeterminate hiring; proba- tionary hiring; and trainee hiring. e law also codifies how dismissal without liability may occur; limits back salaries for un- lawful dismissal to 12 months; prohibits dis- crimination and sexual harassment; ensconces international standards of dignity for employ- ees; promotes environmental sustainability; allows outsourcing under certain conditions; and mandates on-the-job training. Many observers believe that the changes will reverse a long-standing trend that has discouraged formal hiring and let ferment a vast underground economy engaging an estimated 29 per cent of Mexican workers. "is is a huge and important reform that is a positive for the business community, as it will create greater certainty regarding the terms of employment and generate more jobs," says Manuel Limón, a labour partner in Baker & McKenzie's Mexico City office. Limón cites the example of limitation on back pay in severance actions. "Considering that a severance case may take two or three years to resolve, back pay liability was oen higher than the severance pay itself and was payable in full whether or not the terminated employee found another job," he explains. "e 12-month limitation in the new law will reduce the contingency costs of litigation and provide certainty regarding these costs, whereas the old law could bankrupt some small companies." In another nod to the business community, the reforms dilute seniority rights in promotion decisions. On the other hand, companies who do not comply with restrictions on outsourcing may be deemed to be the employers of the individuals doing the outsourced work. "at could make affected companies liable for profit-sharing to those individuals," Limón says. Another provision will change the minimum wage rate from hourly to daily. Employers are also disappointed that legislative compromises stripped away certain measures imposing greater transparency and accountability on Mexico's unions, whose membership comprises some 25 per cent of the country's workforce. Critics of the current regime allege that the divide between the individual worker and the union is in some cases so great that unions negotiate first agreements before workers for new factories are even hired, and that many union members have no idea which union represents them. e initial version of the new law, as originally passed by the House of Representatives, would have required ratification of collective agreements by membership vote. e Senate, however, refused to approve the bill unless this and other clauses were eliminated. But what remained were provisions requiring union elections by secret ballot and that unions' finances be audited annually. e passage of the labour reforms, albeit in a diluted format, could signal that the country's new president, Enrique Peña Nieto, may have some success with other planned reforms, which include imposing a new tax regime and opening up the coun- try's tightly controlled energy sector. e optimism stems from the fact that Nieto's Institutional Revolutionary Party, former president Felipe Calderón's National Ac- tion Party and the Green party managed to reach a consensus on the highly controver- sial, riot-provoking labour reforms. Peña Nieto, then the president-elect, supported the reforms in principle, even though they were introduced by Calderón a scant three months before his term ended. Mexico's wide-ranging labour-reform bill will have a number of implications for Canadian businesses hiring Mexicans PHOTO: REUTERS Mexico's former president Felipe Calderon (r) and Mexico's current president Enrique Pena Nieto.