By Francisco Méndez, SPHRi, Manager, Client Solutions, GoGlobal
“You were hired because you met expectations, you will be promoted when you exceed them.”
This insightful quote from Saji Ijiyemi, business leadership coach and author of Don’t Die Sitting, captures the positive and optimistic beginnings of a labor relationship, emphasizing mutual benefit and shared optimism.
However, amid optimism in starting an employer-employee, there is often a silence surrounding the complex topic of terminations, bringing forth psychological, social, legal and economic implications.
Exploring the termination landscape in the United States and Mexico unveils contrasting approaches shaped by distinct legal frameworks, cultural influences and economic considerations.
In this blog post, we delve into the termination practices in both countries, starting with the controversial principle of “employment at will” in the U.S. and contrasting it with Mexico’s emphasis on stability in the workplace. Let’s unravel the complexities and nuances that define termination practices in these two neighboring nations.
What does ‘employment at will’ mean in the U.S.?
The U.S. largely follows the principle of “employment at will,” allowing employers to terminate employees with or without cause. This controversial principle has been both praised for fostering economic success and criticized for its potential for arbitrary terminations.
Despite its broad application, common law and local laws in the U.S. have introduced exceptions to mitigate abuses of at-will-employment. Notable exceptions include the Public Policy exception, Implied Contract exception and Covenant of Good Faith exception.
- Public Policy Exception: This exception prevents wrongful termination when it violates an explicit, well-established public policy of the state. For instance, an employee cannot be terminated for revealing a truth under oath that harms the employer.
- Implied Contract Exception: Even without a written contract, employers may be bound by representations made regarding job security or procedures. Employee handbooks, for example, can create implied contracts, emphasizing the importance of clear guidelines in the termination process.
- Covenant of Good Faith Exception: This exception introduces a covenant of good faith and fair dealing into every employment relationship, preventing terminations made in bad faith or motivated by malice. It ensures fairness, especially in cases where long-term employees are terminated close to retirement without just cause.
How does Mexico handle terminations?
Mexico, in contrast to the U.S., operates under a federal labor governing body without state-specific labor laws. Unlike the U.S., there is no concept of “employment at will.” Instead, Mexican labor law emphasizes stability in the workplace, prohibiting termination without just cause.
While this may seem restrictive, the economic burden on employers – including penalties, compensation packages and severance – is comparatively lower than U.S. standards.
Mexican law provides a specific list of motives and procedures for terminating employees, including reasons like vandalism, sexual harassment, false statements and unexcused absences. In the absence of substantial evidence, termination can occur through voluntary agreements, ensuring employees receive statutory benefits and severance in accordance with the law.
Statutory benefits in Mexico in termination cases include the following:
- Compensation for all labored days (including accrued extra hours)
- Proportional 13th-month bonus
- Proportional accrued vacation pay and premium
- Proportional vacation premium (if applicable)
- Constitutional indemnity (90 days of salary)
- No reinstallation (20 days of salary. This is paid when an employee files a case before labor authorities and asks to be reinstated to his job. The company in lieu will pay the equivalent of 20 days of salary.)
- Seniority bonus (12 days of salary)
Adapting to termination practice across borders
Termination practices have evolved in recent years, further emphasizing dignity and respect. While the U.S. relies on the “employment at will” principle with common law exceptions, Mexico prioritizes stability in the workplace. Employers in both countries must navigate legal frameworks and HR strategies to ensure fair and just terminations, reducing costs and legal exposures.
As the workforce landscape continues to change, understanding and adapting to termination practices are essential for fostering positive employer-employee relationships.
Cross-border HR services with local expertise and knowledge, such as an Employer of Record (EOR) solution, play a pivotal role in enhancing talent management across borders to ensure compliance. With the specifics of termination practices varying between the U.S. and Mexico, having professionals who understand the cultural nuances, legal intricacies and local regulations is crucial.
Moreover, cross-border HR facilitates effective communication between global headquarters and local teams. This ensures that corporate policies align with regional norms, fostering a harmonious work environment.
As the global workforce landscape continues to change, understanding and adapting to termination practices across borders is essential for fostering positive employer-employee relationships. By incorporating local expertise, international companies can mitigate risks, promote compliance and ultimately enhance talent management strategies in the U.S., Mexico and beyond.
Watch GoGlobal’s recent webinar on demand From Singapore to Spain and Beyond: How to Hire and Fire Around the World or contact us to learn more about hiring and firing practices around the world. You can also download our new guide: Building a Resilient Workforce in Latin America Guide.