Hire in Mexico

Contracts for a fixed term or for a specific task can be entered into when the needs of the employer require such an engagement. To enter into such an agreement legally, the employer must justify the reason for hiring an employee for a fixed term or for a certain undertaking. Hence, the contract will automatically terminate upon the completion of its term (fixed-term employment) or at the completion of the specified undertaking (employment for a specific task). If the activities under which the employee was originally hired continue following the end of the contract, the employment relationship will be automatically extended and accordingly deemed an indefinite term contract.

Employees hired pursuant to an indefinite employment agreement or a fixed-term agreement of at least 180 days can be subject to a probationary period of up to 30 days. This is extendable by up to 180 days if the employee is hired as an executive, manager or director or fills an administrative position.

The FLL states for every six days worked, employees are entitled to one day of rest. It also recognizes three types of work shifts:

• eight hours a day for daytime work (48 hours a week)
• seven hours for night-time work (42 hours a week)
• 7.5 hours for a mixed work shift (45 hours a week).

The principle of a 48-hour workweek is officially the law of the land. However, a 40-hour workweek has been established in many employment relationships throughout much of the private sector in Mexico.

The FLL also specifies employees are entitled to at least 30 minutes of rest or to have a meal during their shift. This time will be considered as part of the employee’s working day.

An employee must not be required to work more than three hours beyond the number of hours in the statutory workday during a given shift (or more than nine hours in each week). An employee working overtime on a given day is entitled to double compensation for each hour of overtime. In the event the employee works more than nine hours overtime in each week, the employee is entitled to triple compensation for each hour of overtime.

However, as a matter of law, all employees are entitled to overtime pay. It has become common practice for employees holding managerial positions not to claim any overtime pay because it is implied their salary already includes and covers the extra time they need to work in view of their role. Nevertheless, this should not be assumed to mean they are not entitled to overtime pay because, under the FLL, it is possible to claim overtime pay.

As per the provisions of the FLL, employers must establish work environments in accordance with the principles of worker safety and health. All employers have an obligation to prevent work-related stress by constantly evaluating the organizational environment and applying any necessary control measures.

Employees have the right to a Christmas bonus (‘Aguinaldo’) of at least fifteen days of their daily base salary. This must be paid by no later than December 20 each year.

If an employee wishes to resign, they must provide written notice to their employer at least 30 days before the termination date. In cases where there is mutual agreement between the employer and employee, there is no specific notice period required. The employment relationship will end on the date agreed upon by both parties.

Grounds

An employer can terminate an employment relationship without incurring any liability only under one of the justified causes established by law, as follows:

• use of false documentation to gain employment
• dishonest or violent behavior against the employer or the employer’s family
• dishonest or violent behavior against co-workers that disrupts work discipline
• acts of harassment or sexual harassment directed toward any person in the workplace
• sabotage of the workplace
• negligence
• carelessness that threatens the safety of the workplace and of other workers
• immoral acts in the workplace
• disclosure of trade secrets
• more than three unexcused absences in a 30-day period
• insubordination
• failure to adopt preventive measures or to follow procedures to avoid accidents or illnesses
• reporting to work under the influence of alcohol or narcotic drugs
• incarceration

Strictly, the employer cannot otherwise terminate the employment without cause. However, under Mexican labor law, “integrity at work” is mandatory behavior for the employee. An employee is deemed to act with integrity where work is carried out with intense effort, care and attention. It must be performed in the agreed-upon time, place and manner. “Lack of integrity” is a generic cause for dismissal in Mexico.

In practice, however, exposure under an unlawful termination lawsuit is mostly limited to the statutory termination payments. Therefore, most terminations can be implemented either through employee resignations or through a mutual termination (with severance).

Restricted or prohibited terminations 

If the employment relationship is at that time suspended (e.g., an employee on maternity leave), the termination will be considered a restricted or prohibited termination.

There is no statutory minimum notice period for terminating an employment relationship in Mexico. If the employer dismisses the employee, the employment termination will be effective immediately. However, the employer must notify the employee in writing of the cause or causes for the dismissal. If an employer terminates an employee under the justified causes established in article 47 of the FLL, the employer must notify the employee within 30 days of the cause or causes of the termination.

Garden leave is not a common practice in Mexico as the employer can terminate the employment relationship immediately.

The severance payment is calculated depending upon the cause of termination:

Voluntary resignation: The employer must pay the employee all benefits due (including sales incentives) on a prorated basis through the date of termination. If the employee has at least fifteen years of seniority, he or she is also entitled to a seniority premium of twelve days’ salary for each year of service. This is capped at twice the minimum daily salary in force.

Termination with cause: The employer must pay all benefits due (including commissions) on a prorated basis until the date of termination, as well as the seniority premium of twelve days of salary for each year of service. This has a cap of twice the minimum daily salary.

Termination without cause: Employees who are terminated without cause are legally entitled to a lump sum severance, as follows:
(1) three months of the employee’s daily aggregate salary, plus (2) 20 days of the employee’s daily aggregate salary for each year of service, plus (3) a seniority premium of twelve days’ salary for each year of service, with a cap of twice the minimum daily salary and (4) any benefits due.

The Mexican Constitution includes the general principle of “freedom of work,” whereby an individual cannot be prevented from working or performing a lawful activity unless there is a judgment stating otherwise issued by a competent court. Based on this, the generally accepted interpretation is that post termination non-compete obligations and in general restrictive covenants are not enforceable in Mexico. This interpretation does not change even if the obligation is limited to a certain period, territory, product or to identified competitors.

Post-termination non-compete, customer non-solicit and employee non-solicit clauses are therefore not enforceable. However, such provisions are often included in employment agreements because they can have a deterrent effect and even create a sense of moral obligation on the part of an employee.

Trade unions are prevalent in certain sectors, such as the sugar, railway, automotive and mining industries, as well as the public sector (especially education and energy). A union can be formed by at least 20 employees in a workplace. However, employees affiliated with an existing union can request, through that union, to sign a collective bargaining agreement with their employer. There are no works councils or other employee representatives in Mexico.

An employer must make all salary and statutory payments from an in-country bank account.

The process of issuing payslips to employees in Mexico is fully electronic. All payroll documents must go through a process before it can be issued to the employee. Namely, the electronic payslips must initially be submitted, validated and e-signed by the Mexican Tax Authority.
The payslip must contain personal and job information of the employee, the bank account number, tax ID (RFC), citizen ID (CURP), social security number, position, cost center, etc. It must also outline each wage type paid to the employee, including in the payment, perception, taxes withheld, other deductions and net to be paid. The amount must also match the amount sent from the employer’s account to the employee’s bank account.

All employees must enjoy vacation periods which cannot be less than 12 days per year for the first year. This will increase by 2 working days for each following year until the allowance reaches 20 vacation days. Thereafter, the vacation period increases by two days for every five years of service.

This will continue to increase by two days every five years.

In addition to this, employees in many states are entitled to a minimum of 25 percent of the salary earned during their holidays as a vacation bonus.

Note: Vacations must be approved at least 30 days in advance.

An employee has a statutory right to sick leave depending on the type of illness and degree of disability. In the case of illness or injury, an employee must obtain a doctor’s certificate. The Mexican Social Security Institute (IMSS), not the employer, pays the employee’s income during the leave.

Mexico legislation does not provide for a mandatory unpaid medical leave of absence. If the employee needs an unpaid medical leave of absence due to a condition not recognized by the IMSS, then the employer has the discretion to grant the leave.

The economic benefits paid by the IMSS due to illness are based on 60% of the employee’s registered salary. They are paid as of the fourth day of absence and up to 52 weeks.

There is no statutory regulation regulating leave in the event of a bereavement, although such a policy may be included in the individual contract.

Maternity Leave

Women have the right to six weeks of paid leave prior to the birth of a child and six weeks following the birth of a child. Women can allocate up to four of the six weeks of the pre-birth leave to the post-birth leave period. The salary during this period is paid by the IMSS.

During the nursing period of six months, the new mother is entitled to two additional thirty-minute rest periods per day.

Paternity Leave

A male employee is granted five business days of paid paternity leave when his spouse gives birth or if he adopts a child.

Adoption Leave

The FLL specifies women are entitled to a paid maternity leave of absence of six weeks after they gain custody of the adopted child. Fathers are entitled to a paid paternity leave of absence of five days following the adoption of a child.

There are nine mandated national public holidays each year. These include December 1 every six years (on the day of the national presidential inauguration) as well as the election day scheduled by federal and local electoral laws.

If employees are required to work on a mandatory holiday, they are entitled to double pay.