Mexico Federal Labor Law Changes for 2020

On May 1st of 2019, Mexico’s Ministry of Labor and Social Welfare posted in the Federal Official Gazette the much-expected Labor Reform which modifies a large number of provisions of interest for the country’s workers, unions, companies, and legal societies. This labor reform in Mexico comes from the requirements to be in compliance with the Annex 23-A of the USMCA labor chapter, highlighting topics such as young people joining the workforce, outsourcing, minimum wage, collective bargaining agreements, new union confederations, labor ministry, among others.

Starting this year, changes made in 2019  to the Mexican Federal Labor Law and other correlated labor laws will start their validation.  Here’s a summary of the new adjustments:     

•Administrative Work Authorities will start inspecting work centers more intensely and frequently. The goal is to supervise integral compliance of the law and occupational safety and health regulations (NOM’S STPS). Some of them include the Nom-035 and the most recent addition that began on January 1, 2020, NOM-036.

•The implementation of Conciliation Centers and the operation of two Labor Courts in Mexico will start on 10 states, which will lead the attention of labor disputes in two more official instances.

•With the start of Labor Courts, there will be no doubt as to the effect of the amendment to article 784 of the Federal Labor Law, which will create difficulties to defend the employer and obtain favorable results.

•The registration of new or revised collective labor contracts will be more rigorous and complicated.

•With the modification and/or addition to article 1A, section IV of the VAT law, companies using outsourcing or insourcing schemes (providers of own services), should coordinate their labor and tax advisors to assess the impact of said provision as for PTU, deduction of such item and accreditation of the respective VAT, with the purpose to determine whether or not they continue under these schemes.

•Companies that use outsourcing and insourcing schemes must also evaluate the new fiscal obligation of the 6% VAT withholding to the company that provides them with personnel, which, in addition to the previous point, will put them in the dilemma of keeping these schemes.

The purpose of this article is to inform and provide a brief description of the new changes regarding Labor Law in Mexico. If you have any questions or require additional information regarding the content, we recommend getting in touch with your legal advisor. 

By Barbachano Staff