Enacted on May 1, 1970, the Mexican Labor Act (the “MLA”) governs all labor relations in Mexico falling under the scope of article 123, section A, of the Federal Constitution (which refers to private employment as opposed to bureaucratic employment). The spirit of the law is to provide protection to employees and this explains the basis for numerous provisions of restrictive and prohibitive nature.
A Few Keynotes on Mexican Labor Law
by Moises GonzalezSantillan
Enacted on May 1, 1970, the Mexican Labor Act (the “MLA”) governs all labor relations in Mexico
falling under the scope of article 123, section A, of the Federal Constitution (which refers to private employment
as opposed to bureaucratic employment). The spirit of the law is to provide protection to employees and this
explains the basis for numerous provisions of restrictive and prohibitive nature.
Article123 of the Mexican Constitution provides that the MLA shall apply to any employment
relationship in Mexico, regardless of the nationality of the employer or employee, the place of execution of the
activities or where wages are paid.
Under the MLA an employment relationship is deemed to exist whenever there is subordination of one
party (employee) against payment of consideration (wage) by the other party (employer, whether in the form
of a corporate entity or natural person). Once an employment relationship is established the provisions of the
MLA will automatically apply, regardless of how the agreement is characterized by the parties.
Once an employment relationship is deemed to exist, jurisdiction is immediately vested upon the Labor
Boards (Juntas de Conciliación y Arbitraje) which will in turn adjudicate any employment conflict (whether of
individual or collective nature) according to the provisions of the MLA. If an employment relationship is
deemed to exist for services rendered in Mexico, jurisdiction and governing law may not be waived.
Under the MLA, employment relationships are of bilateral nature and thus, amendment to employment
conditions by the employer entitles an employee to terminate the employment with liability onto the employer.
The MLA affords all employees rendering services in Mexico (again, regardless of nationality) certain
non‐waivable rights. The MLA explicitly provides that employees are entitled to the following non‐waivable
fringe benefits per full year of employment (“Accrued Benefits”):
a Christmas bonus equal to at least 15 days worth of wages, payable prior to December 20 of each
a yearly vacation period, the length of which depends on the worker’s seniority (6 days of paid
vacation for the first full year of services rendered);
a vacation premium equal to 25% of the salary payable to the worker during the vacation period;
mandatory paid holidays .
Furthermore, employers in Mexico are obligated to distribute 10% of their net profits among their
employees as statutory profit sharing.
Unlike many other countries where employment‐at‐will is the general rule, in Mexico the MLA aims for
stability in the employment. An employer in Mexico may dismiss an employee without liability only if there is a
cause for dismissal.
An employer may dismiss an employee for cause without liability onto the employer only if there is a
statutory cause for doing so in accordance with the MLA (a so‐called termination with cause). It should be
noted that the MLA is rather stringent in the manner of substantiating and having document support for a
termination with cause and imposes the burden of proof onto the employer.
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In other words, while two persons may engage into an independent contractor agreement in order to prevent the MLA from applying, a
Labor Board could overturn the existence of such independent engagement and determine the existence of an employment relationship thus,
triggering the application of the MLA.
Labor Boards are administrative courts vested with jurisdiction to administer collective and individual labor claims.
Mandatory holidays are January 1, February 5, March 21, May 1, September 16, November 20, December 1 (every six years for election of
President) and December 25.
A Few Keynotes on Mexican Labor Law
The MLA lists the following specific events as grounds for dismissal with cause and thus, with no
liability onto the employer:
use of false documents, credentials or referrals to secure employment;
dishonest or violent behavior at the workplace;
dishonest or violent behavior against co‐workers producing a disruption of discipline at work;
threats, insults or violent behavior to the employer or the employer’s family members (inside or
outside the working facility), unless provoked or acting in self‐defense;
intentional damage to the employer's property;
negligently causing serious damage to the employer's property;
carelessly threatening workplace safety;
immoral behavior at the workplace;
disclosure of trade secrets or confidential information;
more than three unjustified absences within a thirty‐day period;
disobeying the employer without just cause;
failure to follow safety procedures;
reporting to work under the influence of alcohol or non‐prescription drugs;
a criminal conviction; or
commission of other acts of similar severity to those described above.
In addition to the above, management personnel may be dismissed with cause if the employer has
reasonable grounds for having lost confidence in the employee.
The employer’s right to dismiss an employee with cause expires 30 calendar days following the date on
which the employer becomes aware of the statutory grounds for the dismissal.
Notwithstanding any termination with cause, an employee may appeal any such dismissal before the
Labor Boards within 2 months of dismissal. The burden of proof relies on the employer at all times to properly
substantiate that the employee engaged in one or more of the conducts listed in the MLA for a dismissal with
cause. If the employer fails to meet this burden, the Labor Boards will render the dismissal to have occurred
without cause and the employee can then seek judgment for (a) reinstatement to the former employment, or (b)
a so‐called Constitutional severance. Furthermore, if the Labor Board finds that the employer has failed to meet
its burden of proof and therefore, renders the dismissal to have occurred without cause, the employer will also
be required to pay wages accruing during the course of the litigation.
By statute, a Constitutional severance is comprised by the following items:
3 months worth of consolidated salary ;
20 days of consolidated salary for each year of service ;
seniority premium consisting of 12 days of salary for each year of service , and
Accrued Benefits calculated on a pro‐rata basis (in other words, the pro‐rata portion applicable to
the portion of the year worked until the date of dismissal).
The trend is to negotiate the amount of severance to which an employee is entitled to when a need for
dismissal exists. In these instances, the employer should make sure to secure a resignation letter from the
employee (witnessed accordingly by two working peers) and whenever time permits, cause the employee to
enter into a release covenant and passed before the Labor Boards. The resignation letter should suffice as a
means to prevent any employee from asserting a future claim against the employer for severance or other type
For the purposes of computing severance, salary will include not only base salary but any and all benefits afforded to the employee whether
in cash or kind such as bonuses, premiums, aides, commissions and any other fringe benefits afforded by the employer to the employee such
as food coupons, etc.
This item will be triggered only if the claim is for reinstatement on the job and the employer refuses to do so.
Salary for purposes of calculating seniority premium is capped to twice the minimum salary applicable in the area where employment is