Mexico Enforces Employer Penalties for Unjustified Layoffs

Recently the Mexican government demanded employers not layoff their employees ‘unjustifiably,’ meaning regardless of hardships due to the pandemic. The implication is the government will enact strict measures for companies that do not comply. If an employer decides to dismiss an employee with an unjustified reason, or if dismissal is due to a company’s severe financial hardship, the company must pay the employee:

• 3 months of the worker’s integrated salary, plus
• 20 days of integrated daily wage for each year of the worker’s service^*, plus
• 12 days per year of the worker’s service, considering for the latter case a maximum daily wage of twice the minimum monthly salary of the place where the worker provides his services.
• Days worked after the last paid payroll period.
• Days of vacation not taken.
• Vacation premium and Christmas bonus.

A list of reasons for justified termination are at the end of this article.

Wage and salary reductions

In the matter of reducing wages and salaries during the pandemic, an agreement must be reached between the employer, the employee and the Union (if in place), regarding the method of salary reduction, including but not limited to:

• Taking vacations during the contingency.
• Reduction of working hours, and therefore reduction in their payment.
• Reduction of income and cancellation of benefits.
• Reductions in salary according to the worker’s income.
• Working remotely or home office.

The minimum general monthly salary in Mexico is 3,749 MxP (USD $164), and in the Northern Border Free Zone, it is 5,567 MxP (USD $243). Employee agreements cannot factor in salaries lower than these amounts.

Employer support

The Mexican Social Security Institute (IMSS) established the following measures to support employers:

• At the employers’ request, the IMSS may grant an extension for the payment of the Employer contributions for up to 48 months and must agree to pay in installments, paying an initial amount of 20% of what is due.
• Defer contributions for full periods owed of retirement and unemployment insurance in advanced age and old age.
• No guarantee will be required for the subscription of the agreements for payment in installments and deferred payment.
• The deferral term comes with interest rate options:
  • Up to 12 months at 1.26%
  • From 12 to 24 months at 1.53%
  • From 24 to 48 months at 1.82%
• The granting, processing and payment of work permits is facilitated through non-on-site mechanisms for employees affected by the COVID-19 virus.

Employees who should stay away from the workplace

The Secretariat of Labor and Social Prevision (STPS) established that workers fitting the following descriptions should not show up at a physical work location:

• Over 65 years of age.
• Pregnant or lactating women.
• People with disabilities or chronic non-communicable diseases (such as high blood pressure, lung disease, kidney failure, lupus, cancer, diabetes mellitus, obesity, liver or metabolic failure, or heart disease).
• Or anyone with a compromised immune system, even when employed by an essential business.

Reasons for Justified Termination

Under a justified termination, the employer has no obligation to pay any severance to the employee. The only justified reasons to terminate an employee are:

• For the employee’s deception regarding their capabilities or qualifications.
• For acts of dishonesty, violence, threats, insults, or ill-treatment against the employer, his family or management, or administrative staff of the company or establishment, or against the employer’s customers, suppliers, or coworkers.
• By intentionally causing material damage through their work performance.
• By causing damages to the facilities, inventory, machinery, instruments, raw materials, and other work-related objects.
• By compromising, by recklessness or inexcusable carelessness, the security of the establishment or persons therein.
• For committing immoral acts or harassment and/or sexual harassment against any person in the establishment or workplace.
• For disclosure of trade secrets or disclosure of confidential matters, to the detriment of the employer.
• For being absent more than three times in a period of thirty days, without the employer’s permission or justified cause.
• For refusing to take preventive measures or to follow the procedures indicated to avoid accidents or illness.
• Coming to work while intoxicated or under the influence of any narcotic or enervating drug unless it had been prescribed by the doctor.
• Due to the imposition of a prison sentence on the worker, thereby prohibiting the worker from fulfilling the terms of their employment.
• The lack of required legal and regulatory documents.

Contact us if you would like answers to more of your questions about employee benefits in Mexico. We will put you in touch with Asinta’s Mexican Partner Intertec.

* The 20 days of compensation per year can be negotiated with the collaborator and agreed upon by both parties.