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The Auto-Industry in USMCA’s Facility-Specific Rapid Response Mechanism | The Trading Room

14 May , 2021  

The Trading Room

The Rapid Response Mechanism

This week, two events related to the USMCA’s Facility-Specific Rapid Response Mechanism (RRM) were raised against the following companies in the auto industry:

  • Tridonex, located in Matamoros, Tamaulipas.
  • General Motors’ Facility located in Silao, Guanajuato.

Tridonex – A Rapid Response Petition

Per reports, on Monday the AFL-CIO filed, in conjunction with the Sindicato Internacional de Empleados de Servicios (SEIU), SNITIS, and Public Citizen, a Rapid Response petition against Tridonex, an auto-part manufacturer located in Matamoros, Tamaulipas (near Brownsville, Texas).

In brief, what allegedly happened?

According to the news reports, the petition claims that workers have been denied their right of freedom of association to create a new union because of the State government’s inactions. Also, the media reported that about 600 employees that sought to have a new union were fired last year.

Important Fact: Labor Law Implementation

Though the Mexican Labor Law reform on unions and collective bargaining matters is in force, its implementation is phased. Accordingly, the State of Tamaulipas will start to implement the reform by 2022.

What will happen next?

The Interagency Labor Committee for Monitoring and Enforcement (the “Committee”) will review the petition, per the interim guidelines, and has to decide within 30 (calendar) days whether or not there is sufficient, credible evidence of a denial of labor rights at said facility. If affirmative, the Committee will inform the USTR to trigger RRMs, requesting Mexico to review such denial of rights.

Per Article 31-A.4 USMCA, Mexico must be informed about this petition and/or review process. As a result, the Ministry of Economy, in conjunction with the Ministry of Labor, will proceed to investigate for internal purposes.

Conclusion

We highlight that the USTR has not yet requested Mexico to review the alleged denial of rights.

General Motors’ Silao Facility |The First Rapid Response Mechanism Case

On Thursday, the USTR announced that it had requested Mexico to review of Alleged Worker’s Rights Denial at General Motor’s Facility in Silao.

What does the request say?

The request claims that the workers at this facility are being denied the right of free association and collective bargaining. In particular, the US has concerns about the process regarding the vote on the collective bargaining agreement between GM and the Union; this process is known as (“legitimación” or “legitimization”).

The US is aware that the Mexican Ministry of Labor suspended the vote as a result of concerns about irregularities, including the destruction of ballots.

Given the above, the US requests Mexico to review “all actions and statements, by or on behalf of the Union or the Company, with respect to the legitimization process […]” including any action or statement against any worker’s right to a personal, free, and secret vote on the legitimization of the collective bargaining agreement.

Settlement of Customs Accounts

According to the Press Release, the USTR has requested the Secretary of the Treasury to suspend the final settlement of customs accounts related to entries of goods from GM’s Silao facility. If there is an agreement that there has been a denial of benefits, it is possible that goods from GM’s Silao facility will not enjoy preferential tariffs per USMCA.

The Reported Alleged Facts

According to the media, the Mexican Ministry of Labor on Wednesday ordered to reinstate the legitimization process on Wednesday 12th of May (just one day before the USTR’s request!).

Also, we share the following reports:

  • It is allegedly reported that threats were made to workers against the collective bargaining agreement and that their votes were destroyed and replaced with votes in favor of the agreement. (May 12, Reforma)
  • Ministry of Labor detected destroyed ballots that were not used. (April 23, Reforma)
  • When requested the ballots, the Union rejected to provide said documents to the Ministry of Labor. (April 23, Reforma)
  • The Union claims that the authorities did not provide adequate conditions for the voting process. (April 23, Reforma)
  • The Ministry of Labor filed a criminal complaint before the Attorney General Office of the State. (May 11th, Reforma).
  • The Union (“Miguel Trujillo Lopez”) is controlled by a former Senator and is a member of the CTM (a confederation of unions with strong political influence).
  • Interestingly, it is was also reported that workers in GM’s Silao facilities were seeking to create a new union in 2019 and that one of its leaders was fired in that year. (May 13, Reforma).

GM’s Press Release

GM stated that it did not have any involvement in any alleged labor violations and that it will cooperate with the US and Mexican authorities.

What’s next in the Rapid Response Mechanism?

Mexico has 10 days to accept the USTR’s request to review the alleged denial of rights per the RRM. The government of Mexico issued a press release stating that it will start reviewing (internally) the case, but we expect Mexico to formally engage in the RRM process and, thus, Mexico will eventually have to share its findings within 45 (calendar) days since USTR’s request.

For more information about the process, see our Rapid Response Mechanism flow chart and our presentations:

What can we expect?

Interestingly, Katherine Tai, head of the USTR, congratulated yesterday Mexico for “stepping in when it became aware of voting irregularities earlier this year”. If Mexico’s course of action is implemented successfully, it is possible that the USTR agrees with the remedial actions and, thus, GM’s Silao goods continue to enjoy preferential tariffs.

VTZ comment

In VTZ, we believe that these are the first of many labor cases. Katherine Tai is a strong “enforcement” advocate and promoter of the rapid response mechanism. Therefore, it is imperative for Mexican companies covered by the rapid response mechanism, such as in the manufacturing industry, not to interfere with their workers’ rights of freedom of association and collective bargaining, but also to cooperate with the labor authorities as appropriate. Failure to do so, the USTR may initiate the rapid response mechanism, jeopardizing preferential tariff treatment per USMCA.

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Doing Business in Mexico, English

Labor and Migration in Mexico

24 Aug , 2020  

Labor, Employment, Assembly, Migration, Mexican Lawyers, USMCA, Manufacturing

Our seventh chapter of Doing Business in Mexico, Labor and Migration in Mexico, will provide a general overview of the relevant labor law provisions on employment, from worker rights, dismissals to unions and collective bargaining, including a brief summary regarding the USMCA, the rapid response mechanism, as well as information on migration.

This Chapter includes the following sections:

  1. Labor and Migration Environment
  2. Individual Employment Agreements
  3. Foreign Employees
  4. Outsourcing
  5. Salary and Wages
    1. Over-working hours
    2. Rest Day
    3. Labor Rights and Premiums
  6. Termination of Employment
  7. USMCA Labor Chapter
    1. Publications
    2. Labor Chapter and its Enforcement Mechanism
  8. Labor Mexican Amendment: Unions and Collective Bargaining
  9. Migration Matters
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Labor and Migration Sample [647.00 KB]

Labor and Migration Environment

Mexico’s labor framework is set forth in the Constitution and the Federal Labor Law (hereon “Labor Law”). Accordingly, a “job” or “working relation” is defined as rendering of a subordinated personal service to another person in exchange for a wage.[1] The job definition is quite broad because any person that renders a subordinated service to another, who in turn pays compensation, is deemed as an employee, regardless of the nature of the service performed, and he or she is entitled to labor rights.

Pursuant to the Labor Law, workers are entitled to numerous rights. Employees are entitled, for instance, to profit sharing, which can only be dismissed in a limited number of cases. If a worker is terminated without a justified cause, he or she is entitled to seek job reinstatement or severance pay. Indeed, foreign investors perceive Mexican Labor Law as “overprotective” and costly, as noted in WEF’s Global Competitiveness Index 2019

In addition to the Labor Law, Mexico has the following labor-related laws or regulations that complete its regulatory framework:

  • Social Security Law,
  • Retirement Savings System Law,
  • Institute of the National Housing Fund for Workers Law (INFONAVIT Law),
  • Federal Regulation on the Safety, Hygiene, and Environment at the Workplace,
  • The Mandatory Standard NOM-035-STPS-2018 on Psychosocial Risk Factors at Work – Identification, Analysis, and Prevention,[2] establishing the elements to identify, analyze and prevent psychosocial risk factors, as well as to promote an environment organizational support in the workplace.

The employers are required to register all of their employees before Mexican public institutions, namely the Mexican Social Security Institution (IMSS, acronym in Spanish), the National Housing Fund for Workers (INFONAVIT, acronym in Spanish) and the National Fund Institute for Workers’ Expenditures (FONACOT, acronym in Spanish). As a result, an employer has to pay “social-taxes” to these agencies. Failing to register or make timely payments regarding these social-taxes, the employer is subject to penalties and surcharges.

Also, the employer will have to register before the tax or treasury authority of the State (i.e. local authority).  States collect a Payroll tax that is paid by the employer based on wages and other expenditures. 

Individual Employment Agreements

As a general rule, the Labor Law establishes that an individual employment agreement duration is indefinite (i.e. permanent). Temporary contracts are permitted, however, only when there is a justified cause, such as probationary periods, initial training, among other situations. The employer has the legal duty to have a copy of the agreement.

Foreign Employees

Mexican employers may hire foreign employees. However, the Labor Law provides that employers must comply… Continue reading.

Outsourcing

Outsourcing labor legal schemes are carefully regulated to prevent their abusive use against employees and their labor rights. The 2012 labor reform[3] introduced the “outsourcing or subcontracting regime”, including two very relevant provisions. In essence, a labor-intensive service agreement, for instance, may have far-reaching legal consequences to the extent of deeming service provider’s workers as employees of the contracting company.

In essence, the Labor Law considers that outsourcing entails a “contractor” (i.e. outsourcing company) that performs work or provides services to a “beneficiary”, an individual or enterprise. The beneficiary sets the tasks and supervises the development and execution of the contracted work. In turn, the outsourcing company will carry the services or work with his own employees.

An outsourcing company is responsible for all labor obligations, including social security and tax regarding, his employees. Needless to say, the beneficiary of the outsourcing services is jointly liable in the event that the outsourcing company fails to fulfill its labor obligations (including tax and social security).

The Labor Law considers, for instance, “human resources” companies (e.g. head-hunters) as….Continue reading.

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[1] Article 20 of the Labor Law.

[2] Published on October 23, 2018, in the Official Gazette.

[3] Amendments to Labor Law published on November 30, 2012 and being effective as of December 1, 2012.

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English, News

Labor and Trade: USMCA Labor Chapter

2 Jun , 2020  

USMBA webinar, trade and labor, USMCA, comercio y laboral, VTZ, despacho de abogados comercio internacional

USMCA’s Labor & Trade Relevant Materials

Welcome, thank you for attending the USMBA’s webinar on “Labor & Trade: Is Mexico Ready for the Labor Chapter?.” VTZ law firm has prepared the following parallel and supporting material so that you can review it during or after this event.

 

USMCA Labor Chapter: Labor Dispute Flowchart and Other Proceedings

USMCA Text

English

If you want to see a markup of the labor chapter, you can review the document made by Professor Kathleen Claussen.

 

USMCA”Labor” Texts in Spanish – Texto TMEC

Mark-up of USMCA’s text (in Spanish) made by our Jr. Partner, Emilio Arteaga, available through google docs:

  • Capítulo 23 – Laboral Integrado
  • Capítulo 31 – Solución de Controversisas Integrado
  • Anexo 31 – A  (Mexico-EEUU) – Texto

 

USMCA Implementation Act: US Congress

To access the US-Mexico-Canada Implementation Act, click the following link: USMCA Implementation Act

 

USMCA Labor Chapter: An Introduction.

USMCA Labor Chapter

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English, News

Trade & COVID-19 – THE TRADING ROOM: AN ECONOMIC NEWSLETTER

29 May , 2020  

Trade Balance, Mexico, Exports, Imports, COVID-19, USMBA, USMCA

Trade & COVID-19

(PDF Version)

The National Institute of Statistics, Geography, and Information (INEGI) released on Monday the data on Mexico’s trade balance during April 2020. According to the figures, Mexico’s trade balance had a trade deficit of 3,087 million dollars during  April. Compared with the same month of the previous year, INEGI reported that Mexico had a surplus of $ 1.51 billion.

This negative monthly performance is, of course, explained due to the measures implemented by the COVID-19 pandemic, both nationally and internationally.

Mexican Trade Balance, April 2020, INEGI

 

The monthly deficit of the Mexican trade balance is explained by the annual decline in exports of 40.9%, this has been the worst drop in the indicator since 1986. When comparing to April 2019, oil and non-oil exports decreased by 66.4% and 39.4%, respectively.

Among non-oil exports, the following data stand out:

1. Export Destination

Exports to the United States decreased by 40.7%, while those directed to the rest of the world decreased by 33.4%.

On this, Fernando Ruiz Duarte, general director of the Mexican Business Council of Foreign Trade, Investment, and Technology (COMCE), commented “the April figures were already expected since around 80% of sales abroad are directed to the United States and its economy was practically paralyzed, so it is logical that exports decrease. ” He also called for the need to diversify export markets.

2. Manufacturing Industry

The other noteworthy data is that exports from the manufacturing industry decreased by 41.9%, whereby 79.1% correspond to the automotive industry and 20.9 % correspond to non-automotive manufacturing exports decreased.

3. Imports

Imports decreased by 30.5% when compared to the figures in April 2019. According to the type of goods,  consumer goods, intermediate-use goods, and capital goods decreased by 46.5%, 28.1%, and 26.7%, respectively.

Source: https://www.inegi.org.mx/contenidos/saladeprensa/boletines/2020/balcom_o/balcom_o2020_05.pdf

Webinar USMCA Labor Chapter & Trade

Just another friendly reminder that on June 2nd, 2020, the free webinar on “Labor & Trade: Is Mexico ready for USMCA’s Labor Chapter?” will take place organized by the US-Mexico Bar Association, in conjunction with VTZ.

The Panel will be made up of Ricardo Aranda from the Ministry of Economy, Gabriela Peregrina from DeForest Abogados, Olga Torres from Torres Law and will be moderated by our Jr. partner Emilio Arteaga. The members of the panel will discuss the results of USMCA’s labor chapter, the rapid response mechanism as well as whether there is any other labor-related risk to Mexico-US international trade relation.

Register to the Webinar: https://docs.google.com/forms/d/e/1FAIpQLSfFxcD_hJCmCFAGuBhj2YdbYeHU8Gf6el5cKC67x1hYy-gslQ/viewform

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