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Federal Labor Law - OUTSOURCING, SUBCONTRACTING, SHELTER OPERATIONS
 

 

Lic. Glenn L. McBride
Mexican Attorney

BULLETIN - LABOR REFORM

OUTSOURCING AND SUBCONTRACTING OF PERSONNEL

All persons or companies that have employees and/or subcontract the services of personnel should be informed of the new regulation in the Federal Labor Law for outsourcing and subcontracting and avoid noncompliance to their labor obligations.

The changes in the Labor Law for subcontracting are the result of some abuses from the companies that provide personnel and companies that contract outsourcing services to avoid labor obligations, taxes, benefits, social security, etc.

Subcontracting is defined as an Employer, referred to as the Contractor, who executes works or services with their own subordinate workers for a Contracting party that can be an individual or company who sets the tasks of the Contractor and supervises the execution of the services or the works that are contracted. In order for this type of relationship to exist, it is obligatory to comply with the following conditions:

1. The activities of the subcontractor cannot be equal to or similar to the activities carried out in the workplace.

2. The subcontracting relationship must be justified by the specialized character of the work or service performed.

3. It cannot include tasks that are equal or similar to those that are performed by the rest of the workers in the service of the Contracting party.

When the preceding conditions are not met, the new article 15-A of the Federal Labor law stipulates that the Contracting party, the beneficiary of the services, will be considered the Employer for all the effects of the Law, including Social Security obligations, profit sharing, etc.

And the reformed Article 13 states:

“Article 13.  Established companies that contract work using their own materials sufficient enough in quantity to qualify for the obligations inherent in labor relations, will not be considered intermediaries, but employers.  In case of a conflict, they will be jointly responsible with the direct beneficiaries of the labors and services for the obligations contracted with the workers.”

The contract that is entered into for the subcontracting of the rendering of services must be in writing.

In addition the following obligations are established for the Company that is subcontracting the services of personnel.

1. At the moment of execution of the contract, it must be verified that the Contractor has the documentation and elements to comply with all the labor obligations derived from their workers (R.F.C., Social Security, INFONAVIT, and all labor benefits).  Companies that are using the services of Subcontractors must have a clear and concise written policy for subcontractors.

2. The contracting company must also verify that the Contractor complies with health and safety and environmental standards as they relate to the personnel of the Contractor.  (health and safety documentation, training, personal protective equipment, medical examinations, etc.)

The fine for the Contracting company for not having a written contract and verifying compliance to the labor obligations of the Contractor is 250 to 2,500 times the daily minimum wage. This fine can be multiplied times the number of workers affected.

“Malicious” subcontracting (subcontratación dolosa) is prohibited. This is defined as when the Contracting party transfers deliberately his workers to the subcontractor for the purpose of diminishing labor rights; in this case, the parties are liable for a fine of 2,500 to 5,000 times the minimum general wage for every affected worker.

The other situation addressed in the reforms to the labor law is the situation where affiliated companies, such as Shelter operations, where one company provides the capital, equipment, raw materials, or the commercial distribution of goods and services, but has no personnel of its own, and another that provides the workers. The services provided include the totality of activities and there is no specialization character; consequently, the contracting party is considered the Employer for all the applicable legal effects.

I think I should remind the reader that Article 14 of the Mexican Constitution states that “no Law will be applied retroactively to the detriment of any person.” Companies that find themselves not in compliance with the reforms to the Labor law that took effect Dec. 1, 2012 should bring themselves into compliance in a reasonable amount of time. After a very detailed review of the reforms, I have found several errors that depending on their application could provide an argument for the unconstitutional nature of the reforms.

I should also remind the reader that the concept of joint responsibility has already been established in the Social Security law and that this reform to the Labor law was an update of the current law to coincide with the practice and obligations of other laws.

 

THE MEXICAN FEDERAL LABOR LAW

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MAJOR REFORMS TO THE FEDERAL LABOR LAW WERE PUBLISHED NOVEMBER 30, 2012 IN THE DOF - They took effect on December 1, 2012 - Our updated translation is now available.

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