Vol. 7, No. 3, No. 41. What South Carolina Lawyers Need to Know About Mexican Labor Law.

• Author: David E. Dubberly

South Carolina Lawyer

1995.

Vol. 7, No. 3, No. 41.

What South Carolina Lawyers Need to Know About Mexican Labor Law

41What South Carolina Lawyers Need to Know About Mexican Labor LawDavid E. DubberlyThanks to the recent North American Free Trade Agreement (NAFTA), South Carolina companies of all sizes are turning to legal counsel for advice on doing business in Mexico. Some compaines are small businesses interested only in exporting their products to Mexico for sale through one or two agents or distributors.

42Others are medium-sized companies exploring opportunities to set up manufacturing or marketing joint ventures with Mexican partners. Still others are large businesses in labor-intensive industries with established manufacturing operations in Asia that because of NAFTA are relocating those operations to Mexico, where industry relies heavily on American-made component parts.

Mexico's Federal Labor Law of 1970 (FLL) protects even the agent of a small South Carolina exporter. (FLL, Art. 285.) (Mexico's state governments do not have labor laws of their own.) How a joint venture is structured will determine whether the medium-sized client or its Mexican counterpart is responsible for employee relations and obligations. Accordingly, the FLL is one of the Mexican laws that should be discussed early in counselling all businesses interested in Mexico, not only large employers.

Labor issues are particularly important in Mexican business transactions because the NAFIA debate left many South Carolina executives with two incorrect impressions: first, that Mexican labor is inexpensive, and second, that the FLL is not enforced.

While the minimum wage for non-skilled workers in most of Mexico is only approximately $5 per day, many industrial employers pay two to three times the minimum. Benefits required by the FLL increase base wages 70 to 100%. Any potential for lower productivity and quality than clients are accustomed to in South Carolina must also be considered. Most importantly, however, the FLL dearly favors employees in all dealings with employers, placing many burdensome restrictions on employers. In fact, one of the opening provisions of the FLL requires that in case of doubt in the interpretation of the FLL, the interpretation most favorable to the employee shall prevail. (Art. 18.)

Labor issues are particularly important in Mexican business transactions because the NAFTA debate left many South Carolina executives with two incorrect impressions: first, that Mexican labor is inexpensive and, second, that the FLL is not enforced.Concerning enforcement, the North American Agreement on Labor Cooperation--the NAFTA side-agreement on labor demanded by President Bill Clinton as a condition of supporting NAFTA--has led to much more vigorous enforcement of the FLL. Also, in the wake of Mexico's currency crisis, there is considerable pressure to increase government revenues through greater enforcement of regulations, including labor regulations.

Following is a summary of the most important requirements of the FLL.

Individual Employment Relations

Establishing the Employment Relationship. Under the FLL, every employee not covered by a collective bargaining agreement is entitled to a "writing" stating the terms of his or her employment. The agreement is signed in duplicate. One copy is given to the employee. (Art. 24.) The agreement must contain a number of required terms, such as the work to be performed; the length of the work shift; and the salary with day and place of payment. (Art. 25.) The employer is responsible for executing the agreement. Absence of a signed agreement does not deprive workers of rights set forth in the statute. (Art. 26.)

Duration of the Relationship. In sharp contrast to our employment...