Labor considerations in light of COVID-19 in Mexico: Salary & Health Contingency

Due to the recently declared pandemic due to the coronavirus called "COVID-19" worldwide and the current situation in our country, it is important to analyze the employment situation and the possible consequences to consider with respect to salary and a health contingency.

Article 427 of the Mexican Federal Labor Law (Ley Federal del Trabajo) provides, amongst others, the following causes of temporary suspension of employment relationships: (i) acts of god or force majeure not attributable to the employer, or his physical or mental disability or his death, which produces as a necessary, immediate and direct consequence, the suspension of work; (ii) the lack of funds and the impossibility of obtaining them for the normal continuation of the work, if it is fully verified by the employer; and (iii) the suspension of work, declared by the competent health authority, in cases of health contingency.

Furthermore, article 429 of the aforementioned law provides the rules applicable to such suspension, which must be notified to the competent authority, except in the case of a health contingency, in which case the employer will not require any approval or authorization but will be obliged to pay its employees compensation equivalent to one day of the current general minimum wage, for each day the suspension lasts, without exceeding one month. In this case, the employees will be obliged to resume their work as soon as the health contingency ends.

It should be mentioned that, any preventive policy that is established by the employer (i.e. home office, reduction of labor hours, etc.) must be remunerated in accordance with the provisions of the individual employment agreement and must not violate the rights of the employees since any modification to their current working conditions could affect the employer in terms of the provisions of the Federal Labor Law.

It will be necessary to review the situation of each company on a case-by-case scenario and review the contractual terms and conditions with the employees and the union -if any- in order to take a preventive action considering the current situation in Mexico.

In any case, it should be considered that any termination of the labor relationship today, without justified cause, would result in the payment by the employer of the compensation provided for in the Federal Labor Law.

Finally, it is important to mention that in the event that the employer is in a situation of dissolution and liquidation or bankruptcy filing (concurso mercantil) –with respect to corporations– must comply with the labor and tax obligations at all times in accordance with the applicable legal provisions.