Navigating Employment Termination Laws in Mexico: A Guide for Businesses

Ending an employment relationship without adhering to Mexican law, particularly regarding compensation, can prove to be prohibitively expensive for employers. In Mexico, terminating an employee without just cause mandates payment of various compensations, including proportional Christmas and vacation bonuses, accrued but unused vacation days, three months’ salary, and an additional 20 days’ salary per year of service.

Employees with 15 or more years of service who retire voluntarily or are dismissed are entitled to compensation equivalent to 12 days of double the minimum wage per year of service.

It's crucial to note that unlike in some other countries, Mexico lacks government-sponsored or employer-sponsored unemployment insurance. Therefore, the only financial cushion for employees upon termination is the mandated 90-day severance pay. While this amount may seem substantial, the overall liability (assuming the employer acts within the bounds of the law and does not engage in negligent or illegal behavior) is considerably less than potential legal costs associated with defending unjustified terminations, fostering a hostile work environment, or facing harassment lawsuits in other jurisdictions.

Under specific conditions, employers can terminate employees without severance pay. Permissible grounds for termination without compensation include the completion of a project, expiration of a specified employment term, or reasons outlined in the Federal Labor Law, which enumerates justifiable causes for dismissal:

1. Providing false references regarding qualifications for the job.
2. Being found guilty of dishonest or dishonorable actions during employment.
3. Engaging in violence, threats, or mistreatment towards the employer, their family members, senior management, or fellow employees.
4. Committing acts listed under the workplace harassment policy.
5. Engaging in severe misconduct outside the workplace that renders fulfilling the employment contract impossible.
6. Intentionally causing damage to workplace property.
7. Negligently causing significant damage, solely due to negligence.
8. Negligently endangering workplace safety or individuals therein.
9. Engaging in immoral conduct at the workplace.
10. Revealing trade secrets or communicating proprietary information to sabotage business interests.
11. Unexcused absences exceeding three times in a thirty-day period.
12. Refusing to obey employer directives related to agreed-upon job duties.
13. Failing to follow prescribed safety procedures.
14. Reporting to work under the influence of alcohol or drugs unless prescribed and disclosed to the employer.
15. Receiving a final conviction resulting in imprisonment preventing fulfillment of employment obligations.
16. Physical or verbal violence and dishonesty towards clients or suppliers.
17. Sexual harassment against any individual in the workplace.
18. Failure to provide required documents for job performance within two months.
19. Other similarly serious reasons.

Employees dismissed with two or more years of service have the right to demand reinstatement. If successful, the employee can regain their position, receive back pay, and possibly obtain punitive damages. In cases of justified dismissal, the employer must provide written notification to the employee stating the termination date and reasons. Failure to provide written reasons can render the dismissal unjustified.

Mexico maintains a specialized labor tribunal to resolve disputes. Employees can file complaints with the tribunal, which seeks conciliation before initiating judicial proceedings.

Key considerations include:

1. Failure to notify the employee directly or through the tribunal renders the termination unjustified and null.
2. Employees can demand reinstatement or compensation within two months of termination.
3. Employers bear the burden of proving just cause for dismissal. Failure to do so may lead to a determination of unjustified dismissal by the tribunal.
4. During litigation, employee salaries accrue until the employer fulfills the tribunal's judgment or agreement. Salary accrual is capped at twelve months, after which the employee is entitled to monthly interest payments of 2% on an amount equal to fifteen months' salary, compounded at the time of payment.
5. Lawyers or litigants who unduly prolong labor trials may face fines of up to 1,000 daily wages (approximately USD 6,000).
6. The new law allows for additional forms of evidence in labor trials, such as videos, recordings, emails, and electronic devices.

In conclusion, understanding and adhering to Mexican labor laws regarding employment termination is essential for businesses to navigate potential legal complexities and financial obligations effectively. Compliance not only mitigates legal risks but also fosters a fair and respectful work environment for all parties involved.