MEXICO: An Introduction to Labour & Employment

Ongoing Reform of the Mexican Labour Law Landscape

The Mexican labour law landscape regulates employer‒employee relations nationwide. Since 2012, it has seen significant changes, as successive governments and political parties have used labour reforms as key elements in their electoral campaigns ‒ either by promoting workers’ rights to gain support or by implementing measures that align with their broader political and economic agendas.

Further changes are expected in 2025. These will present challenges for employers, who must continuously adapt and ensure compliance by proactively strengthening their compliance strategies, enhancing internal audits, and maintaining proper documentation to mitigate legal risks and avoid costly sanctions.

Moreover, social media also plays a key role in raising awareness of employee rights and legal changes, increasing pressure on employers. However, it can also lead to misinformation, as not all content shared on social media is accurate.

Furthermore, there has been a growing trend in discrimination-related complaints, requiring employers to implement stronger preventative measures. There has also been a notable increase in employee empowerment, leading to a rise in complaints of this nature.

2019 reform – labour justice

One of the most significant amendments occurred in 2019, driven by Mexico’s commitments under the United States–Mexico–Canada Agreement (USMCA). The following were among the key changes.

• New labour justice system ‒ labour courts replaced the Conciliation and Arbitration Boards. A new process was introduced, requiring mandatory conciliation before the Conciliation Center, except for specific cases (eg, discrimination claims). If no agreement is reached, disputes proceed to labour courts via a formal lawsuit.
• Freedom of association and union transparency ‒ employee rights and collective bargaining have been strengthened, influenced by the USMCA and International Labour Organization (ILO). New consultation rules for collective bargaining were implemented, alongside measures for greater union transparency. Nowadays, unions are required to be more active and engaged with their members to maintain their support.
• Federal Conciliation and Labour Registry Center ‒ a new public registry was created to ensure transparency, covering collective bargaining agreements (CBAs), internal work regulations, and union information (including by-laws).

Subsequent key reforms in recent years (2021 ‒24)

The COVID-19 pandemic sparked significant changes in work organisation in Mexico, leading to new telework regulations in the Federal Labour Law (FLL) in 2021. The goal was to formalise remote work and establish clear rights and obligations for employers and employees alike. Employers are now required to provide necessary tools for remote work, cover proportional internet and electricity costs, respect employees’ right to digital disconnection, supply ergonomic chairs, and ensure health and safety standards. To reinforce these changes, the government also enacted a specific standard (NOM-037), setting out detailed health and safety requirements for teleworking.

But that was just the beginning. In April 2021, the Mexican government introduced major reforms to address labour abuses and address the informality in employment, as well as addressing non-compliance with labour, tax, and social security obligations. The reforms reshaped the landscape of outsourcing and insourcing, imposing stricter rules on subcontracting. Now, subcontracting is only allowed for specialised activities ‒ including shared services or back-office functions ‒ that are not part of a company’s core business.

Service providers must now register with the Ministry of Labour (Secretaría del Trabajo y Previsión Social, or STPS) and renew their registration on the Register of Providers of Specialised Services or Works (Registro de Prestadoras de Servicios Especializados u Obras Especializadas, or REPSE) every three years. Non-compliance can result in severe penalties, including substantial fines, no tax effects, and even the classification of non-compliance as tax fraud.

Moreover, a new cap on profit-sharing was introduced as part of the subcontracting reform: up to three months of an employee’s salary or the average profit-sharing amount received in the past three years (whichever is more favourable to employees). This measure was part of negotiations between the government, employer sector, and worker representatives and was aimed at reducing outsourcing and insourcing practices.

In 2023, further reforms were made to FLL, increasing vacation entitlements to improve working conditions. Prior to this reform, employees were entitled to only six vacation days, positioning Mexico as one of the countries with the least vacation days.

Then, in 2024, further amendments to FLL were introduced ‒ for example, the “Chair Law”, which requires employers to provide chairs with backrests for employees during shifts. Additionally, the Digital Platform Workers Reform recognises an employment relationship for digital workers in specific cases. These reforms reflect the ongoing evolution of Mexico’s labour laws, aligning with global trends and the demands of a modern workforce.

What’s next

Several significant reform initiatives that could reshape labour relations and employer obligations are being considered in the labour agenda of new Mexican President Claudia Sheinbaum (2024‒30).

One major proposal is a significant increase in the minimum wage, aiming to cover 2.5 canasta básica (“market baskets”, representing the minimum cost of living in Mexico) by 2030, with annual increases always above inflation. This will have a considerable impact on companies, requiring salary adjustments and influencing CBA negotiations.

Additionally, Sheinbaum indicated that one of her priorities is to reduce labour informality, focusing on digital platform workers. The goal is to make social security mandatory for this sector and require platform owners to assume social security and employer responsibilities. Just days after taking office, Sheinbaum enacted this reform.

In the medium and long term, Sheinbaum is expected to push for pending reforms presented in Congress, such as:

• reduction of the weekly work shift from 48 to 40 hours;
• increase in minimum mandatory benefits, including:
  • Christmas bonus;
  • vacation bonus;
  • extend paternity leave; and
  • seniority premium
• hiring quotas ‒ companies with more than 20 employees may be required to hire a certain percentage of workers over 60 years old; and
• gender pay gap measures ‒ implementation of policies aimed at reducing gender-based wage disparities in the workforce.

These reforms, if implemented, will have significant implications for businesses in Mexico. Employers will need to reassess budgets, review internal policies, and prepare for higher labour costs. More frequent inspections by the Ministry of Labour and stricter enforcement of laws will make compliance a priority.

Furthermore, the political landscape in the USA will play a crucial role in shaping labour policies in Mexico. With Donald Trump as US President and strong economic ties between both countries, monitoring shifts in trade agreements, foreign investment policies and labour compliance standards will be crucial, especially for multinational companies.

Potential impact of judicial reform

The Judicial Reform, introducing the popular election of judges and magistrates, could significantly impact labour justice. Among the concerns expressed by different sectors, we identified the following issues:

• newly elected officials may lack the specialised training required for labour trials;
• a potential delay on case resolutions; and
• impact on the quality of ruling.

Increase in collective dispute

We have observed a growing trend of more complex CBA negotiations and strikes. This is a result of the 2019 reform, which strengthens workers’ rights and union transparency. Additionally, there is increasing international pressure ‒ particularly with regard to the mechanisms established by the USMCA, which have been triggered against Mexico in response to complaints.

Conclusion

Recent labour reforms and initiatives in Mexico reflect a shift towards greater employee protection, increased benefits, and stricter employer obligations. Additionally, the political landscape, the new President’s labour agenda, and international pressure have created some uncertainty ‒ along with the need for constant updates.

As a result, companies must be prepared to respond efficiently and strategically by implementing robust compliance strategies and maintaining proper documentation.