On March 31, 2020, the Federal Ministry of Public Health (”SSP”) published in the Official Gazette of the Federation (”DOF”) the agreement by which it established the general suspension of non-essential activities in the country from March 30 to April 30, 2020, as an extraordinary action to address the health emergency and mitigate the spread and transmission of the COVID-19 virus (”Agreement”). In the Agreement, the SSP generically defined the activities considered to be “essential” to address the health emergency, as well as the sectors that are considered fundamental to the economy, which may continue to operate under certain guidelines. To see the full list of these activities/sectors, please go to the following link:

Www.dof.gob.mx/Agreement

On April 6, 2020, the SSP published an additional agreement in the DOF in which it defined “technical guidelines” related to the activities described in subparagraphs c) and e) of section II of Article One of the Agreement. This agreement defined, among other things, that “companies whose suspension may have an irreversible effect on their operation” should be understood as those dedicated to the production of steel, cement and glass, as well as to developing information technology services that guarantee the continuity of computer systems in the public, private and social sectors. They may maintain a minimum activity that avoids irreversible effects on their continuation. In the first 3 cases (i), companies must submit a notice to the Ministry of Economy (”IF”) within 24 hours after the publication of the agreement (that is, no later than today, April 7, 2020); and (ii) companies that have current contracts with the Federal Government may continue to operate as required to fulfill short-term commitments exclusively for the Dos Bocas, Tren Maya, Felipe Ángeles Airport, Transismic Corridor projects; as well as existing contracts considered indispensable for PEMEX and CFE.

This agreement also defines that (i) the “messaging services” referred to in the Agreement include companies and e-commerce platforms; (ii) coal mines may maintain a minimum activity in order to meet the demand of the CFE. These companies must also submit the above-mentioned notice to the SE, within the same 24-hour period; and (iii) in all cases, companies must comply with the guidelines and safety measures ordered by the health authorities. The agreement referred to above can be found in the following link:

Www.dof.gob.mx/Lines

Under the Agreement, companies can be subject to inspection visits by health and labor authorities, both federal and state (depending on the activity they are engaged in).

For this reason, we have developed this Practical Guide for companies with the intention of helping them to define what preventive actions they should take in the face of the general suspension of non-essential activities:

The first thing: Companies must define what their objective is.

A. Continue to operate; or

B. Suspend activities.

A. Continue to operate.

A.1. Define if your activities can fall within the “Essential Activities”, namely:

— Those that are directly necessary to address the health emergency;

— Those of the fundamental sectors of the economy;

— Those that are necessary for the conservation, maintenance and repair of critical infrastructure that ensures the production and distribution of indispensable services; and

— Companies whose suspension may have an irreversible effect on their operation (from the perspective of their operation, as well as from a financial perspective).

In some cases, it is possible to include companies that are part of the supply chain of others that are dedicated to “Essential Activities” (i.e. direct and some indirect suppliers, distribution, transportation, logistics services, etc.).

A.2. If appropriate, prepare and submit the corresponding notice to the SE (applicable to steel, cement and glass production companies, and coal mines, as well as those that are part of their respective supply chains).

A.3. Prepare the necessary documents and information to attend to possible inspections by health and labor authorities. This measure is extremely important for the continuation of the operation, and for avoiding the imposition of fines and sanctions for non-compliance with the Agreement, as well as the closure of the operation.

Some aspects to be considered:

— What information should I require from the inspector?

— What information must the inspection order contain in order for it to be carried out?

— What should happen if the Legal Representative is not present?

— What information and documents should I have ready to show the inspector?

Inspectors have the power to make an immediate determination. For this reason, it is extremely important to properly prepare and prepare the documents that must be shown to the inspector in order to justify the continuation of the operation of the companies.

In accordance with the criteria issued by the health and labor authorities themselves, some of the documents that inspectors may require include: constitutive act and reform of statutes, proof of registration in the R.F.C., employer registration with the IMSS, collective employment agreement, lists of workers, description of production processes, contracts for the provision of services with providers of “outsourcing” and “insourcing” services with respect to personnel, reasons why the company is considered essential, reasons for which are considered that, if they suspend their activities, there would be an irreversible effect for their continuation, contracts with customers that are part of essential activities (including purchase orders, invoices and respective payments), among others.

In particular, it is highly recommended that companies that are part of the supply chain of essential activities have original letters issued by their customers, in order to justify the need to continue with their activities. It is extremely important to take care of the drafting of these to achieve their objective.

In addition, companies must be ready to justify the contractual relationship between the company that operates the business and those that provide them with personnel outsourcing services, both in the form of “insourcing” and “outsourcing”.

— What aspects should I consider if the inspector requests a tour of my facilities?

In this regard, it is important to comply with the preventive guidelines ordered by the health authorities (avoid crowds of more than 50 people, minimum distance between each worker, have signs and necessary cleaning material, observe the recommended measures regarding personal hygiene, etc.).

— How should I prepare my staff in case the inspector conducts interviews?

A.4. Identify personnel who are part of vulnerable groups: People over 60 years of age and people at risk of developing serious illness and/or dying from it (pregnant or breastfeeding women with children under 5 years of age, people with disabilities, people with chronic non-communicable diseases (high blood pressure, pulmonary hypertension, kidney failure, lupus, cancer, diabetes mellitus, obesity, liver or metabolic failure, heart disease), or with any medical condition or treatment that suppresses the system immunological).

In this regard, it is important to:

— Prepare a specific questionnaire that all workers must sign, in which they define if they are within these vulnerable groups.

— Consider that, in accordance with the Agreement, these workers will not be able to attend workplaces. Therefore, we recommend first defining if they can continue to carry out their work remotely (in the “Home Office” mode). Otherwise, the employment relationship of these workers must be suspended. In both cases, it is necessary to prepare and conclude a written agreement.

A.5. In cases where it is necessary to reduce the operation, it is possible to implement measures to reduce labor costs in order to avoid layoffs.

These measures include: technical stoppages, reduction of working hours, implementation of flexible working hours and remote work (“Home Office”), early use of vacation days, among others.

In any of these cases, it is essential to draw up and conclude written agreements with workers in order to reduce the legal risks associated with their implementation.

A.6. It is essential that companies observe and comply with the guidelines and practices ordered by the health authorities in order to avoid the infection and spread of the COVID-19 virus (avoid crowds of more than 50 people, implement personal hygiene protocols and regulations for the health of people, provide medical supplies, set signs, among others).

B. Suspend activities.

B.1. The Federal Labor Act (”LFT”) contemplates the possibility of temporarily suspending employment relationships by virtue of the suspension of work ordered by the competent health authority, as a measure in the face of the health contingency generated by the COVID-19 virus (Foundation: Section VII of Article 427 of the LFT).

In this case, it is legally possible to pay workers a general minimum wage for each day of suspension (not exceeding one month), or any percentage below 100% of the salary (Basis: Section IV of Article 429 of the LFT).

However, the implementation of this measure involves certain risks. In particular (i) possible conflicts with workers, especially because of the unfounded information that the Federal Government has issued in this regard; and (ii) the possibility of fines imposed by the administrative labor authorities, even though there is sufficient legal basis to implement this measure. Therefore, it is important to do a “case-by-case” analysis to determine the appropriateness and, where appropriate, the way in which the suspension should be applied.

If employment relationships are suspended, it is highly recommended to draw up and conclude written agreements with workers, in order to reduce the inherent legal risks.

Depending on the company's activity and the characteristics of each position, it is possible to continue with certain activities that are essential for the survival and continuation of the business during the period of suspension (i.e. preparation and dispersion of the payroll, payment of goods and services that cannot be interrupted, preparation and filing of tax returns and reports for authorities, etc.). This is as long as they do not involve employees attending the workplace (these activities must be carried out remotely under the “Home Office” mode). For this purpose, it is essential to draw up and conclude a written agreement.

B.2. In the meantime the company's objective is being evaluated, it is essential that the guidelines and practices ordered by the health authorities be complied with in order to avoid the contagion and spread of the COVID-19 virus.

For more information, please contact any of our partners at the phones/emails indicated at the beginning of this note.

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