On March 11, 2020, the World Health Organization (“WHO”) issued the declaration of a pandemic caused by the SARS-COV2 coronavirus outbreak, whose disease is known as COVID-19 (“COVID-19”). In Mexico, as of the date of this communication, there are 251 confirmed cases.

According to figures from the International Labour Organization, it is estimated that this pandemic will cause an increase in global unemployment of between 5.3 million (under a “prudent” hypothesis) and 24.7 million (under an “extreme” hypothesis). By comparison, the global financial crisis of 2008-2009 increased global unemployment by 22 million.

As of today, the competent health authorities in our country (that is, the President of the Republic, the General Health Council, the Ministry of Health and the governments of the States and Mexico City) have not yet issued a formal declaration of health contingency regarding COVID-19. However, some of these authorities and civil society in general have promoted and implemented recommendations aligned with those issued by the WHO, with the purpose of preventing the spread and contagion of the virus, especially “Social Distancing”.

In particular, last Friday, March 20, the Secretariat of Labor and Social Security (“STPS”), in coordination with the Ministry of Health, issued a “Guide to Action for Workplaces in the face of COVID-19” (“Guide”), in which, among other things, it contemplated the possibility for employers to implement various “temporary policies” (as will be seen below). We recommend reviewing the Guide in the following link:

https://www.gob.mx/stps/documentos/guia-de - action-for-workcentres-before-Covid-19

The COVID-19 pandemic has certainly affected the country's productive and economic activity, which is aggravated by additional macroeconomic factors that simultaneously converge at the global level.

Given this, concerns naturally arise regarding labor implications in companies, and the alternatives that exist to mitigate their effects.

What can I do BEFORE a health contingency is formally declared?

The Federal Labor Law (“LFT”) provides for certain cases and specific mechanisms to collectively suspend employment relationships before a health contingency is declared. The effect of such a measure would temporarily suspend the obligation of workers to provide their services, as well as the obligation of employers to pay wages. However, for this it is necessary for employers to give notice and request the approval of the competent authority, which can hardly be done at this time considering that, paradoxically, most of the Conciliation and Arbitration Boards in the country have suspended work.

However, there are some alternatives to reduce labor costs for companies in the face of the COVID-19 pandemic, and thus avoid the definitive closure of sources of employment in the country.

These alternatives include “technical stoppages”, reduced working hours, flexible working hours, remote work under the “Home Office” modality, early enjoyment of vacation days, and others.

The applicability and effectiveness of each of the above-mentioned alternatives depends on the nature of the companies' productive activities and the specific functions of each position, so it is advisable to make an evaluation before implementing them.

In addition, considering that in Mexico employers cannot unilaterally modify the working conditions of their workers, any preventive measure of this nature must (i) be expressly agreed with them; and (ii) formalized in writing. In these cases, the practical and logistical aspects of preparing and communicating the message to the workers are essential, so we recommend adequate planning.

Some of these alternatives have been confirmed by the STPS itself in the Guide, particularly in point 5.5.

Once the suspension of work is formally declared due to a health contingency...

Section VII of Article 427 of the LFT establishes as a cause for temporary suspension of employment relationships that declared by the competent health authority in cases of health contingency.

To do this, employers do not require approval or authorization from the authority. However, according to section IV of Article 429 of the LFT, employers will have the obligation to pay their workers compensation equivalent to one day of general minimum wage for each day that the suspension lasts, not exceeding 1 month.

The current general minimum wage is $185.16 M.N. in the Northern Border Free Zone, and $123.22 M.N. in the rest of the country.

It should be noted that the LFT does not specifically state what would happen if the suspension of work due to a health emergency lasts more than 1 month.

However, from our perspective, the payment of compensation for 1 day of minimum wage for each day of suspension constitutes a temporary exception to the general rule applicable to suspensions of employment relationships, consisting of the suspension of obligations to provide the service, and to pay the salary. Therefore, once the deadline for the exception (1 month) has expired, the general rule described must prevail and, therefore, employers would not be obliged to continue paying compensation or salaries.

If you require additional information, we will be happy to assist you.

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