The Monetary Law states that any dollar-denominated operation payable in Mexico may be paid in pesos at the exchange rate of the day of payment. For such purpose the Bank of Mexico publishes the official exchange rate daily in the Official Daily Gazette.
Nevertheless the parties may agree to make payments in foreign currency to be paid outside of Mexico, in which case the Monetary Law would not be applicable.
The official monetary policy of the government to date is a floating peso. At present different alternative monetary regimes are being discussed.
Foreign currency may be purchased from authorized banks and exchange houses at quoted rates and upon availability of such foreign currency.
Although there is no exchange control, bank accounts may not be denominated in foreign currency, except in a few cases for individuals and for maquiladoras on the border.
Dividends to foreign shareholders are not taxed when distributed, if they are paid from a net taxed profit account. (See Section XIV.C.4.m. hereinafter).
There are no limitations on capital remittances imposed when operations are wound down or dissolved.
The economically active population in Mexico is approximately 26 million. About 34% are employed in the service sector, 13% in agriculture and fishing, 20% in commerce and distribution, 17% in manufacturing, 6% in construction, 6% in transportation and 4% in mining. A sizable portion (approximately 25%) of the labor force works in the informal sector, i.e., unregistered for tax purposes or for social security benefits.
The Federal Labor Law of 1970 governs all aspects of the employer-employee relationship, including collective bargaining, the right to strike, minimum wage rates, work hours and compensation, and occupational health and safety. The Law establishes employee rights that go well beyond the guarantees provided in many industrialized countries. For example, employees are entitled to mandatory profit sharing, may only be dismissed for a limited number of justifiable causes and enjoy the right to severance pay upon unjustifiable dismissal as well as seniority pay.
Labor legislation is predominantly the province of the Federal Government. However, state labor boards may enforce the federal labor law within their jurisdiction, except for specific cases in which the Federal Government maintains exclusive enforcement jurisdiction.
Any individual rendering services to another individual or entity, under supervision or subordination is considered an employee. This is a concept not to be ignored in drafting independent contracting agreements.
In a transfer of an on-going business, the transferee becomes a substitute employer of the transferor and acquires all the transferor's obligations towards the latter's employees. The transferor is jointly obliged to such employees for six months after notice of such transfer is served to the Labor Board. (See Section X.A. hereinabove).
The main unions frequently support the ruling party, the PRI. Many of their members form part of the government as municipal authorities, state governors, representatives and senators.
Strikes are recognized and protected by law as a tool at the service of the workers for obtaining improved benefits and working conditions. Although legally the labor authorities may only resolve the legality of a strike once started, they vigorously intervene in order to conciliate interests in order to avoid work stoppages.
During the 1980's, spiraling inflation in Mexico led to several minimum wage adjustments per year. During the last years of the 1980's and until late 1994, inflation was tempered as a result of labor management and the government establishing wage parameters through national agreements such as the Economic Solidarity Agreement and the Economic Stability and Growth Agreement. While these national agreements kept wages in check, their terms were a framework for the establishment of wages.
The last of the series of national agreements was renewed in December 1994 and was to be in force until December 1995, but in January 1995 the Unity Agreement to Overcome the Economic Emergency was announced. This agreement was complemented by the Action Program to Reinforce the Agreement to Overcome the Economic Emergency which included a mandatory minimum wage increase of 12%.
There are three types of work shifts:
If workers render their services on their rest day, they are entitled to a double pay plus their salary corresponding to that rest day.
If workers render their services on Sunday they are entitled to a 25% premium.
Compulsory holidays are observed on January 1st, February 5, March 21, May 1st, September 16, November 20, December 1st every six years, December 25 and the day fixed by the Elections Law to exercise the right to vote.
Years of Service No. of vacation days 1 6 2 8 3 10 4 to 8 12 9 to 13 14
Workers are entitled to a vacation premium of 25% over the salaries of their respective vacation days.
In businesses whose income is derived exclusively from personal services, the amount of profit share is capped at one month's salary.
The mandatory profit sharing does not apply in the following cases:
The officer with the highest level of authority is not entitled to a share of the company profits. Workers holding confidential positions will have a share in the company's profits; however, if their salary is higher than that of the highest paid unionized worker (or in the absence of a union, the non-confidential worker), such salary plus 20% will be considered as the maximum salary for profit sharing distribution which is made on the basis of salary earned and days worked during the fiscal year.
Temporary workers shall be entitled to their share of the profits, provided they have worked at least sixty days during the respective year.
IMSS maintains medical clinics and hospital facilities throughout Mexico and provides services free of charge to eligible employees and their families. IMSS pays 100% of an employee's salary in the event of job-related accident or illness in case of temporary disability. It also pays a percentage of an employee's salary where the employee is permanently disabled and remits benefits to heirs in case of death from job-related causes.
The quotas regarding the work risks insurance depend on the risk class applicable to the field of employment. Until 1995, IMSS determined the risk class and applicable premium percentage for employee classes in Mexico. Beginning in 1995, however, the employee's risk class and the applicable percentage contributions shall be determined by the employer, based on procedures set forth in the Social Security Regulations.
An employee may obtain pension benefits upon retirement at 65 or earlier as per the Social Security Law. There is no legal mandatory retirement age.
Employment contracts are for an indefinite period unless terminated for justifiable cause. An employer may only justifiably dismiss an employee without liability if the latter incurs in any of the causes foreseen in the Law, such as, presenting false certificates misrepresenting his capabilities, negligence, disclosure of manufacturing secrets, unjustified absences in a 30 day period, and insubordination. The Law obligates employers to give employees written notice of their justified dismissal.
An employee may appeal his termination to an administrative labor dispute board. At the administrative trial, the employer has the burden of showing that the worker engaged in one of the specific culpable acts contained in the Law, and that the employer gave the employee written notice of such justified dismissal. If the employer fails to meet this burden, the employee may request either: 1) reinstatement to his previous job, or 2) severance equivalent to three months plus twenty days of wages per year of employment at integrated full salary, a seniority bonus equivalent to twelve days of wages per year of services rendered, with a cap of twice the minimum wage as well as any fringe benefits accrued. The right to reinstatement will not apply to certain employees who occupy positions of trust with their employer or who have been employed less than one year.
Employment may be for a defined term provided the purpose of such employment is specific and has a determined timetable. If the specific work is prolonged, the employee cannot be dismissed or replaced until such work is terminated.