It is our interest to provide practical help that may assist companies in Mexico to be in compliance with Labor and Employment rules and regulations, on that line, we provide the following brief on employee contracts:
On the practical side of the comprehensive labor reform undergone in Mexico in 2019, it is noteworthy to point out that while special labor courts were created together with a procedure overhaul for labor and employment trials that are still awaiting enforcement pending on the inauguration of the courts, some aspects of the reform became effective immediately and they directly affect the relationship of employers with new and existing employees, and generated compliance obligations for companies that if not fulfilled, might be met with fines from the Labor Secretary in case of inspection.
Such is the case for the keeping of employment contracts and specially, the addition of the designation of beneficiaries in case of death of employee.
Article 25 of the Federal Labor Law delimitates all specific information that needs to be included in a labor contract, such as:
- Name (of both parties), nationality, age, sex, personal identification number granted by government, as well as fiscal identification number.
- Duration of employment in case hire is for a specific time bounded purpose, or season.
- Specification if there is probation or training periods.
- Detail of services to be rendered and responsibilities of employee.
- Place of employment.
- Workdays and work hours
- Salary and periodicity of payment, including description of manner of payment.
- Reference to commitment of employer to continual training and preparation of employee.
- Any other clause to specify employee benefits such as rest days, vacations, Christmas bonus, and any other agreed upon between parties.
As per the labor reform on May 2019 a new employer requirement was created as there is now an obligation to include the employees beneficiaries in case of death. This is a practical addition as the death of an employee creates the need of employer to pay accrued wages and benefits to a beneficiary and traditionally spouses and family members needed to go through a cumbersome and long process to have the labor board declare them as rightful beneficiaries. The commented addition not only benefits family that survives a deceased employee as the need for a trial is waived, it also gives the employer opportunity to immediately pay out any owed benefit to pre-determined persons without risk of being subject to pay (again) any person claiming a right as beneficiary on trial.
In addition, it is important to state that in case of inspection by labor authority, the lack of beneficiary designation in the contract can cause fines to employer.
Do take into account that such obligation is not only effective for new hires, but it became applicable to all existing employees, so an addendum to the contract with designation of beneficiaries is in order for existing contracts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.