Publish in Perspectives - Wednesday, March 25, 2020
The Federal Labor Law establishes that if the health authorities issue a suspension of labor relationships, employers will be released from their obligation to pay wages. (Photo: Juarez City Govt)
Leslie Palma, head of Holland & Knight's Labor, Employment and Benefits Group in the Mexico City office.
COVID-19 scenarios for employers in Mexico.
BY LESLIE PALMA
The Mexican General Health Council recognized on March 19, 2020, that COVID-19 is a "serious disease that requires priority attention." Hugo López-Gatell, Mexico's undersecretary of Prevention and Health Promotion, indicated that he has decided to advance phase 2 recommended measures, such as the rescheduling and cancellation of massive events, along with the suspension of school and non-essential government activities.
POSSIBLE EMPLOYER SCENARIOS
In response to the new coronavirus (COVID-19), and the immediacy and uncertainty of the fast-developing global crisis, employers have started to implement the first preventive measures that are being carried out in Mexico to reduce infections caused by the virus. Among these measures, “social distancing” requires new rules and policies in work centers, quarantine, remote work and possibly the statement of a health contingency. Mexican employers may face the following two scenarios regarding work suspension in the country:
1. If the Mexican government, through the health authorities, issues a labor suspension:
The Federal Labor Law establishes that if the health authorities issue a suspension of labor relationships, employers will be released from their obligation to pay wages and benefits for the entire duration of the contingency, and employees will not be obliged to provide services – a health contingency is expressly foreseen as an employment relationship suspension under the LFT. Suspension may vary and be limited according to each region and industry. Employers will be obliged to pay a general minimum wage for each day the suspension lasts as compensation to employees, with the measure not to exceed one month. The general minimum wage in Mexico is 123.22 pesos per day (approximately US$ 4.92), so the total compensation would be 3,696.60 pesos (about US$ 147.58).
In view of the actions endorsed by other countries and the pressure that the World Health Organization (WHO) is exerting on Mexico, such a suspension seems likely to be enforced by the federal government in the next few days.
a. the company must pay full salary to employees
b. in case of disease or incapacity, employees must obtain a certificate of illness or incapacity issued by the Mexican Social Security Institute; in this case, employers will not be obliged to pay those employees' salaries because the Mexican Social Security Institute will subrogate this obligation
Temporary measures that employers may adopt to help employees cope with COVID-19 include financial and/or in-kind aid (e.g., medicine reimbursement, free medical exams), or modification of working conditions (e.g., shortening and/or making working hours more flexible). These measures should not negatively impact the employer, and will expire once the pandemic ends. If employers choose to carry out such measures, it is recommended that they thoroughly document these measures, as well as expressly inform employees of their purpose and duration.
Leslie Palma is head of Holland & Knight's Labor, Employment and Benefits Group in the Mexico City office.
This article is based on an alert by Holland & knight. Republished with permission.