The End of Outsourcing as we know it?

in Mar 03, 2020

On October 23, 2019 Morena’s Senator, Napoleón Gómez, presented a bill to amend the Federal Labor Law and the Social Security Law relating to outsourcing of employees to set greater restrictions and seek to impose sanctions and consequences of greater significance to companies that use this hiring structure.

The bill was recently presented for discussion by the Mexican Senate, so it is still subject to the legislative process and is not yet legally binding. However, Senator Napoleón Gómez who, in addition to being the leader of the Miners’ Union, has been one of the main detractors of the outsourcing structure so his bill has great significance and may proof to have significant weight.

Some items of the bill may directly impact the organizational structures of companies hence it is important to know the bill and monitor its progress. The following items in the bill stand out:

  • It widens the scenarios prohibiting outsourcing and deeming such scenarios as simulations for all legal purposes including for criminal and tax purposes.
  • Among the new scenarios, the bill provides that outsourcing will be prohibited «…when the contractor has a direct professional, labor or economic relationship with the contracting party or is part of the same company, entity or economic group».
  • In connection with the prior point, it is intended that the beneficiaries of the service pay the corresponding PTU (profit sharing) to outsourced personnel.
  • It provides that the agreements between contracting parties or beneficiaries and the outsourcing company shall be in writing and a copy thereof shall be delivered to the outsourced personnel.
  • The outsourced personnel will have the right to receive the same working conditions as those employed by the contracting party or beneficiary.
  • It contemplates the creation of a National Outsourcing Companies’ Registry (Registro Nacional de Empresas de Subcontratación), including the requirements for admission and permanence.
  • It gives authority to STPS, IMSS and INFONAVIT to conduct preventive, ordinary and extraordinary inspections to guarantee the performance of employer-employee obligations.
  • Article 1004 of the Federal Labor Law is amended to provide for penalties that will range from 250 to 5000 measurement units against those who undertake outsourcing simulations.
  • Surprisingly, the transitional provisions of the bill seek to impose sanctions retroactively those who incurred in outsourcing simulations.
  • In contrast to the prior point, the transitional provisions will give a 180-day deadline to the contracting parties that failed to pay PTU to the personnel that were illegally outsourced (i.e., in simulation) to pay it, as well as to voluntarily pay to SHCP the omitted tax contributions, among others. Once such cure period expires, the prosecutor may initiate criminal actions for any criminal and tax matters that may have resulted -independently from any other sanctions that may apply from a labor perspective.

About the author: Juan Tejedo is a partner at García Mingo & Tejedo, S.C. with broad experience representing international and domestic clients in labor and collective matters. Juan may be contacted at: juan.tejedo@gmt.mx

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