International Society of Primerus Law Firms

Employment Law – Termination of Employment Relationships (Third and Final Part)

Written By: Pablo Saenz

Cacheaux Cavazos & Newton

Mexico City, Mexico

To finalize the discussion on the various manners in which companies may terminate employment relationships with their employees in accordance with the Federal Labor Law, this article discusses the following: (i) the unilateral termination of the employment relationship when there is a lack of elements required to rescind the contract; and (ii) the rescission of the employment relationship for just cause.

The unilateral termination of the employment relationship and the individual employment agreement. This situation applies when the employer does not have necessary and sufficient elements to rescind the employment agreement for just cause with its non-union employees, and when the employee refuses to negotiate with the employer as to the termination of the employment relationship. In order to proceed with a termination in this event, the employer must pay a severance to the employee pursuant to the terms established by the Federal Labor Law, consisting of the following: (i) Three months’ salary, a concept known as “constitutional severance”, which must be paid taking into account the fully loaded salary consisting of the payments made in cash for daily wages (daily salary), bonuses, other consideration, premiums, commissions, benefits of kind and any other amount or benefit given to the employee for his/her work, such as vacation bonus, end of year bonus, savings fund, food vouchers, etc.; it is important to note that depending on the benefit that is provided, such may or may not be included in the fully loaded salary payment; (ii) 20 days of salary for each full year of employment (with the fully loaded salary payment referenced in the preceding subsection); (iii) seniority bonus (payable based on 12 days’ salary for each year of employment or its proportion thereof, up to a maximum amount of double the minimum salary in effect for the geographic area where the employer is located); (iv) payment of the proportional part of the end of year bonus for the calendar year in which the termination of the employment relationship occurs; (v) vacation pay due for the last year of employment and the proportional part to the date of the termination of the employment relationship; (vi) vacation bonus pay due for the last year of employment and the proportional part up to the date of termination of the employment relationship; (vii) the wages due up to the date of termination of the employment relationship; and (viii) any other benefits which have been agreed upon and which were not paid as of the date of termination of the employment relationship, including, among others, employee savings funds, food voucher programs, productivity bonuses, etc. It is important to note that the amounts due for the end of year bonus, vacation time, vacation bonus, salary and other benefits that are agreed upon with the employee must be paid with a daily salary, without aggregating, unless otherwise agreed to in the employment agreement or in any other agreement. 2.- Rescission of the employment relationship and the individual employment agreement. This situation occurs only when the employer possesses all of the elements necessary and sufficient to rescind the employment relationship with the worker or employee without incurring any liability. In the first place, the necessary and sufficient elements mentioned above require the employer to have one of the causes established in article 47 of the Federal Labor Law in order to rescind the agreement. Secondly, the employer must have the proper evidence in order to demonstrate conclusively to the labor authorities that such cause for rescission truly did occur. In accordance with the Federal Labor Law, the following are causes for rescission of the employment relationship without liability for the employer: (i) deception by the employee or if applicable, the labor union that proposed or recommended him/her with false certificates or references which attribute false skills, aptitudes and abilities which the employee is lacking. This cause for rescission is not valid after the employee has rendered services for 30 days; (ii) the employee, while performing his/her work, demonstrates lack of integrity or honesty, commits acts of violence, threats, insults or mistreatment against the employer, his/her family or the management or administrative staff of the employer or facility or against clients or the employer’s suppliers, except in the event of provocation or self defense; (iii) the employee commits any of the acts mentioned in the preceding subsection against one of his/her coworkers, if as a result, discipline in the work place is altered; (iv) the employee commits one of the acts referenced in the preceding subsection, outside of work, against the employer, his/her family, or the managerial or administrative staff of the employer, if such acts are serious enough that they make the employment relationship impossible; (v) the employee intentionally causes property damage to the buildings, work, machinery, instruments, raw materials and other objects relating to the work during the performance of his/her work or has the intention to do so; (vi) the employee causes the damages mentioned in the preceding subsection, provided they are serious, without malice, but negligent to the extent that such negligence is the only cause of the damages; (vii) the employee compromises the security of the establishment or the persons located therein, whether due to his/her imprudence or inexcusable neglect; (viii) the employee commits immoral acts or harassment and/or sexual harassment against any person at the workplace; (ix) the employee discloses manufacturing secrets or confidential information which affects the company; (x) the employee has more than 3 absences within a period of 30 days (the criteria established by the Courts is that there should be at least 4 absences), without the employer’s permission or without an excusable reason; (xi) the employee disobeys the employer or its representatives, without just cause, with respect to contract work; (xii) the employee fails to adopt required preventative measures or to follow the indicated procedures in order to avoid accidents or illness; (xiii) the employee reports to work intoxicated or under the influence of a narcotic or drug, unless such drug was medically prescribed, and the employee must make the fact known to the employer and present the medical prescription; (xiv) a final judgment sentencing the employee to prison, which prevents performance of the employment relationship; (xiv Bis) a lack of documents required by law and regulations necessary for the performance of the work when such is imputable to the employee and which exceeds the period authorized by the Federal Labor Law; (xv) those causes which are analogous to that established in the foregoing subsections, which are equally serious and/or with similar consequence as it pertains to work. In order to apply this manner of termination, first analyze the causes for rescission that will be imputed to the worker or employee and whether the employer possesses all of the supporting documentation for such. It is recommended that an administrative investigation be conducted in order to investigate all of the facts relating to the cause of the termination and, thereafter, that the respective notice of rescission be prepared stating the causes that gave rise to such by specifying the manner, time and place in which they occurred. Subsequently, the notice of rescission should be delivered to the worker or employee and if he/she refuses to accept such, it must be presented before the Labor Board of Conciliation and Arbitration with jurisdiction so that the Board may proceed to give notice of the referenced rescission.

In order for the employer to rescind the employment relationship with the worker or employee without any liability, it must do so within 30 days from the time that the cause occurred or from the time in which the employer had knowledge of the cause for termination or of the failure or omission by the worker or employee. If the employer rescinds the employment relationship with a worker or employee for a legal cause, upon departure the employee will be entitled only to payment of the corresponding proportional amount (depending on the date of termination of the employment relationship) of the following : (i) payment of the proportional amount of the end of year bonus for the calendar year in which the termination of the employment relationship occurs; (ii) vacation pay due for the last year of employment and the proportional amount to the date of termination of the employment relationship; (iii) vacation bonus pay due for the last year of employment and the proportional amount up to the date of termination of the employment relationship; (iv) wages due up to the date of termination of the labor relationship; (v) seniority bonus pay in the terms already established, being 12 days’ salary for each year of employment or a proportional amount, based on a maximum of double the minimum daily salary in effect for the geographic area where the employer is located ; (vi) any other benefits which have been agreed upon and which have not been paid as of the date of termination of the employment relationship. In this case, the employer is not obligated to pay the severance consisting of three months’ salary and 20 days’ pay for each full year of employment.

For more information about Mr. Saenz, a partner at the Mexico City office of Cacheaux, Cavazos & Newton, please visit www.ccn-law.com or the International Society of Primerus Law Firms.

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