The end of outsourcing poses the question of the end of Community Culture

Note published in El Universal, Cultura [Culture] section by Alida Piñón.
Read the note in its original source

The labor implications of the bill for the reform by the executive Power jeopardizes the star program of this administration, entails changes in the contracting of service providers and leaves unsolved questions.

The bill for the reform on outsourcing in the country, presented by the Executive Power will have labor consequences in the cultural sector. For example, one of the star programs of the current administration, Community Culture [Cultura Comunitaria], could become unviable because it operates, to a great extent, through subcontracting. In fact, the National Institute of Anthropology and History (INAH) has already ordered that in 2021 no contracting of technical and professional services under item 33901, that is, Subcontracting Services with Third Parties. will be done. Additionally. service providers that have a subordinate relationship could be entitled to demand a labor relationship with the Department of Culture.

A few days ago the President of the Republic, Andrés Manuel López Obrador, was blunt: the outsourcing contracts that are held in the federal public administration will be terminated and the government will be in charge of paying the workers, without intermediaries. He even said that if the bill to limit subcontracting is not approved by Congress, the Executive Power will maintain its position of prohibiting it. If this happens, a program such as the Community Culture program, which uses subcontracting would become illegal? According to specialists, it would.

The favorite program of the administration of Alejandra Frausto, Minister of Culture, faces a check mate because, if the presidential instruction is followed, whether or not the bill is approved, Community Culture has, according to specialists, two options: assimilating the cultural agents that are contracted through outsourcing or ending the program.

EL UNIVERSAL documented that in August 2019, with the start of Community Culture, the Department of Culture hired the outsourcing company Lore Soluciones Integrales for 178 million pesos in order to contract 630 people who fulfilled the tasks of facilitators, regional trainers, regional and state operators, professors, artistic workshop managers, project co-operators, promoters and territorial liaisons, with salaries of between eight and 22 thousand pesos per month.

At the time, Esther Hernández, head of the Cultural Liaison Directorate, from which this program is operated, explained to this newspaper that this scheme was chosen because only in this way could Social Security be offered to trainers and promoters of Community Culture: “The option given to us by the Administration Department (of the Department of Culture) was a Payroll Administration Service.” She said and added that if the people were contracted on a for-fee basis and, in addition, insurance was paid, it would have been financially unviable due to the cost.

The bidding process, in which four companies participated, was won by Lore Soluciones Integrales Empresariales de Sinaloa S.A de C.V., for the concept of: “Contracting of specialized services with third parties to provide services to the Community Culture Program of the Directorate General of Cultural Linking.”

178 MILLION PESOS is the amount for which the Department of Culture hired the outsourcing provided by Lore Soluciones Integrales in 2019

In 2019, Community Culture operated with 400 million pesos, Lore Soluciones was contracted using this budget. In 2020, 637 million pesos were approved and, once again, Lore Soluciones was required through a public tender, for the concept of “contracting of specialized services with third parties to provide services to the Community Culture Program of the Directorate General of Cultural Linking”, for an amount of 293 million 103 thousand 448 pesos. And, according to file 2066902, available at Compranet, it is in force from March 16 to December 31, 2020.

Lore Soluciones is a conglomerate comprised by Help Rendimiento y Ventas S.A de C.V, Control y Servicios Derh S.A de C.V, Obra y Remodelación Activa S.A de C.V and DSD Grupo Técnico S.A de C.V. Its business registration number before the Department of Economy is N-2018097980; it was first incorporated as a non-profit corporation and it then changed to a business corporation. And it has18 legal representatives who are assigned representation of the company in different contracts. The address registered by the company presents an inconsistency, because it states that it is located in Mazatlán, Sinaloa, but the borough and the street listed are located in Mexico City: Río Mixcoac 36 interior 1302-A, colonia Actipan, C.P. 3230, municipality of Mazatlán, state of Sinaloa.

2020 has not been a normal year, due to the Covid-19 pandemic. Notwithstanding this, in her recent appearance before the Commission on Culture of the House of Representatives, Alejandra Frausto said that the Community Culture activities continued both in a presential and virtual formats. The official even stated that “over 75% of the activities were carried out in a digital manner.” And she said that the program was present in a little over 500 municipalities in the 32 states that comprise Mexico, “benefiting over 1 million 800 people, from September 2019 to June 2020.”

And what does the executive power propose? Prohibiting personnel subcontracting, which consists of an entity or a natural person providing or making its own workers available for the benefit of another. This scheme was justified by Esther Hernández as follows: “It is because of the level of territorial penetration that it has and the involvement of people at the national level. We are working in municipalities in which there was no State presence.”

And the rest of the country?

“This case faced by the Department of Culture is very similar to the position in which the vast majority of companies in the country find themselves. Many companies must have a profitability deriving from the number of people hired by them and, therefore, in order to have control, they subcontract services through third parties”, explains lawyer Óscar de la Vega, founding partner of the De la Vega & Martínez Rojas, S.C. Firm, with over 30 years’ experience.

The bill presented by the Executive Power, explains De la Vega, allows the provision of specialized services or the performance of specialized works that are not a part of the corporate purpose or of the economic activity of the company benefiting from these services. Then, can the Department of Culture use the services of companies such as Lore Soluciones again? No.

“In terms of the proposed law, the Department of Culture could no longer contract these services because they are part of the activity that it predominantly carries out. That is, it could only use outsourcing if that which it is contracting falls outside of its main activity, but if these people perform activities that the Department performs due to its nature, then it would be illegal, even when the contract with a company was for a specialized service. What should it do, then, if the reform is approved? Assimilate all of the workers and provide them with all of their rights; otherwise, it would be performing an illegal action. Or it can terminate the contract and compensate the workers in that corporation”, says De la Vega, who has focused his practice on labor litigation and consulting, and provided legal services to multinational companies.

Elías Micha, CEO of TallentiaMX, an association that seeks to promote responsible and professional subcontracting in the country, agrees with De la Vega.

“We would have to have a good understanding of the agreement between Culture and Lore Soluciones but, in principle, it does appear that we are seeing a case of third party contracting and it would no longer be allowed”, he says.

The assigned budget for 2021 for the Directorate General of Cultural Linking is of 97 million pesos; this office is, in fact, the only one with such a dramatic budget reduction. Is this the end of Community Culture? It still isn’t clear. An interview with Esther Hernández was requested throughout the course of several days, a date was even set for it for last Thursday, but the interview never took place.

630 PERSONS hired by Lore Soluciones to carry out tasks as facilitators, regional trainers, operators, among others.

Micha states that in the event that this bill is approved, there will be “very serious repercussions in all areas of labor life in Mexico.” He explains that “at this time, there are around 5 million workers who are subcontracted. And federal, state and municipal governments subcontract intensively. We want sanity to prevail, it cannot be prohibited at a time with such tremendous economic damage. We are in agreement with regulation, but not with prohibition.”

The case of the INAH

A few days ago, members of the YaPágameINAH [PayMeNowINAH] movement, published on their Twitter account a document that states that the INAH notified all of its administrative units that the budget for 2021 cannot be used for contracting technical and professional service suppliers, that is, subcontracting services from third parties.

The INAH, according to the document, does not say that this request is due to the presidential bill; it justifies it by means of different articles from the Federal Law of Republican Austerity, the Federal Budgetary and Financial Responsibility Law, the General Law of Administrative Responsibilities of Public Servants and the Organic Law of the National Institute of Anthropology and History.

“For the 2021 fiscal year, the only modalities for contracting personnel services are those of regular personnel, non-union personnel and temporary personnel. Contracting technical and professional service providers under item 33901 (subcontracting of services from third parties) should not be used for contracting personal services, that is subordinate personnel”, reads the document signed by Pedro Velázquez Beltrán, administrative secretary of the INAH.

César Valdez, researcher at the Directorate of Historical Studies of the INAH, reacted as follows: “In summary (the document), says that INAH centers must operate solely with its regular personnel. That no museum administrator or director of INAH museums or centers may authorize hiring non-union personnel or personnel for personal services. This will be done centrally.” He added that archeological zones have grown significantly and that regular personnel is insufficient and that many restoration programs depend on non-permanent personnel.

And for-fee contracts?

The reforms proposed by the Executive Power may also reach other labor schemes that exist in the sector of culture, such as the provision of services. “Many companies enter into service provision agreements instead of offering an employment contract. Then, people work for the concept of assimilated to salaries. What defines an employment relationship? A very simple element: subordination. Thus, there is an employment relationship to the extent to which there is subordination, which is the legal power of command, coupled with the correlative of obedience. Therefore, in all contracts in which services are provided under a subordination, whatever they may be called, we are speaking of an employment relationship”, says De la Vega.

And he adds: “The main promoter of outsourcing has been the government. That is why I believe that the proposal made by the Executive Power is good, that seniorities, salaries, benefits be acknowledged; but at this time, given the situation of the economy, it will be very difficult for the government and for the private sector to comply with these reforms. It will be impossible to resolve things between now and January 1, there will be no way for the government itself and for companies to comply with the new regulations, even if it is something positive and very well written. In my opinion, a minimum of one year is required for its implementation, otherwise, there will be very important legal battles.”

Elias Micha, of TallentiaMX, believes that working for fees is a modality that will continue to exist, but acknowledges an exception. “People working for fees do not have an employer, they are self-employed and, in the first instance, they do not have social security and therefore, this is not considered as a formal job, it is a scheme to conduct certain works or jobs and this is not addressed in the bill.” Nevertheless, if somebody offers a contract on a by-fee basis to disguise a job that should be formal, because it is continuous and there is a workplace and he performs the same job as the corporate purpose, then they would be outside the law.”

Thousands of workers have faced a battle against the job insecurity posed by the for-fee scheme or Chapter 3000. To date, there is no precise data on how many work under this regime in the culture sector. In 2018, after a crisis due to late payments, it was said that, just in the INBAL [National Institute of Fine Arts and Literature], there were more than one thousand people.

Specialized services

In October, the INBAL released a statement informing that it will not contract cleaning or security personnel under the outsourcing regime; instead, it will contract third parties through bidding schemes or tenders for the provision of its cleaning and security services at its 84 facilities and work centers. In this sense, he pointed out that the Institute “does not participate in the internal procedures or schemes of the company in regard to the hiring of their personnel.”

For lawyer De la Vega, this type of schemes will be the ones that will continue in operation, since the corporate purpose of the INBAL is different from the service being required. Therefore, given that the institute does not work on security or cleaning, it can put out a tender for a company specializing in those services.

“The reform proposal sent by the President prohibits labor subcontracting, as established in Article 13 of the Federal Labor Law, where the statement is clear and transparent, but it also establishes what is understood as subcontracting, and it is that a natural person or an entity makes its own workers available for the benefit of others. If a company that provides cleaning services makes its workers available to the INBAL, under its subordination, then we would be within the provision of Article 13. But Article 14 opens a window, because it says that the provision of specialized services or the performance of specialized works that are not a part of the corporate purpose or of the economic activity of the beneficiary of these services is not considered to be subcontracting. That is, the main activity of the INBAL is culture and, therefore, it can contract cleaning services”, says De la Vega.