The joint Commissions of Labor and Social Welfare and of Treasury and Public Credit of the House of Representatives have approved a “Draft Decree” that contains amendments to the Federal Labor Law, the Social Security Law, the National Workers’ Housing Fund Institute Law, the Federal Tax Code, the Income Tax Law and the Value Added Tax Law, all of them in regard to the labor subcontracting regime.
The Project in question is based on the reform bill presented by the President of the Republic on November 12 of last year and also includes a series of agreements that were negotiated between the business and the union sectors.
I. In regard to the Federal Labor Law.
- The amendments to the Federal Labor Law consist of the derogation of Articles 15-A, 15-B, 15-C, and 15-D, to eliminate personnel subcontracting.
- On the other hand, Article 12a is amended to the effect that personnel subcontracting is prohibited, understanding this as a natural person or an entity providing or making its own workers available for the benefit of another natural person or entity.
Additionally, it is established that employment agencies or intermediaries may participate in recruitment, selection and training among other activities. They will not be considered as employers; this capacity belongs to the beneficiaries of their services.
- Article 13 is amended to allow subcontracting of specialized services or of services for the execution of works that are not a part of the corporate purpose or of the main economic activity of the beneficiary, as long as the contractor is registered in the public registry provided for in Article 15 of this Law.
An important change in relation to the previous bill of November 12, 2020 is that a second paragraph is added, in which complementary or shared services or works within a single business group are allowed (“shared services” or “back office”), also considered to be specialized, as long as they are not part of the corporate purpose or of the main activity of the company receiving them.
NOTE. – This subcontracting of specialized services or of the execution of works refers exclusively to labor matters, and other types of legal, civil or commercial relationships will not be considered as being regulated by the Federal Labor Law, such as innominate contracts for the provision of goods, which are obligations of giving that, in many cases, entail a service, such as the installation or the maintenance of those goods, supply contracts or contracts for the provision of professional services specifically regulated by the Civil Code and that are not of a labor nature, among others.
- Article 14 is amended to the effect that subcontracting must be formalized by means of a written contract in which the objective of the services to be provided or the works to be executed is specified, as well as the approximate number of workers that will participate in the fulfillment of said contract.
It is also established in this Article that the person subcontracting with a contractor that does not comply with the obligations arising from its employment relationship with its workers will be jointly liable in relation to the workers used in said hirings.
- Article 15 is amended to the effect that natural persons or entities that provide subcontracting services for specialized services or works referred to in Article 13 must be registered with the Department of Labor and Social Welfare.
Registration must be renewed every three years.
The Department of Labor and Social Welfare must process the registration within 20 days after its receipt, if it does not do so within this term, the employer may request that the corresponding decision be rendered within the next three days; otherwise, said registration will be considered as having been approved.
The registry of natural persons and entities will be public and will be available in the internet portal.
The Department of Labor and Social Welfare will issue the general provisions that determine the procedures relating to the registration referred to in this article.
Note. – In accordance with Transitory Article Two, the Department of Labor must issue the provisions referred to in this article within 30 calendar days after the entry in force of the Decree.
Note. – In accordance with Transitory Article Three, from the entry in force of the Decree, natural persons or entities providing subcontracting services must obtain the registration provided for in Article 15 within a term of 90 calendar days from the date of publication of the general provisions.
- Article 41 of the Law, relating to employer substitution, is amended, adding an additional paragraph that specifies that, in order for employer substitution to come into effect, the property of the company or the establishment must be transferred to the substitute employer.
Note. – For the purposes of the application of this last paragraph of Article 41, in the case of companies operating under a subcontracting regime, the transfer of the property of the company or the establishment will not be required during the term of 90 calendar days from the date of entry into force of the Decree, provided that the contractor transfers the workers involved to the beneficiary within said term. Labor rights, including seniority, must be acknowledged in all cases.
- In regard to the payment of profit sharing (PTU), Article 127 is amended, adding Section VIII, which establishes that the amount of participation in profit sharing will have, as an upper limit, 3 months of the worker’s salary or the average of the participation received in the last 3 years, the amount that is most favorable to the worker will apply.
Note. – It is important to take into account that when the Federal Labor Law refers to salary in relation to the provisions of profit sharing, Article 124 of the Law establishes that, for the purposes of that chapter, salary is understood as the amount that each worker receives in cash as a daily wage, that is, it does not consider the consolidated salary provided for in Article 84 of that same Law.
- Article 1004-A is amended to impose penalizations on employers that do not allow the inspection and surveillance ordered by the labor authorities or refuse to provide the required information, through fines ranging from 250 to 5000 times the UMA [Unit of Measure and Update].
- Article 1004-C is amended, to penalize those who provide subcontracting services referred to in Article 12, as well as natural persons or entities that provide subcontracting services without having the corresponding registration, with fines ranging from 2000 to 50,000 times the UMA.
II. Amendments to the Social Security Law.
- Articles 15 A, 304 A, Section XXII, and 304 B, Section V are amended, and the second paragraph of Article 75 of the Social Security Law is derogated.
Note.- The amendment to Article 15 A entails highly onerous and bureaucratic obligations in requiring companies that have already obtained their registration with the Department of Labor and Social Welfare to provide the Institute, on a quadrimestral basis, the information on the agreements that it has entered into, their objective and term, a list of the workers including their CURP [Personal Population Registry Code], social security number and base salary used for the payment of social security dues as well as the name and federal taxpayer’s registration number of the beneficiary of the services. In addition to a series of rules for its compliance.
- All of these amendments have the objective of harmonizing their content with the amendments the Federal Labor Law on subcontracting matters.
- The elimination of the second paragraph of Article 75, regarding the classification of companies in terms of risk is relevant and, therefore, it will be necessary to comply with the provisions of Transitory Article Five of the Decree, to the effect that employers who, in terms of the derogated second paragraph of this article had, prior to the entry into force of the Decree, requested from the Mexican Social Security Institute the assignment of one or more employer registrations by class, of those provided for in Article 73 of the Social Security Law, to register their workers at the national level, will have a period of 90 calendar days from the date of entry into force of the Decree to cancel said employer registrations and, if applicable, request from the abovementioned institute that an employment registration be granted in terms of the provisions of the Regulations of the Social Security Law in matters of Affiliation, Classification of Companies, Collection and Supervision. Once that term has ended, those employer registrations that have been canceled, will be canceled by the Social Security Institute.
- The review of Transitory Article Five, which establishes the rules for the classification of companies in regard to employer substitution, is also very important.
III. Amendments to the National Workers’ Housing Fund Institute Law
- Articles 29, in its third paragraph and 20 Bis are amended, with the objective of harmonizing their provisions with the reform to the Federal Labor Law in employer substitution matters.
Note.- The amendment that adds Article 29 Bis, in a similar way to the Social Security Law, imposes highly onerous and bureaucratic obligations in requiring companies that have already obtained their registration with the Department of Labor and Social Welfare to provide the INFONAVIT [National Workers’ Housing Fund Institute], on a quadrimestral basis, the information on the agreements that it has entered into, their objective and term, a list of the workers including their CURP, social security number and base salary used for the payment of social security dues as well as the name and federal taxpayer’s registration number of the beneficiary of the services.
IV. Amendments to Tax Laws
- Amendments are made to the Federal Tax Code, the Income Tax Law and the Value Added Tax Law, conditioning the deductibility of expenses, conditioning them to compliance with the obligations established in the Federal Labor Law, including the registration of subcontracting companies, penalizations are imposed and the commission of tax crimes for non-compliance is even provided for.
NOTE. – It is important to highlight that Transitory Article One establishes that:
“This Decree shall enter into force on the day following its publication in the Official Gazette of the Federation, with the exception of the provisions of Articles Four, Five and Six (which refer to tax provisions), which will enter into force on August 1, 2021.
The Decree is expected to enter into force on May 1st.
We remain truly yours for any clarification or additional information in regard to this document.