Note published on September 1 in El Economista, Capital Humano [Human Capital] Section by Gerardo Hernández and Blanca Juárez.
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“Every date finally comes around and every deadline will arrive”, states a well-known saying, which is a perfect fit for the new scenario for outsourcing in our country, which enters into force on September 1. As of this month, all of the new provisions in outsourcing matters will enter into force and, with them, the criminal implications in case of simulating specialized services or signing agreements for the provision of personnel.
With the start of September, the new terms provided for the regularization of companies who had labor subcontracting agreements and businesses that wish to provide specialized services in the market came to an end. At the same time, all of the provisions on social security and tax matters entered into force.
Among the new regulations applicable as of this month, labor subcontracting or the simulation of specialized services is equated to the crime of tax fraud, which can be punished with up to nine years in prison, in accordance with the Federal Tax Code.
Additionally, invoices for the concept of provision of personnel or subcontracting of specialized services that are not registered in the Registry of Specialized Services or Specialized Works (Repse) lose their effects of deductibility.
During the time of transition, companies could enter into new contracts for the provision of specialized services without having the Repse, but as of September 1, all third-party hiring agreements must be registered in the public registry managed by the Department of Labor and Social Welfare (STPS) in order for invoices issued by contractors to have deductibility and accreditation effects in regard to ISR [Income Tax] and VAT.
“After September 1, the immediate consequence of lack of compliance will be non-deductibility of invoices for those services, that is where we will see the first impact”, said Jaime Rodríguez Eguiarte, leading partner in Labor Practice of the Ibarra, del Paso y Gallego Firm.
The reform on subcontracting included the amendment to eight pieces of legislation; thus, outsourcing based on the provision of personnel was prohibited since April. The changes to the legislation established new rules for subcontracting, like third-party hiring of services as long as they are not part of the corporate purpose and of the main economic activity of the client and that the contractor has the Repse.
Modifications to the scheme of subcontracting also integrated the highest fines for non-compliance in the history of labor legislation. Once the term of transition came to an end on September 1, any company that provides or benefits from specialized services that are not registered with the STPS can be sanctioned with a fine of up to 4 million 481,000 pesos.
“All elements of the reform are now 100% enforceable. Hiring companies will have to ensure that the have a valid service provision agreement in terms of the provisions of the reform and they will have to verify whether their contractors are subscribed in the Repse, if they have personnel available for the provision of the service and they will have to be prepared for possible inspection or verification visits by the authorities”, said Mary Carmen Fuertes, counsel at Hogan Lovells México.
The last numbers provided by the Department of Labor and Social Welfare (STPS) state that 106,000 companies have started the procedure at the Repse, of which 48,444 have completed it.
Reports to the IMSS and the Infonavit
As of this month, among the new obligations that must be complied with by companies that offer specialized services we have the reports that must be submitted every four months in regard to the agreements entered into that must be provided to the Mexican Social Security Institute (IMSS) and the National Worker’s Housing Fund Institute (Infonavit). September 17 is the deadline for the submission of the first report.
Manuel Fuentes Muñiz, professor at the Universidad Autónoma Metropolitana (UAM), considered that the reform is about to enter its most notable stage: implementing all of the new rules and, in this phase, what will stand out the most are the reports to be submitted to the IMSS and the Infonavit.
“This information will put the scenario of subcontracting in black and white, as it will provide visibility to the contracts of the workers and the activities that they perform. We will have monitor whether these reports are able to achieve stability in the employment of the workers”, said Fuentes Muñiz.
Quadrimestral reports are a new rule that must be followed by subcontracting companies, these reports must be shared with the authorities in January, May and September of each year.
Mary Carmen Fuertes stated that in this new stage of the reform, specialized service companies will enter a scenario of double supervision, as clients will assume an active role in the verification of compliance by contractors with their labor, social security and tax obligations toward the workers with whom they are providing the specialized service.
“Many companies are now implementing protocols to review their contractors, seeing what information that they are going to request, how to ensure that they are complying with their obligations”, said the specialist.
This role that will be assumed by companies subcontracting services is linked to the inclusion in the legislation of the joint liability that clients have toward the workers provided by the contractor.
A scenario of amparo proceedings
If the reform were a series, the second season would premiere on September 1. Specialists consulted by El Economista agree that the next scenario is not exempt from a wave of amparo proceedings arising from the questions and different interpretations surrounding the new rules.
The Federal Labor Law (LFT) expressly prohibits labor subcontracting understood as making one’s own workers available to another company. However, the guidelines of the Repse indicate that specialized services are those which are provided making one’s own workers available for the benefit of the client. “This is what causes so much confusion”, pointed out Óscar de la Vega, partner at the D&M Abogados Firm.
In various forums, the STPS has explained that “making one’s own workers available for the benefit of another” is understood as when a contractor sends his workers to the client’s work center to perform the activities established in the agreement.
“This has created an issue of great uncertainty among businessmen. It is possible that we will soon find ourselves with a proliferation of amparo proceedings by businessmen who have a different vision on these topics, “, said Manuel Fuentes.
In this same vein, Óscar de la Vega said that under this interpretation, the application of the reform reaches activities that do not involve subcontracting of specialized services. Faced with this panorama, added the specialist, it is probable that companies within some sectors such as construction and commerce file amparo proceedings in face of the application of the reform.
“Given the lack of clarity, the subjectivity on the part of the authorities, litigation will necessarily be generated. In the end, the interpretation of what really has to be registered with the Department of Labor will be in the hands of judges and magistrates”, emphasized de la Vega.
In the opinion of Jaime Rodríguez, a scenario of amparo proceedings is not unreasonable, given that there is even a conflict of interpretations among the authorities involved in the application of the reform. “As months go by and when controversies at the judicial level arise, criteria will start to emerge and we will see how this will truly operate,”
The IMSS acknowledges amparo suits
According to the Mexican Social Security Institute (IMSS), 301 companies have filed 321 judicial amparo suits against the reform on subcontracting. Between February 28 and August 1 of this year, the number of job positions associated to these organizations decreased 16%, that is, approximately 16,000 jobs.
“We have precise information” on these companies, stated Norma Gabriela López Castañeda, director of Incorporation and Collection of the IMSS.
The official said that half the companies that have filed amparo suits are in the business of providing services to other companies and to the transformation industry. 40% of them had more than 100 associated workers and 30% had registered less than 10 at the IMSS.
But the institute found that 27 of these organizations had not affiliated anyone in their staff and they started to do so after the reform. Another 101 companies “have never had any workers registered at the IMSS.”
Additionally, 90% of the 40 million pesos that subcontracting companies owe the IMSS come from those who have filed amparo suits.
However, the lawyers who were consulted state that, in reality, there are more than 2,000 amparo suits in the Eighth District Court in Labor Matters of Mexico City and that their resolution is slow due to the workload.