Informative Note on the effects of the Ruling of the Eighth District Court in Labor Matters of Mexico City.

On May 20 of 2022, a union from the mining industry filed a writ of amparo against the Executive Order for the Reforms to the Federal Labor Law, the Social Security Law, the Law of the National Workers’ Housing Institute, the Federal Tax Code, the Value Added Tax Law, the Income Tax Law, among others.

The writ, in particular, challenged the unconstitutionality of the reform to Article 127, Section VIII of the Federal Labor Law, which established a cap to the payment of profit sharing of three months of the workers’ salary or the average of the profit sharing received in the immediately preceding three years, with the requirement of applying the amount that resulted to be most favorable to the workers. The foregoing because they consider that it violates the human rights set forth in articles 14, 16, 123 and 133 of the Political Constitution of the United Mexican States.

The District Court conducted an in-depth analysis of the constitutional history on the right of workers to company profit sharing and reached the conclusion that the concepts of violation posed by the union were well-founded considering, among numerous reasonings, that the Constitution establishes that the profits of a company must be distributed to the workers in an integral manner and, therefore, the reform is unconstitutional in the establishment of caps and that, under these conditions, the reform does not comply with pursuing a constitutionally legitimate purpose; this is not complied with because Section VIII of Article 127 of the LFT [Federal Labor Law] entails a negative effect on the human rights of the workers and that this article that is being challenged is not found to pursue a constitutionally valid purpose.

In its reasoning, the ruling states:

“In such conditions, it must be taken into account that the right to profit sharing is acknowledged in Article 123 of the Constitution and, in its regard, the law must not establish any cap, given that the Political Constitution of the United Mexican States itself does not provide any limit whatsoever; on the contrary, as the supreme regulation of the nation, it not only organizes the powers of the State, but also protects human rights acknowledged in the fundamental regulation itself and in the international treaties that the Mexican State is part of; hence, all secondary regulations must abide by the contents of the Constitution regardless of the matter and the substantive or procedural institution that governs them, as many of the constitutional precepts establish the minimum parameters that the secondary regulations must abide by, thus guaranteeing the absolute respect thereof,”

Based on the foregoing, the Court granted the amparo to the union’s workers to the effect that the caps are not applied in their case.

A motion for review can still be filed against this ruling, a motion that could be ruled upon by a Collegiate Court or by the Federal Supreme Court of Justice.

According with the principles of our amparo system, the declaration of unconstitutionality of a Law only benefits the complainants and has no “erga omnes” effects. Nevertheless, it is still a precedent for the filing of other writs of amparo, and it is therefore possible that other cases may arise, or that unions may call to strike based on Section V of Article 450 of the Federal Labor Law, in order to demand compliance with the provisions on profit sharing matters in those cases in which companies use caps.

A very important aspect that must be taken into account is that since the Law is hetero-applicative, the opportunity for challenging it is the first act in which it is applied; therefore, all of the workers that received profit sharing with the application of the caps this year have consented to the act and, therefore, they have lost the right to challenge the Law; nevertheless, they could resort to a call to strike, demanding the payment of 10%.

There will surely also be effects on Social Security and Income Tax Matters.

We remain truly yours for any clarifications on this matter.