Mexico Senate Sets Stage for Sweeping Labor Reform Upon Unanimous Ratification of ILO Convention

October 05, 2018

The Mexican Senate has unanimously ratified the International Labor Organization’s Convention 98 on the Right to Organize and Collective Bargaining, which could ultimately produce dramatic changes in the status of unions in Mexican labor relations.  It remains to be seen how the labor protection provisions of the new trade agreement (USMCA) will also impact this if implemented.

Newly-elected and leftist Mexican President Andrés Manuel López Obrador has long promised to outlaw so-called “protection contracts.”  Protection contracts are currently a legal relationship between employers and unions that are privately agreed to and registered with the government to prevent other, potentially adversarial unions (so-called “red unions”) from seeking representation.  Employee dues are often paid by the employer, and both the relationship and any terms are typically not disclosed to employees.

The new government intends to assure that unions are selected by at least 30 percent of employees in addition to banning protection contracts, according to Mexican and U.S. news media reports.

The legislative details will be critical, including what happens to existing contracts that do not have a representative basis, how representation can be demonstrated, what options and rights are provided to employers, and many other central considerations.

It is estimated that nine out of 10 companies in Mexico have a trade union recognition arrangement of which their employees are unaware.  In recent years, a number of companies began to migrate away from hidden agreements to a more open relationship (generally referred to as “white” unions) where the union and contract terms were known to employees and some aspects of bargaining were present.  How these will fare is also unknown, since they were not selected by employees originally.

Outlook: While this move may offer traditionally adversarial “red” unions the opportunity to organize more deeply, it could also encourage “white” unions to become genuinely more representative to secure their funding.  The most extreme case could be a situation similar to Brazil, where union membership is required by law.

HR Policy will host a conference call briefing on October 24 on the Mexican labor situation.  If you are interested in joining the call, please follow this link.