U.S., Mexico Reach Deal Under USMCA, With Extensive Remediation Obligations

Last month, the U.S. and Mexico reached a “Course of Remediation” to resolve a labor complaint at VU Manufacturing in northern Mexico pursuant to the United States-Mexico-Canada Agreement (USMCA). The unprecedented solutions included sanctions and dismissals against managers responsible for undermining workers' rights, in-person trainings from the Mexican labor department to employees during working hours, and continuous sharing with U.S. authorities on the remediation process at the plant.

Background: Last December, Mexican union La Liga Sindical Obrera Mexicana (LSOM) filed a petition against VU Manufacturing, marking LSOM’s second petition against the same company. The union alleged that the company favored the old union, Confederation of Mexican Workers, and was not willing to work with LSOM despite LSOM winning a recent election. The U.S. and Mexico agreed that there was sufficient evidence for the Denial of Right and reached the course of remediation.

Significant implications for employers in Mexico: The remediation agreement should put employers who have operations in Mexico on alert as it puts in place several new requirements aimed at preventing future violations. The agreement requires VU Manufacturing to take the following actions:

• Distribute, post and make a written statement available for public request by April 10, in which the company commits to respect the rights of freedom of association and collective bargaining and affirms a neutral position.
  
  
• Penalize (up to and including dismissal) any action or omission on the part of management or company representatives that violates these rights.  
  
  
• Hold an all-staff meeting, hosted by U.S. executives, in the facility with representatives from both countries’ governments and the union before April 21.
  
  
• Allow the Secretaría del Trabajo y Previsión Social (STPS) to conduct in-person workers’ rights training for all company personnel during normal working hours, including on strike and negotiation processes.  
  
  
• Issue transparent guidelines establishing when and how union representatives and advisers can carry out union activities within the working day and train HR on the same. 

Continuous government review: Additionally, the Centro Federal de Conciliación y Registro Laboral (CFCRL) will initiate sanctions proceedings against individuals, labor organizations, or companies that have been found to violate Mexican law in connection with this review. STPS will monitor the facility and conduct regular inspections until September 30. STPS will share the results of the monitoring with the United States, as well as VU Manufacturing executives in the United States and Mexico. 

Outlook: The landmark case could potentially change how companies manage their workforces and implement union strategy in Mexico. This announcement is the third time the United States and Mexico have agreed on a formal course of remediation under the USMCA’s Facility-Specific Rapid Response Labor Mechanism (RRM). We will discuss more on this issue at our upcoming Latin America Summit in Orlando, Florida on May 11 and 12.