The [rude] awakening of collective rights for Mexican workers, and what that means for employers.
Unionization in the work place as a whole has dropping numbers both in the US and in México, nevertheless, the USMCA has a very big, intentional, and evident intent in making sure that businesses and industries that do have unions in the US and Canada, have a level trans-border playing ground in Mexico as far as recognizing the absolute right of employees to form and be part of a Union of their own choosing if they will.
It might come as a surprise that the champion for this endeavor is also the most powerful capitalist nation in the world.
When it comes to labor rights, Mexico has had bragging rights in the international community, and as a Mexican labor and employment attorney myself I am often quick to offer up that Mexico was the first country to constitutionalize labor and employment rights, since 1917, even before the Weimar Republic´s constitution in 1919. While that much is true at face value, it is also factual that such achievement came in the wake of an armed revolution and that the winning party was not particularly championing labor rights as part of their main political agenda, but rather compromised and recognized the support that came from social organizers that had for years fought for labor rights and served to spark the revolutionary flame. While the Federal Constitution recognized labor rights in 1917, it was not till 1931 that a Federal Labor Law was enacted to give effectiveness to the Constitution´s content.
As far as collective rights and unionization goes, it was precisely through the Mexican Revolution and the immediate years that followed that political leaders understood the strength they could accumulate though the "on-boarding" of union leaders that could guarantee mass mobilizations and voter turnup. For years, Union Confederations served as breeding grounds and platforms for grass root leaders to become political organizers, representatives, senators, governors, all within the official governing party. The reward on such assent to power came in the form of huge economic wealth provided by the state, not necessarily at the expense of their union or work base with whom the kept a comrade rhetoric, obtaining benefits for employees that were first conceded by the political regime rather than in a hard fought negotiation with the employer, so began the morphing of the Union into a corporate and political instruments, rather than a means to better the life of employees, and many unions and union leaders were made as political favors and means to economic ends.
Even within this misconstrued union environment many middle-class business owners that came into their own and became important magnates in their industries or perhaps just consolidated their business enough to secure comfortable living or a generational survival for the business, did negotiate with unions to create a real symbiotic and antagonistic relationship with yearly wearisome negotiations to secure a raise or a new benefit for unionized employees. Real unions and real collective bargaining do exist in Mexico but is not the case in most businesses. Even while most businesses do have a union. This might seem like a contradictory assertion. How is it that most businesses have a union but there is not union activity? The answer comes from years of perfecting a practice called protection bargaining agreements.
The short explanation for this phenomena is that business recognized a need for a protection mechanism as some unscrupulous union leaders filed motions to strike against the workplace if the employer did not sign a collective agreement with the union, even if the union leader did not know a single employee from that workplace. This was an evident extortion practice as the union leader would drop the suit if paid a negotiable (often large) sum of money. To avoid such extortion, other business minded union leaders recognized that employers would be willing to pay a permanent retainer if they signed a collective agreement with their union in order to keep "the bad ones" from calling on their door. This mechanism was effective, as law provided that if there was a collective bargaining agreement in place, no other union could file a motion to strike to get a collective agreement signed, thus the dubbed protective collective agreement was born and thrived.
This whole system was in place for years creating fixed costs for companies, producing income for unions and union leaders (without doing any union work), hefty billable hours for attorneys, and generating filings of many collective bargaining agreements that served the state to white wash, but with the absurd result of millions of employees covered by minimum wage and minimum benefits agreements without even being privy to the fact they had been unionized. If at first there was a clear abuse from union leaders that became extortionists, at some point lines blurred and it became common practice to enter into a protective agreement scheme even before (or without any hint of) becoming the target of such extortion. Why take the risk?
All this was possible due to the fact that it was solely the union leader and the employer who had the power to execute and file a collective bargain agreement without any proof of consent or knowledge by the employees within the supposed collectivity. This drastically changed when Mexico enacted its Labor Reform in May 2019, as per the clear and strict guidelines put down in a Free Trade Agreement entered into with the United States and Canada on November of 2018, the USMCA.
As per the new procedures in place in México, all existing collective bargaining agreements (CBA) need to undergo a "Legitimation" process through which all employees are asked to participate in a referendum to vote if they support the union that represents them through the CBA. If the union does not get a majority approval, it loses the capacity to represent employees, and even though benefits contained in the CBA are still valid, for all intends and purposes the company ceases to have a union and is open for any new union (external or internal) to try to represent employees and sign a new CBA, as long as that union can previously demonstrate that it really represents the employees.
As there is a four-year grace period to undergo such legitimation of the CBA from when the reform was enacted, in May 2019, many employers are moving very cautiously and not rushing to make waves that could spark union activity in businesses that have had a union and been "union activity free" for decades. This, however, has a very different perspective when seen through the lens of the businesses and unions in the US that know for a fact that companies in Mexico exporting products to the US that compete in the same market as them do not have real union dynamics and labor rights in the workplace. Specially, given the fact that by the coming into effect of the trade agreement, anyone can act as a whistleblower to accuse a Mexican business of violating labor rights, and that the US and Canada can call for dialogue or start procedures to correct such alleged violations.
As per the USMCA´s controversy solution chapter (31), and furthermore, in the rapid response mechanism set in place in a for violations to the right to freely unionize and to have a CBA within specific industries1, the US and Canada may call for a procedure which could prevent a specific work site from being able to export goods based solely on a good faith principle of belief that labor rights are being violated. This of course seems aggressive, especially as there is no need for hard evidence required to initiate such proceedings, but as stated in the previous pages, Mexico´s track record does not back a case for lenient treatment, taking into consideration as well the previous knowledge and experience of the US and Canada with Mexico under the prior trade agreement, this state of affairs is more an effect and less a cause.
This threat to any industry in the export streamline, whether the exporter or a part of the productive chain for exported goods, has to generate concern to be or become compliant in the short term with all aspects of the labor reform in México, particularly legitimizing existing CBAs and allowing for union activity to take place within the business if employees seek such activity.
As labor and employment consultants we strive to assist in generating an environment where employees see their needs met by employers without the need of a Union to intermediate between them, but also to serve as valid intermediators on behalf of the employer where there is a Union, or where there is a clear need or intent to have union activity, in order to keep it within negotiated boundaries in a win-win perspective in the symbiotic relationship between employees and employers.
One of the most important takeaways from this piece, specially for companies in México that export their goods to the US or Canada, needs to be a sense of urgency to undergo a due diligence to legal compliance and risk analysis. Companies need to check the degree to which the collective rights of employees are being respected and put a plan in place to become compliant with all aspects of the Labor Law in the short term to be able to withstand inspections from the Department of Labor in México.
Do not be caught off guard by Government sanctions as Mexico will be under immense pressure from its trade partners to show that real change is taking place and old practices are being overhauled by best practices recognizing, upholding and prioritizing labor rights.
Unionization seems to be diminishing, companies that enact best practices in the way they treat employees and are socially responsible in the way they produce goods and services may find that there is no threat of union activity as employees reach their potential and have fulfilling or gratifying roles in their businesses. The way to achieve this is to have a paradigm shift through which employees are not enemies or cost, but rather key assets in getting the company to its fullest potential, and none of this is contrary to being in full compliance with labor law, labor rights and best practices at work.
1. As per Chapter 31-A of the USMCA: Auto assembly, auto parts, aerospace, industrial bakeries, electronics, call centers, mining and steel an aluminum.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.