MEXICO AND COMPETITIVENESS

Mexican Federal Labor Law of 1970 Obsolete It was characterized by its inflexibility Discouraged growth and productivity Lack of legal certainty Unlimited wages in case of litigation

Legislative Process 2012 September 1Preferred bill to reform the Federal Labor Law (“FLL ” ) President Felipe Calderón Hinojosa September 28Approval of the House of Deputies October 23Approval of the House of Representatives with modifications for union freedom and transparency. November 13Approval from both Chambers November 30Publication in the Official Daily Gazette December 1In effect

New Employment Agreements 1.Initial training 2.Probationary period 3.Seasonal agreements Employment agreements for an indefinite and definite term are still valid according to the Labor Law.

Individual Employment Agreements (art. 35 y 39) 1.Initial training – Objective: That employee acquires knowledge and skills to perform the activities he will perform. – Effective term: Three months - general rule. Six months - managerial positions that require professional and specialized capabilities.

Individual Employment Agreements (art. 35 y 39) 2.Probationary Period: – Objective: Verify that the employee has necessary skills to perform the job. – Effective term: 30 days - general rule 180 days – managerial positions – Termination: Employer shall consider the opinion of the Employee – Employer Productivity and Training Committee.

Individual Labor Agreements (art. 35 y 39) 3.Seasonal Agreements: – For indefinite term; fixed, periodic and discontinuous work.

Hourly salary payment (art. 83) Conditions: – Must not exceed the legal maximum working shift. – Employer must comply with all labor and social security obligations. – Employee’s salary shall not be less than the minimum daily wage.

Home Office (art. 311) “Home Office” is considered as work at distance by using information and communication technologies. Recommendations: Implement home office policy Written agreement with employees Communication and training

FLL Reform – art A Subcontracting (“Outsourcing”) is the work or services performed through employed by and working under a contractor’s control, for the benefit of a customer, whether a legal or natural person, and the customer sets the tasks for the contractor and supervises the contractor in rendering the services or performing the contracted work

Subcontracting / Outsourcing (art. 15-A) This type of work must comply with the following conditions: – It cannot cover the totality of the activities, whether equal or similar in totality, undertaken at the workplace. – Outsourced activities shall be specialized. – It shall not include equal or similar tasks to the ones performed by the employees of the contracting party (customer). If these conditions are not met, contracting party (customer) will be considered to be the employer for purposes and effects under the Law, including social security obligations.

Limit to Back Wages (art. 48) If the employer does not prove the grounds for dismissal: cap to back wages: 12 months. Monthly interest rate: 2% over 15 months capitalized at the payment date It will apply only to labor suits started as of December 1, 2012 (art. 11 transitory)

Productivity (art. 153 – I) Optimize human, material, financial, technological and organizational resources. Purpose: Promote competitiveness and sustainability Improve capacity, technology and organization Increase salaries Welfare Distribute benefits equitably

Employee – Employer Committee for Productivity and Training (art. 153 – E y K) Obligation for companies with more than 50 employees Correlation between wages and productivity National Productivity Committee - advisory agency

Questions & Answers

Oscar de la Vega Shareholder Littler de la Vega y Conde Mexico City, Mexico Tel: Presented by:

International Seminar of TST, CUT, UGT & CNI August 20, 2013