"LABOR IMPLICATIONS ARISING FROM THE DECLARATION OF SANITARY EMERGENCY FROM FORCE MAJEURE"
On Monday, March 30, 2020, it was issued and published in the Official Gazette the “Resolution declaring a state of sanitary emergency due to force majeure of the epidemic generated by the virus SAR-CoV2 (COVID-19)”.
Such resolution complies with the laws of our country, whereas the General Health Council is the constitutional body entitled to take executive and general measures regarding public health, particularly in the event of danger of epidemics.
The entrepreneurial community remains uncertain about its workers, as they do not know how to manage their labor relationships due to the fact that the authority defines this atypical situation as a "health emergency due to force majeure" instead of a "health contingency", a term referred to in the Federal Labor Law (LFT), which would allow them to apply the provisions of articles 42-Bis, 427, section VII and 429, section IV of that law, which provide that whenever the proper authorities issue a declaration of health contingency, in accordance with the applicable provisions, employers shall not require the approval or authorization of the Conciliation and Arbitration Board (and ultimately, the Labor Courts) for the suspension of effects of the labor relationships and shall only be obliged to pay their workers an indemnity equivalent to one day of the general minimum wage in force, for each day of the suspension, which may not exceed one month.
Furthermore, Articles 427 section I and 429 section I of the LFT provide that a temporary suspension of employment relations in a company or establishment shall be due to a cause of force majeure that results in the suspension of work as a necessary, immediate and direct consequence, although in this case the employer shall give notice of the suspension to the Conciliation and Arbitration Board or eventually to the Court, so that the latter, upon the procedure set out in the Special Collective Procedure established in Article 897 of the LFT, approves or disapproves it, who shall determine the compensation to be paid to the employees, considering, among other circumstances, the expected duration of the work suspension and the possibility of finding a new occupation, without it exceeding the amount of one month's salary, whereas such procedure, although more expeditious than the ordinary one, is not resolved immediately and under the current circumstances, the Conciliation and Arbitration Boards have suspended their ordinary activities and only work with guards, complicating the progress of such procedure.
RESOLUTIONS ISSUED BY THE MINISTRY OF HEALTH
In the “Resolution by which it is stablished the preventive measures for mitigation and risk control due to the virus SARS-CoV2 (COVID-19)”, Published in the Official Gazette on March 24, 2020, the Ministry of Health set several preventive measures, and regarding the labor aspect it was detailed:
• Avoiding attendance at workplaces, public spaces and other crowded places for adults over 65 years old and groups of people at risk of developing serious illness or dying from it, who, at all times, where appropriate, and as a form of paid permission, shall enjoy their salary and any other allowances established in the regulations in force.
• Temporarily suspend all activities of the public, social and private sector that involve physical concentration, transit or displacement of people as of the date of the effective date of this Resolution and until May 30, 2020.
• In the private sector, enterprises, businesses, commercial establishments and all those necessary to face the contingency, such as hospitals, clinics, pharmacies, laboratories, medical services, financial services, telecommunications and media, hotel and restaurant services, petrol stations, markets, supermarkets, miscellaneous, transport and gas distribution services, will remain working, provided that they do not correspond to closed spaces with crowds.
• Labor relationships shall remain and apply in accordance to each individual, collective or law labor agreement; corresponding general conditions, during the period of time referred to in this Resolution and under the provisions of the Federal Labor Law, Federal Law for State Workers; the aforementioned, with strict respect to the employees’ labor rights, in public, social and private sector.
Subsequently, the Ministry of Health published in the Official Gazette on March 31, 2020, the " Resolution establishing extraordinary actions to address the health emergency generated by the SARS-CoV2 virus", in which, in compliance with the Resolution issued by the General Health Council on March 30, 2020 (Resolution declaring a state of sanitary emergency due to force majeure of the epidemic generated by the virus SAR-CoV2 (COVID-19)) stated, regarding labor matters, the following:
• Order the immediate suspension, from March 30 to May 30, 2020, of non-essential activities, in order to mitigate the spread and transmission of the SARS-CoV2 virus in the community, so as to reduce the disease burden, its complications and death from COVID-19 in the population living within the national territory.
• The only activities considered as essential, and that may continue working, are the following:
1. Those directly necessary to attend the sanitary contingency.
2. Those involved in public security and citizen protection.
3. Those of the fundamental sectors of the economy: financial, taxation, energy distribution and sales, gas stations and gas, generation and distribution of potable water, food and non-alcoholic beverage industry, food markets, supermarkets, self-service stores, grocery stores and prepared food sales; passenger and cargo transportation services; agricultural, fishing and livestock production, agro-industry, chemical industry, cleaning products; hardware stores, courier services, guards in private security work; day care centers and children's homes, nursing homes and homes for the elderly, shelters and care centers for women victims of violence and their children; telecommunications and information media; private emergency services, funeral and burial services, storage and cold chain services for essential supplies; logistics (airports, ports and railways), as well as activities whose suspension might have irreversible effects on their continuation.
• In all places and venues where the activities defined as essential were carried out, meetings or congregations of more than 50 people are not allowed.
• Co-responsible home care shall be strictly applied to all persons over 60 years old, pregnant or immediately postpartum, or diagnosed with high blood pressure, diabetes mellitus, chronic heart or lung disease, immunosuppression (acquired or induced), kidney or liver failure, regardless of whether their work activity is considered essential.
• All measures set forth in such Resolution shall be implemented with strict respect for the human rights of all persons.
As it can be seen, none of these instruments decreed the health contingency referred to in the LFT, thus failing to comply with the extremes for the effects suspension of labor relationships.
Consequently, the employers are obliged to cover the workers' salary in full, especially with regard to the first of these resolutions, which established that the labor relations would be maintained and applied in accordance with the individual, collective or law agreements or the corresponding general labor conditions, in the public, social and private sectors.
Therefore, these resolutions are validly related to the health security measures provided for in the General Health Law, which entitles the Ministry of Health (and the governments of the federal entities, in their respective fields of competence), to order or execute immediately, among others, quarantine; suspension of work or services, and others of a health nature that may prevent risks or damage to health from being caused or continued (art. 404, sections II; VII, and XIII).
Regarding the suspension of work, articles 411 and 412 of the General Health Law indicate that it can be temporary; total or partial, and for the strictly necessary time. All this, to avoid endangering people's health.
Such suspension may be terminated by the same authority that ordered it when the cause for which it was decreed ceases.
However, this circumstance does not mean that the effects of the employment relationship are suspended, as already mentioned.
Even if the scope of the resolutions issued by the Ministry of Health could be questioned, and a possible interpretation could be held that a health contingency is indeed already taking place, the truth is that Articles 17 and 18 of the LFT provide that in case of doubt, the general principles derived from labor regulations shall be applied; the general principles of law; the general principles of social justice derived from Article 123 of the Constitution; jurisprudence; common law, and equity, prevailing at all times the interpretation most favorable to the worker.
In the event of temporary suspension of labor relations due to force majeure, the employer would have to give notice of the suspension to the Conciliation and Arbitration Board so that it may approve or disapprove it, after the procedure set forth in the Special Collective Procedure established in Article 897 of the LFT, and determine the compensation to be paid to the employees based on the worker's salary for up to one month. (article 429), which results complicated and time-consuming, and is therefore impractical given the scenario that the companies are going through.
Therefore, given the severe negative economic repercussions that COVID-19 is causing, and in order to guarantee the labor source, we think that it is legally possible and advisable to negotiate with workers and unions, in order to reach the best possible agreements and conventions, supported by the provisions of article 57 second paragraph (reformed by the Official Gazette 01-05-2019) of the Federal Labor Law, which establishes that:
"...the employer may request the modification of the working conditions when economic circumstances justify it".
In practice, these arrangements for the modification of working conditions are called technical strike, which are carried out precisely as a consequence of an economic affectation suffered by a company and are aimed to preserve the source of employment of the collaborators by modifying certain working conditions, such as: reduction of the working hours and therefore reduction of the workers' salary income depending on the modifications made or the temporary suspension of the working relationships with no salary or with agreed compensations, but such procedure requires the express and written consent of the workers and the union.
The modifications are recorded in an agreement, which is of a temporary nature, that is, its duration is only for the time that the economic circumstances of the organization require it and it must be ratified and approved by the respective Conciliation and Arbitration Board in order to be fully valid and to avoid future legal contingencies. (Articles 33 and 34 LFT).
Effects before the Social Security Mexican Institute (IMSS)
Even though the technical strike may imply the reduction of the working shift or working week, or both; the employer and employees have the obligation to cover the worker-employer and housing contributions incurred on those days since there is no legal precept that exempts them from this.
The benefit provided for this case is the special determination of the Basic Contribution Salary (SBC) of workers in this situation. Therefore, employers in technical strike shall:
• Calculate the SBC of their employees in accordance with the provisions of paragraph 62 of the Social Security Law Regulations on Affiliation, Classification of Companies, Collection and Fiscalization (RACERF), that is, in the case of:
a) Reduced shift: the SBC is determined by adding up the wages the worker receives for each hour in a week and then dividing it by seven.
Although section I of this article sets forth that the calculation must include the proportional part of the bonus, vacations, vacation bonus and seventh day, it is necessary to consider these concepts because they are income received by the subordinate for each unit of time worked (article 27, first paragraph of the Social Security Law ). The result is the wage basis, which, if it falls below the regional minimum wage, it shall be adjusted to it.
b) Reduced week: to calculate the basic contribution salary, the salaries received by the worker in one week must be added, plus the amount of the benefits that integrate it and the proportional part of the seventh day and they are divided by seven. If the quotient is lower than the regional minimum wage, it has to be adjusted to it, or
c) Reduced shift and week: the SBC is determined according to whether the salary is stipulated per day or unit of time, using the corresponding formula, and
• Submitting to the IMSS the salary modifications of their employees (article 34 LSS)
Once the technical strike is over and the workers' working conditions are restored, the employer must inform the Institute of this situation by submitting the corresponding wage changes.
From the foregoing, we will continue to inform you regarding the sanitary measures that the Federal Government may adopt.
CDMX April 29, 2020.
The information contained herein is for information purposes only and is not intended to be a legal opinion or provide advice on any particular case. In case you require any specific guidance, before making any decision, you can contact us; we will be delighted to assist you on this matter.