Labor Reform regarding Teleworking

The Mexican President presented an initiative with a draft decree amending several legal provisions governing the figure of labor outsourcing.

The main purpose of this initiative is, as it is extracted from the explanatory memorandum, to prohibit the outsourcing of personnel and to set forth precise rules to the provision of services in order to be of specialized nature or for the execution of specialized works.

It is important to emphasize that the initiative also states in its motivation, that for no reason is it intended to harm companies that due to the needs of their production and service provision schemes must seek to hire  specialized services or works that are not part of their corporate purpose or economic activities.

Likewise, the reform sets forth additional formalities and requirements to those currently in existence in order to be able to subcontract services without falling into the figure of labor or personnel outsourcing, among which the existence of a census of specialized service providers and obtaining of an authorization by the Ministry of Labor and Social Welfare for such service providers or contractors stand out.

We will keep an eye on the course of the initiative described above, to the changes that it could have within the legislative process and its review by the legislative chambers, in order to be able to reach precise conclusions regarding important aspects that are still under uncertainty such as (i) which service or work providers should be registered and (ii) the concept of specialized works or services. The clarification of the above mentioned points is very important since not complying with the requirements set forth by the law could imply negative consequences such as non tax deductibility, impossibility of crediting VAT, and/or joint and several liability with the contractor before the tax authorities and the IMSS.

Finally, it will be necessary to evaluate the situation of the service companies under common control of the companies they serve and the impact on workers’ participation in the companies’ profits.

Should you have any questions or require advice in relation to the above, please do not hesitate to contact any of our partners or associates.

Yours sincerely,

Cannizzo, Ortiz y Asociados, S.C.