GOM MAKES PUBLIC ITS PROPOSAL FOR LABOR LAW REFORM

UNCLAS SECTION 01 OF 03 MEXICO 000780

SIPDIS

DEPT FOR DRL/AWH AND ILSCR, WHA/MEX, USDOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON PGOV SOCI PINR MX
SUBJECT: GOM MAKES PUBLIC ITS PROPOSAL FOR LABOR LAW REFORM


1. SUMMARY: On February 9, the GOM finally made public its
long awaited proposal for reforming Mexico's Federal Labor
Law (FLL). In addition to presenting the proposal to the
Mexican Congress the GOM,s Secretary of Labor also placed it
on his ministry,s website thereby making it available to any
and all interested parties. Mexico,s FLL is based on
Article 123 of the country,s constitution and a large number
of the GOM,s proposed changes would significantly modify
what many labor unions and activists consider to be bedrock
constitutional guarantees of worker rights. The proposed
reform is a sweeping initiative in that it touches on such
topics as how wages are calculated (daily vs. hourly),
authorizes part-time and temporary employment (practices that
at present are technically illegal),re-defining union
autonomy with respect to internal affairs and modifying the
right to strike. The GOM's Labor Secretary believes the
reform could be enacted by the end of April and the proposal
clearly has the support of Mexico's ruling PAN political
party and that of the country's business community. However,
it has been sharply criticized by organized labor and leading
figures in Mexico's two main opposition political parties.
The GOM's labor law reform proposal is unlikely to be enacted
by the Congress without the support of at least one of
Mexico's main opposition parties. END SUMMARY

GOM PROPOSES LABOR LAW REFORM

2. On February 9, the GOM's Secretary of Labor, Javier Lozano
Alarcon, presented to the Mexican Congress the Calderon
administration,s long awaited proposal for reforming the
country's Federal Labor Law (FLL). The proposal was also
placed on the Labor Secretariat,s (STPS) website thereby
making it freely available to any and all interested parties.
The GOM's proposal to reform Mexico's FLL is a sweeping
initiative that touches on numerous controversial labor
issues, some of which have resisted significant legislative
change for decades. In discussing the proposal Lozano stated
that the GOM,s intent was to formalize in law the use of
free, direct and secret ballot elections in cases where more
than one union was competing to become the workers' legal
representative. Lozano also highlighted such things as the
elimination of "exclusion clauses" which have been used to
compel an employer to fire a worker by expelling that
individual from a union, incorporating the concepts of
productivity and competitiveness into the FLL and a variety
of steps to add greater flexibility to labor/management
relations. The difficulty of implementing this type of
change notwithstanding, Labor Secretary Lozano expressed
confidence that the reform proposal could be enacted into law
by the end of April.

3. Not surprisingly initial reactions to the proposal from
labor activists who commented publically on the initiative
focused on its more controversial elements. One of these was
the proposal,s intent to mandate the publication of
collective bargaining contracts. Some considered this to be a
retreat from a constitutional guarantee of union autonomy and
control over its internal affairs. Other sensitive elements
included such things as instituting a change from a daily to
an hourly wage, authorizing temporary employment (a practice
that at present is technically illegal),instituting a
modification to the right to strike and setting a six month
limit on the amount of wages a worker is eligible for in a
dispute with an employer.

CONTEXT AND BACKGROUND OF MEXICAN FEDERAL LABOR LAW

4. Mexico,s Federal Labor Laws are derived from the
country,s constitution, specifically Article 123, which
establishes a set of principals and rules applicable to all
laws regulating labor relations. Over time these rules have
developed into an intricately detailed set of regulations
primarily covering the obligations employers have towards
employees. Article 123 and the laws derived from it
establish such basic protections as the right to organize,
bargain collectively and to strike. The FLL also covers such
topics as union autonomy, mandatory profit sharing,
compensation guidelines and the formation and regulation of
unions and their activities. Any meaningful change to the
FLL would require amending Article 123. The last meaningful
change to Article 123 occurred in the 1970s and even that
revision was largely dictated by ideas adopted in the 1930s
by the more progressive elements of the then ruling,
Institutional Revolutionary Party (PRI).

5. Discussions in Mexico over the country's FLL usually are
between supporters of labor and union on one side and
supporters of management and the private sector on the other.

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When pressed, both sides will grudgingly admit that Article
123 was very much designed for a different time and very
different social and economic circumstances. Consequently,
when discussing the matter calmly, both the proponents of
labor and of management often acknowledge that Mexico's labor
laws are in serious need of reform. However, their
definitions of what form that reform should take are vastly
different.

6. For the proponents of the business sector, reform means
greater labor &flexibility8 with that term being defined as
the ability to fire workers more cheaply and easily.
Mexico,s private sector has a point when it says that under
current FLL it is difficult and expensive to fire workers.
The historical reason for this is that since Mexico does not
have unemployment insurance the FLL mandates a complicated
and expensive severance package when an employee is fired
known as "liquidation." Employers are often reluctant to
hire new workers during good economic times because the FLL
makes it very difficult to fire them if conditions change.
Moreover, many of the FLL,s regulations tilt heavily toward
workers and against employers. Labor activists often
complain, correctly, that the FLL is not routinely enforced.
Nevertheless, the FLL is Mexican law and the private sector
must deal with it.

ORGANIZED LABOR REACTS

7. Many labor unionists firmly believe that Article 123
forms the bedrock upon which all constitutional guarantees of
worker rights are based and they are strenuously opposed to
amending it. Mexico,s organized labor movement is a complex
grouping of competing organizations which run the gamut from
very good to very bad and frequently disagree with each
other. Nevertheless, they were fairly consistent in
describing the proposed reform as a total surrender to the
interests of management over those of the workers. Many were
particularly upset that the proposed reform does nothing to
address the problem of &protection unions.8 Protection
unions are labor organizations that exist only on paper and
enter into collective bargaining agreements without the
knowledge or consent of the workers they purport to
represent. In such cases the workers have no opportunity to
vote either on what union will represent them or on the
contract that determines their working conditions.

8. Some of the points most strenuously objected to include
one that would limit the amount of loss wages an employee
could recover in a dispute with an employer. Such cases
often take years to resolve. Under the proposed reforms, no
matter how long a case takes to resolve, if the worker wins
he would only be entitled to a maximum of six months back
wages. Another point that labor unions object to is the
reform proposal,s move to change how salaries are
calculated. At present salaries in Mexico are calculated in
terms of a daily minimum wage. The GOM,s reform proposes to
have wages calculated on an hourly basis. Many labor unions
oppose this believing it would undercut the 8-hour work day
and the calculation of paid benefits.

9. A particularly controversial element contained in the
proposal is a change that would modify the right to strike.
Article 123 guarantees that right but in order to exercise it
the FLL establishes several administrative prerequisites, the
two most important being: (1) that only officially registered
unions can call for a strike and (2) before a strike can be
considered legal a union must receive prior approval of a
strike notice from the appropriate labor authorities. The
reform being proposed by GOM would require unions to provide
the name of every dissatisfied worker before a strike could
be approved. Labor activists claim that providing individual
names in this fashion would subject workers to harassment and
retaliation.

10. Regardless of where an organization may be on that gamut
of good or bad nearly all voiced concern about the proposed
reform elements dealing with union autonomy. Labor leaders
consider this constitutionally protected autonomy to be the
basis for independent unions. The majority of Mexican labor
experts and a good portion of its political class strongly
support union autonomy as one of the bedrock principles
underpinning the growth of a more democratic Mexico. Union
autonomy is viewed as one of the ways the broader human
rights of freedom of speech and association are guaranteed.

11. In theory, union autonomy prevents government attempts
to take over an organization intended to promote the economic
well being of average Mexicans and using it for political
gain. In practice, union autonomy in Mexico seldom appears
to be about protecting human rights. More than anything

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else, &union autonomy8 has come to symbolize one of the
things that most clearly demonstrate the need for urgent
labor reform; specifically union leaders who are accountable
to no one. As noted above the laws derived from Article 123
provide a great deal of detail regarding the obligations of
employers toward workers but it is all but silent with
respect to obligations unions have toward their members. The
FLL does not obligate unions to divulge any information
whatsoever about their internal administration.
Consequently, labor leaders closely guard such information
claiming that the details of internal union administration
are freely available to their organizations, membership
since they are the only ones who really need to know. In
reality, since the current FLL does not require labor leaders
to release information about the internal workings of their
unions, most of them do not do so.

COMMENT

12. Although both sides of Mexico,s labor/management divide
agree that the country is badly in need of labor reform, the
two groups do not really agree on much else. Many of the
GOM,s reform proposals, available on the STPS website, are
logical and a case could be made that the majority (although
certainly not all) are beneficial. However, the proposals
would definitely require Mexico,s organized labor movement
to operate very differently than it does now and there is
little in the GOM,s initiative that the unions could point
to as an example of what they are getting in exchange. The
GOM,s reform proposal has the support of the business
community and the country's ruling PAN political party.
However, the PAN by itself does not have the votes in
congress to enact this reform into law and it is unlikely to
pass, especially by April, as suggested by Labor Secretary
Lozano, without the support of at least one of Mexico,s two
main opposition political parties. The GOM,s best hope for
getting the votes it needs in congress is to make some sort
of deal with the PRI but that may be difficult. Keenly
focused on the upcoming mid-term elections scheduled for
July, the PRI,s national party leader has already gone on
record as saying the party will not support any reform
legislation that is not first negotiated with Mexico,s
organized labor movement. Some members of the PAN have
privately questioned the political wisdom of proposing labor
reform viewed as potentially harmful to labor unions and
workers in the midst of a recession and in the run-up to
elections. Depending on how negotiations over this proposal
are conducted, the only way such a bill could pass in
Congress would be if its more substantive, controversial
elements were significantly watered-down.
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