Mexico moves toward elimination of labor protection contract system with some hurdles along the way

The practice of protection unionism in Mexico appears to be on its way out - though slowly, with several bumps in the road.  In early 2017, the Mexican Congress passed sweeping constitutional reforms to eliminate protection unionism through replacement of tripartite labor boards with independent labor courts.

My recent piece in the ABA Section of Labor and Employment Law International Newsletter provides an update on legislative efforts to implement the constitutional reforms. According to Proceso, a leading political analysis magazine in Mexico, President Peña Nieto's administration introduced the reforms to meet labor commitments as part of the process of negotiation the Trans-Pacific Partnership.

Labor protection contracts exist at the intersection of international labor standards, free trade, and corporate compliance - particularly compliance with the U.S. Foreign Corrupt Practices Act (FCPA).  Long denounced by Mexican and international labor and human rights activists, these contracts are negotiated by employers and representatives of "official" unions before a company opens its doors - and without the participation or knowledge of workers.

Less recognized by Mexican and international companies that engage in protection unionism in Mexico is the serious corporate compliance risk presented by the practice because of the current configuration of tripartite labor boards in Mexico.  Payments made by employers to leaders of "official" unions may in fact be payments to government officials, since these individuals often serve as labor representatives on tripartite labor boards and as officials in local and federal government.  For example, as reported by Proceso in 2010, after signing a labor protection contract, an employer in the State of Jalisco paid 2,000 pesos a month to a trade union leader for "paperwork processing."

In recent years, Mexico has increased its efforts to eliminate corruption and bribery of government officials.  In March 2018, the labor department of the State of Jalisco introduced a new campaign against corruption.  Mexico will not eliminate government corruption without eliminating the practice of protection unionism, however.