1 Outsourcing in Mexico: Best Practices By Monica Schiaffino and Philip Berkowitz

5 A New Brazilian Commercial Code and Its Effects on Brazilian Corporate Law By Paulo Coelho da Rocha

a special supplement to ACC Docket sponsored by Littler Mendelson, P.C.

Outsourcing in Mexico: Best Practices

By Monica Schiaffino ( mschiaffino@littler.com), Littler, Mexico, and Philip Berkowitz ( pberkowitz@littler.com), Littler, United States

Corporations engaging staffing companies in Mexico must be careful that they are not considered to be the employer of the staffing company’s (hereinafter “Contractor’s”) employees. Recent changes to the Mexico Federal Labor Law (FLL), and in particular to Article 15-A of the FLL, regarding the practice of outsourcing, increase this risk. One of the main risks of Article 15-A is, if the beneficiary of the services (i.e., the company retaining the Contractor) is considered an employer, labor authorities may then determine that the company needs to pay profit sharing (at 10 percent of pre-tax earnings) to the Contractor’s employees.

Reforms to Mexico Social Security Law

On July 9, 2009, reform bills to Mexico’s Social Security Law (SSL) were enacted into law. The purpose of the SSL, as amended, is to regulate outsourcing and establish legal mechanisms that strengthen the Social Security Institute’s (SSI) revision authority.

These reform bills mainly establish joint and several liability for those companies receiving personnel services from Contractors through the execution of a services agreement.

According to the SSL, as amended, the beneficiary of the services ( hereinafter “Company”) shall assume the obligations set forth in the reform bills if the following requirements are met:

• The Company gives instructions to the Contractor’s employees;

• The Contractor’s employees work at the facilities determined by the Company;

• The Contractor fails to fulfill the obli-
gations established in the SSL; and
• If the SSI has previously ordered the
Contractor to fulfill omitted obliga-
tions, it fails to meet these require-
ments; and the SSI issues a notice to
the Company regarding such order
and omission.