In the working world, terminations are a reality that both employees and employers must understand and handle with care. In Mexico, the termination process is regulated by specific labor laws that establish different types of dismissal and the corresponding severance payments in each case. In this article, we will thoroughly explore the types of dismissal in Mexico and the indemnifications that must be paid in each situation.
Termination is a challenging decision for both employees and employers. In Mexico, the Federal Labor Law and other state labor regulations establish the rules and procedures for employee terminations. It is important for companies and workers to be aware of these aspects to ensure a fair and legal termination process.
Justified dismissal occurs when an employer terminates the employment relationship with an employee due to a serious offense committed by the worker. In Mexico, the causes for justified dismissal are defined in the Federal Labor Law and may include:
1.- Attendance Violations
When an employee accumulates unjustified absences, the employer can terminate their employment. The allowed number of absences varies according to state legislation and the length of time the employee has worked for the company.
If an employee engages in inappropriate behavior or violates the company’s internal policies, they can be dismissed. This includes cases of sexual harassment, workplace violence, theft, among others.
3.- Failure to Fulfill Obligations
If an employee does not adequately perform their job responsibilities, this can lead to justified dismissal. For example, if a salesperson consistently fails to meet their sales quotas.
4.- Changes in Working Conditions
If significant changes in working conditions occur, such as a geographical relocation that substantially affects the employee, they may be entitled to compensation if they choose not to accept the changes and prefer to be dismissed.
Indemnification for Justified Dismissal
In the case of justified dismissal, the employee is not entitled to receive severance pay for seniority or seniority premium. However, they must receive payment for their accrued salaries, which are the wages earned up to the date of their dismissal.
Unjustified dismissal occurs when an employer terminates the employment relationship without a legally justified cause according to Mexican labor law. In this case, the employee is entitled to receive severance pay for seniority and a seniority premium, in addition to other benefits.
1.- Severance Pay for Seniority
Severance pay for seniority is calculated based on the length of time the employee has worked for the company. Article 162 of the Federal Labor Law establishes that the worker is entitled to severance pay equivalent to three months of salary for each year worked.
2.- Seniority Premium
The seniority premium is another benefit to which the employee is entitled in the case of unjustified dismissal. This premium is equal to 12 days of salary for each year of service.
3.- Accrued Salaries
In addition to severance pay for seniority and the seniority premium, the employee also has the right to receive payment for accrued salaries, which includes wages corresponding to the period from the date of dismissal until the labor lawsuit is resolved or an agreement is reached with the employer.
4.- Reinstatement or Additional Compensation
In some cases, the employee may choose to be reinstated in their position instead of receiving severance pay for seniority and the seniority premium. However, this depends on the nature of the employment relationship and may require a labor lawsuit to determine the feasibility of reinstatement.
Dismissal for Force Majeure or Change in Modality
Dismissal for force majeure or change in modality refers to the termination of the employment relationship due to circumstances beyond the employer’s control, such as natural disasters, company closures, or changes in business modality. In these cases, the employee is entitled to receive special compensation.
Compensation for Force Majeure or Change in Modality
Compensation for force majeure or change in modality is equivalent to 20 days of salary for each year worked, in addition to accrued salaries. This compensation is in addition to severance pay for seniority and the seniority premium.
When an employee reaches retirement age or meets the requirements for receiving a pension, the employer may choose to terminate their employment. In this case, the employee is entitled to receive severance pay for seniority and a seniority premium, as well as the pension corresponding to the social security regime to which they are affiliated.
Compensation for Retirement Dismissal
Severance pay for seniority and the seniority premium are calculated in the same way as in the case of unjustified dismissal. Additionally, the employee is entitled to receive their pension according to the rules of the Mexican Social Security Institute (IMSS) or the Institute of Security and Social Services for State Workers (ISSSTE), as applicable.
Dismissal by Mutual Agreement
In some cases, the employee and the employer may mutually agree to terminate the employment relationship. In this scenario, the parties must sign a labor termination agreement and define the terms of the agreement, including compensation if applicable. It is important for the agreement to be clear and well-documented to avoid future conflicts.
Regardless of the type of dismissal, it is essential to follow a proper procedure to ensure the rights of both parties are respected. Here is a general guide on how to carry out a dismissal in Mexico:
- Notice: The employer must provide advance notice to the employee about the intention to terminate their employment and the reasons for dismissal, if applicable.
- Dismissal Interview: A dismissal interview must be conducted in which the reasons for dismissal are explained, and the employee is given an opportunity to respond and present their version of the events.
- Documentation: It is crucial to maintain a record of all communications and documents related to the dismissal, including advance notice letters, dismissal interview records, and the labor termination agreement if it is a mutual agreement dismissal.
- Payment Delivery: The employer must provide the employee with payments corresponding to their accrued salaries and any severance pay, seniority premium, or other benefits owed.
- Legal Follow-Up: If the employee believes the dismissal is unjustified or disagrees with the terms, they may file a labor lawsuit with the appropriate authorities. It is important to have legal counsel during this process.
Dismissal is a reality in the working world and should be handled with care and respect for employees’ rights. In Mexico, there are different types of dismissal, each with its own indemnifications and procedures. Both employers and employees should be informed about these aspects to ensure a fair and legal termination process.
If you have questions about a dismissal or need legal advice, it is advisable to consult with an experienced labor attorney familiar with Mexican legislation. Remember that proper handling of these situations can prevent legal issues and protect the rights of both parties involved.
In summary, understanding the types of dismissal in Mexico and the corresponding indemnifications is essential for maintaining fair and equitable labor relations in the country.
Finally, if you want to know how BLMHRM can help you calculate the indemnification that should be paid to each employee in case of dismissal, you can contact us.