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A Digital Services Tax in Mexico?
By Eugenio Grageda

A Mexican political party, Party of the Democratic Revolution (PRD), recently added Mexico to the global debate as to whether or not a digital services tax should be imposed on companies providing digital services, presenting a new legislative initiative under the name "Ley del Impuesto sobre los Ingresos Procedentes de Servicios Digitales" (Digital Tax Law).
Some Latin American countries, including Argentina, Brazil, Chile and now Mexico, are following the efforts of developed countries such as Australia, Norway, Spain, South Korea and the United Kingdom to tax multinational digital service companies. These unilateral actions, however, directly conflict with international efforts to achieve a comprehensive solution.
In this Holland & Knight alert, we analyze the draft of the bill of the Digital Tax Law in Mexico and the potential concerns arising from an implementation of such a levy.

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Boosting the trade relationship with Mexico
By CONSULMEX PHILADELPHIA

(Beyond the alternative facts)
There is no doubt that the trade relationship between Mexico and the USA is very dynamic and the one held with states such as Pennsylvania and Delaware is no exception to that rule. That is why the Consulate of Mexico in Philadelphia –whose jurisdiction comprises both states plus the eight southern counties of New Jersey– has been highly committed to making this relationship even more resonant by promoting a broader connectivity among key stakeholders and sectors in both, Mexico and this region.

Mexico is Pennsylvania’s second trade partner (just after Canada) with a value of more than 9 billion dollars in traded goods annually and over 200 thousand jobs in Pennsylvania depending on this trade relationship. Likewise, Pennsylvania is also home to top Mexican-owned firms such as Bimbo Bakeries, Wise Foods and Gruma Corporation, who provide stable and high-quality jobs to more than seven thousand workers in the state.

Given this context, the Consulate of Mexico in Philadelphia has undertaken specific activities to continue engaging businesses from Pennsylvania and Mexico in order to strengthen the relationship and provide more certainty to those wishing to stablish ties with Mexico. Last July, the Consulate signed a “Declaration of Cooperation” with the Department of Commerce of Philadelphia to ensure collaboration between industry clusters and arrange delegations of business people and investors, among other objectives. This instrument will certainly allow better coordination and communication to understate specific needs required from businesses to make a “safe landing” experience possible.

In the case of Delaware, Mexico is also an important partner by being Delaware’s second largest export market and second largest supplier with a traded goods value of more than $510 million dollars a year in industries such as medical and computer equipment, metals and material, just to name a few. Consequently, Mexican companies in Delaware operate 26 businesses and provide more than 300 local jobs while the broader trade relationship is responsible for more than 15 thousand jobs in the state. Similarly to Pennsylvania, Mexican companies like Bimbo Bakeries and Cemex have an important presence in Delaware.

Recently, the Consulate also signed a Memorandum of Understanding with the World Trade Center Delaware to establish a legal framework under which the parties seek to develop joint activities of cooperation to favor and promote exports and strategic alliances.
The instruments above mentioned will not only provide legal support to the activities developed by the Consulate –with the support of key allies such as the US-Mexico Chamber of Commerce, Northeast Chapter–, but will also help increase and evolve a framework of trust for companies seeking to embark into new ventures.

Finally, the organization of forums and conferences to promote the gains of trade or the use of tools such as the recently inaugurated direct flight between Mexico and Philadelphia will help boost this connectivity. At the same time, as with the agreement with the USA (USMCA), Mexico has deployed an intense strategy of diversification and will not cede its sovereignty to establish commercial agreements with other nations.

Mexican Senate Approves the Ratification of Measure Impacting Labor-Management Relations
By Mónica Schiaffino and Rogelio Alanis

On September 20, 2018, the High Chamber of the Mexican Congress approved a bill to ratify the International Labour Organization’s Convention 981 on the right to organize and to bargain collectively.  With this approval, the bill now moves to the federal executive branch, which is expected to ratify the Convention.

Among the guarantees contained in Convention 98 is the workers’ right to freedom of association with respect to their employment, and to be protected from anti-union discrimination.  Chiefly, this international instrument seeks to prevent employers from requiring their workers to join a union or to relinquish union membership as a condition of employment.  It also seeks to avoid employer interference over the incorporation, hiring and operation of union organizations.  Actions considered “interference” include an employer's implementing measures to control unions, such as helping form the unions or supporting them financially by paying the union fees.

Convention 98 requires governments to establish adequate mechanisms to guarantee workers’ right to unionize.  This mandate is consistent with Mexico’s last constitutional reform, which requires the formation of a federal agency to be in charge of registering all collective bargaining agreements (CBAs) and union organizations and managing related administrative processes.  Moreover, Convention 98 requires employers to establish sufficient measures to protect workers’ right to organize.  To that end, under Convention 98, admission clauses contained in CBAs will remain valid and enforceable.  These clauses require employers to hire workers only from unions that are parties to the CBAs.  Conversely, exclusion clauses in CBAs will no longer be valid.  Such clauses, which were valid prior to the labor law reform in 2012, require employers to terminate workers who relinquish their membership with the union.

Also consistent with Mexico’s recent constitutional reform, Convention 98 prohibits employers from unilaterally selecting the contracting union.  Under Mexico’s constitutional reform, before the parties of a CBA can file an agreement, or a union can execute a CBA or invoke a strike, the parties must prove that the union is the workers’ representative (i.e., the union was elected to represent the workers through a personal, free and secret vote), and that the related documents have been properly executed, registered and filed.  The legislature has signaled that these requirements will be incorporated into the Federal Labor Law in a subsequent reform.

Convention 98 will be enforceable and applicable to all employers after 12 months from the date the ratification is officially registered and published.  We believe this is a good time for employers in Mexico to analyze their current union strategies, assess and strengthen their relationship with the unions that are parties to their CBAs, as well as explore options to avoid conflicts with unions.

Mónica Schiaffino is a shareholder in Littler’s Mexico offices and has been practicing labor law for over a decade. She is an experienced litigator, with extensive experience implementing pension plans, coordinating and implementing labor structures dealing with expatriates, employee and business transfers, internal labor regulations and compliance, employee handbooks, policies and employment contracts, incentive plans; confidentiality agreement, conducting due diligence, and labor restructuring and collective bargaining agreements.

Mexico: New Method to Calculate Overtime
By Mónica Schiaffino

Mexico’s Second Chamber of the Supreme Court recently decided that to calculate the weekly overtime pay, minutes worked exceeding the regular work day must be counted cumulatively for the entire workweek and paid in full hour units.1 Under this new method, any time period exceeding the legal work day must be considered as overtime and added to complete hours.
For example, consider an employee working eight-hour workdays who works 129 minutes of overtime on a given week, as follows:


Monday 

Hours Worked:  8:45
Overtime Minutes :45         

Tuesday
Hours Worked: 8:50     
Overtime Minutes : 50         

Wednesday
Hours Worked: 8:12     
Overtime Minutes : 12         

Thursday
Hours Worked: 8:00    
Overtime Minutes : 00         

Friday 
Hours Worked: 8:17
Overtime Minutes :17         

Saturday
Hours Worked: 8:05                
Overtime Minutes : 05

TOTAL: 129

Here, because the employee worked a total of two hours and nine minutes of overtime, he/she is entitled to two hours of overtime pay.  As per the Court’s decision, the minutes of overtime within the workweek will be paid as long as they complete full hours.  “Surplus” minutes (here, the nine minutes) are not quantifiable and are not computed towards the overtime.  In fact, according to the Court, those “surplus” minutes do not constitute time worked beyond the regular work shift and may be considered as the time employees use to start the work day or to leave the workplace.

Employers should incorporate these new rules into their current payroll practices to ensure full compliance with this court decision.

We will continue to monitor and report on employment and labor law developments as they occur.

Mónica Schiaffino is a shareholder in Littler’s Mexico offices and has been practicing labor law for over a decade. She is an experienced litigator, with extensive experience implementing pension plans, coordinating and implementing labor structures dealing with expatriates, employee  and business transfers, internal labor regulations and compliance, employee handbooks, policies and employment contracts, incentive plans; confidentiality agreement, conducting due diligence, and labor restructuring and collective bargaining agreements.

New Digital System Allows Verification of Disability Certifications Among Other Related Transactions
By David Leal and Verónica López

Earlier this month, the Mexican Institute for Social Security (IMSS) announced new digital tools that enable both employers and insured employees to review records concerning the employees' disabilities certified by the IMSS, as well as the amount of disability benefits and payment status. Employers can conduct these transactions at the IMSS’ Virtual Desk, clicking on the “Consulta de incapacidades, patrón” button to start the process using their “Advance Electronic Signature” (known as “FIEL”).

Additionally, the new digital tools allow for disability payments to be made via electronic transfers directly to the insured’s bank account, as long as the insured is registered in the Standardized Bank Key system (known as “CLABE”).  The registration can be done online on the IMSS’ Virtual Desk or in person at a family medical unit.

This digital system will help employers verify whether the disability status of their employees has been registered with the IMSS.  This is especially helpful because, at times, employees fail to provide this information.  It will also make it easier for employers to obtain information concerning their employees’ disabilities, so this information can be considered when evaluating occupational risks.

David E. Leal advises and represents employers in labor law and social security. He represents clients before the Labor Board of Conciliation and Arbitration in all matters related to collective labor agreements, such as strike notices and control of collective labor agreements. He has experience negotiating with unions for the revision of collective bargaining agreements, as well as, the termination of collective labor relations. In addition, he has experience with preparing labor agreements, confidentiality agreements and other labor documents.
Verónica López Madrigal represents and advises employers in all matters related to Social Security in Mexico, such as employee and employer conflicts, tax analysis regarding social security payments, as well as performing legal audits. Her practice is focused on litigation and consulting in relation to all proceedings brought by the Mexican Social Security Institute and the National Worker’s Housing Fund Institute.

 

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