Employment Compliance Trends: New Litigation Ruling Impacts Mexican Companies

In September 2016, there was a major shift in the Mexican Supreme Court’s approach to damages, where the highest court in the country ruled on the legality of punitive damages. In April 2020, federal courts made pivotal changes in litigation, where companies doing business in Mexico should not only be concerned about compliance with the Federal Labor Law (FLL), but also be mindful of tort claims.

In recent precedents (May-June 2022), Mexican federal courts confirmed that companies are not released from liability vis-a-vis their employees solely by paying their social security contributions for labor hazards or accidents or by paying their severance obligations. The courts have sustained that in addition to labor-related complaints, those claims addressing personal injury or pain and suffering in the workplace, which may include wrongful termination, are also subject to tort actions filed with civil courts. It may be worth noting that, as opposed to the parameters set forth under the FLL where the employer’s liability is capped, torts are not subject to a monetary threshold. In addition, courts have also ruled that in certain cases related to tort claims, specifically filed against an employer for personal injury or pain and suffering, the burden of proof may shift from the claimant (i.e., the employee), to the defendant (i.e., the company).

This new approach undertaken by the Mexican federal courts underscores the importance of our prior recommendations consisting in properly documenting and maintaining sufficient evidence of compliance with health and safety regulations addressing both physical and mental conditions at the workplace. The wording used in employment termination and settlement agreements should also be revised to minimize the company’s exposure to the aforementioned claims.

In sum, employees may now claim damages for personal injuries, pain and suffering, and perhaps even wrongful termination, not only in the Mexican labor courts, but also in civil courts via tort claims. In addition, the remedies available to employees are not only direct damages, but also punitive damages.

Therefore, considering the importance of labor related health and safety standards, both mental (NOM-35) and physical (FLL), as well as the clear dissection of remedies for employees, former employees, or even visitors to a company’s premises, companies should revisit the need of producing hard non-challengeable evidence of their compliance with the applicable laws and standards in order to mitigate their exposure to tort and punitive damage claims for failure to abide with same.

For more information, please contact your Foley relationship partner. Foley has created a multidisciplinary and multijurisdictional team to respond and ensure that our clients meet the legal and business challenges that the new trend in litigation is creating for stakeholders across a range of industries.

Information about the 2016 ruling can be found here. Our client alert about the 2020 changes can be found here.