Inside the previous couple of months, U.S. employers doing enterprise in Mexico have felt the consequences of the enforcement mechanisms of the “U.S.-Mexico-Canada Settlement” (“USMCA”). It’s maybe counterintuitive to many employers that the USMCA would end in labor enforcement actions in opposition to U.S. corporations below Mexican regulation. However it’s.
Most readers — particularly in Texas, whose largest commerce companion is Mexico — can be conscious that the USMCA (i) went into impact on July 1, 2020, (ii) is the results of President Trump’s renegotiation of NAFTA, and (iii) has a objective of implementing the stronger labor legal guidelines that Mexico was required to enact as a part of the USMCA.
Whereas the historical past of enforcement of labor legal guidelines in Mexico would possibly lead some U.S. corporations working there to imagine the identical degree of enforcement sooner or later, the USMCA additionally established an Interagency Labor Committee, which has the facility to refer complaints of denials of labor rights in Mexican amenities to the U.S. Commerce Consultant, who, in flip, might take enforcement motion.
The primary two such enforcement actions have been associated to U.S. corporations. This can be unsurprising — it is sensible that the U.S. Commerce Consultant has notably good enforcement mechanisms with respect to U.S. corporations which have amenities in Mexico. On account of the primary petition below the USMCA’s “Speedy Response Labor Mechanism,” Basic Motors entered into a complete plan to handle labor practices at its Silao, Mexico facility final month. This month, the Mexican primarily based subsidiary of an American firm, Cardone Industries, with operations in Matamoros, Mexico, entered into an action plan and agreed to pay damages, together with backpay, to Mexican employees. The motion plan was the result of a petition filed by the AFL-CIO and different unions.
These motion plans are agreements with the U.S. authorities and provides the U.S. authorities energy to implement them. In impact, a U.S. authorities company can now implement Mexican labor regulation in opposition to the businesses in these agreements. These first cases of success unions have had below the Speedy Response Labor Mechanism of the USMCA imply it’s doubtless there can be extra of all these actions.
Not solely is the higher enforcement of Mexican labor legal guidelines vital for U.S. corporations to notice, but additionally, as corporations with cross border operations develop Environmental, Social and Governance (“ESG”) packages, they should notice how USMCA actions can impression the “S,” or social facet, of their ESG disclosures. As a result of deal with ESG by buyers and the Securities and Trade Fee (because the V&E ESG Taskforce has written continuously over the previous couple of years), now’s the time for corporations to judge compliance with Mexican labor requirements, with respect to each their subsidiaries in Mexico and the businesses of their provide chains.