Emergency declaration

Up until March 30, 2020, the restrictions and limitations related to the COVID-19 pandemic in Mexico, for the most part, had been implemented as recommendations to the population, causing some uncertainty regarding the impact that these measures have or had with respect to, for example, the performance of contractual obligations, labor matters, and the possibility of continuing to operate regularly.

 On March 30, 2020, the Order declaring the disease caused by the SARS-CoV2 virus (COVID-19) as a sanitary emergency due to force majeure (the “Sanitary Emergency Declaration”) was published in the Federal Register (“DOF”), same that became effective as of the day of its publication and will be in force until April 30, 2020.

Second extraordinary measures order

As a consequence of the Sanitary Emergency Declaration, on March 31, 2020, the Ministry of Health (“SSA”) published in the DOF the Order establishing extraordinary actions to address the health emergency caused by the SARS-CoV2 virus was established (the “Second Extraordinary Measures Order”).

Among other things, the Second Extraordinary Measures Order establishes that, during the period that runs from March 30 to April 30, 2020 (the “Suspension Period”), only activities considered essential to face the COVID-19 and for the fundamental functioning of the economy may continue.

Pursuant to the Second Extraordinary Measures Order, the following are considered as essential activities:

1. Activities of the health sector, including the manufacture and supply of medical equipment.
2. Activities involved in the national defense, public security, and protection, as well as the administration of justice.
3. Essential activities for the fundamental functioning of the economy, namely: Finance, tax collection, distribution and sale of energy products, gas stations, and gas, generation and distribution of drinking water, food and non-alcoholic beverage industries, food markets, supermarkets, convenience stores, grocery stores, sale of prepared food, passenger transportation, and shipping/freight services; agriculture and livestock industries, agroindustry, chemical industry, cleaning products; hardware stores, courier services, private security personnel; daycare centers, asylums (retirement homes) and refugee centers for women suffering violence, telecommunications and media, private emergency services, funerary and burial services, storage services, essential goods supply chain, logistics (airports, ports, and railroads), as well as activities which suspension would have irreversible effect for their continuation.
4. The operation of government social programs.
5. The preservation and maintenance of the critical infrastructure that ensures the production and distribution of essential services such as drinking water, power, gas, oil, gasoline, jet fuel, basic sanitation, public transportation, first-level hospital, and medical infrastructure, among others that could be included under this category.

In the case of activities considered essential and that therefore may continue, the Second Extraordinary Measures Order establishes that: (i) there should not be meetings or gatherings of 50 people or more; and (ii) these follow sanitary and social distance measures previously ordered by the SSA and other health authorities (e.g. hand washing, sneezing etiquette, no hugs or kiss greetings).

In addition, the entire population was encouraged to remain at home during the Suspension Period. For the at-risk population (60+ years, chronic diseases, pregnant or nursing women), they stay at home order will be strictly enforced.

Local governments such as Mexico City and the State of Mexico have issued similar declarations and orders. It is important that all companies and businesses verify that said local authorities allow the regular operation of their activities, since these may not be consistent with, or be different to, the measures and actions of the Second Extraordinary Measures Order.

In the particular case of Mexico City, on April 1, 2020, the local order establishing extraordinary measures to address the Sanitary Emergency Declaration was published. Such order expands the list of essential activities and establishes examples of which are not considered essential, including, but not limited to: private works, department stores, shopping centers, nightclubs, recreational parks with restricted access, among others. Moreover, all public or private activities in which gathering are of 25 people or more are suspended.

It is important to clarify that the Second Extraordinary Measures Order does not amend, cancel or repeal previous orders and/or measures ordered by SSA; hence: (i) companies and businesses, to the extent possible, should continue to privilege home office; and (ii) to the extent that said previous measures or orders are not contrary to the Extraordinary Measures Order (although not expressly mentioned in its transitory provisions), companies and businesses shall continue to comply with them.

As a result of the Sanitary Emergency Declaration and the publication of the Extraordinary Measures Order, regardless of the impact that the contingency is having on companies concerning their contractual obligations, this has generated uncertainty within companies regarding their activities, in connection with their employer-employee obligations, and the sanitary contingency.

In this regard, a series of questions come to mind:

As an employer, should I suspend work activities in my workplace?

Am I required or not to pay full salaries and social security fees during the suspension?

Should someone be notified of the suspension?

Article 427 of the Federal Labor Law (“LFT”) provides that the following are causes for temporary suspension of employment relationships in a company or establishment:

“(...)

I. Force majeure or acts of God not attributable to the employer, or his physical or mental incapacity or its death, which produces, as a necessary, immediate and direct consequence, the suspension of the works;

(…)

VII. The suspension of work or labor, ordered by the competent health authority, in cases of sanitary contingency. (…) ”

On the other hand, article 429 of the LFT establishes that in the cases of article 427, the following rules will apply:

“(...)

I. In the case of section I, the employer or its representative will give notice of the suspension to the Court, for the latter, prior application of the procedure contained in the Special Collective Procedure established in article 897 and subsequent provisions of this Law, approves it or reject it;

(…)

IV. In the case of section VII, the employer will not require the approval or authorization of the Court and will be obligated to pay their employees an indemnification equivalent to one day of the current general minimum salary, for each day the suspension lasts, without exceeding one month. (…) ”

Considering the provisions of the Sanitary Emergency Declaration and the content of the Extraordinary Measures Order, it is not completely accurate to maintain that the hypothesis of section VII of article 427 of the LFT is satisfied, and therefore, employers must suspend individual and collective work relationships – in those that are not necessary to face the contingency, according to the essential activities described above, since there has not been an express indication related to “the suspension of labor” in terms of the LFT, rather, they have been issued as “recommendations”, “measures” and “invitations”.

Notwithstanding the above, considering the activity of each of the companies is engaged in, a sanitary contingency, per se, is a cause of collective suspension of labor relations without requiring the approval or authorization of a competent Court; thus, it should be understood that the hypothesis of article 427 section VII and 429 of the LFT applies to the case. Consequently, each employee has the right to an indemnification equal to one month of the minimum salary in effect during the time of this contingency.

That said, it is clear that the current intent of the Federal Government is to invite companies to instead provide a full paid leave during this time (in their press conferences, the Federal Government has portrayed this situation, not as a sanitary emergency, but rather as a generic “force majeure” case); however, this is arguably not consistent with the LFT, because this would require a declaration of force majeure by the labor courts, which at this moment is not possible since the procedural terms and actions before the labor courts are suspended.

Despite the above, it is important to consider that the Federal Government has expressed that it expects the private sector to abide by these measures, actions, and recommendations without the need of fines or other coercion, but that, nevertheless, the Federal Government is prepared to impose sanctions and could eventually seek liability actions against those who, despite the risk, decide to operate and create an outbreak of the virus at the workplace.

Labor inspection procedures

To enforce the measures and actions ordered by the SSA, the Ministry of Labor and Social Welfare (“STPS”) has issued criteria to carry out inspections to the workplaces where essential activities are carried out, and where non-essential activities are carried out.

In case that activities deemed essential are carried out at a workplace, the STPS will make sure that social distancing measures are carried out. In the event, protection to at-risk individuals are detected in the workplace, STPS will order that they immediately leave the premises so they can self isolate at home, among other measures are carried out.

In case that activities deemed non-essential are carried out at a workplace, the STPS will request that the employers suspend activities. If the employers refuse to suspend activities, the STPS may notify the Attorney General’s office about such refusal.

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