Chapter 23 of the USMCA is dedicated to labor, which was a key topic in USMCA negotiations given that labor issues were a major concern of the United States Congress throughout the negotiation process. In contrast to the USMCA’s dedication of a specific chapter to labor matters, the NAFTA labor provisions were incorporated in a side agreement containing eleven guiding principles on worker rights. The NAFTA requires Parties to cooperate on labor matters and submit only persistent patterns of a Party’s failure to enforce labor laws to full dispute resolution procedures. Chapter 23 of the USMCA strengthens these labor provisions, allows for recourse on labor matters through the same dispute settlement procedures as apply to other matters, and requires each Party not only to enforce its labor laws but to adopt and maintain laws on core worker rights as stated in the International Labor Organization (ILO) 1998 Declaration of Fundamental Principles and Rights at Work (ILO Declaration on Rights at Work), all while promoting fair trade.
II. EXECUTIVE SUMMARY
Given the international importance of labor laws and working conditions, Chapter 23 is dedicated exclusively to addressing labor matters. Importantly, the Parties recognize their ILO obligations and agree to enforce their labor laws and maintain and adopt laws as necessary to protect the labor rights set forth in the ILO Declaration on Rights at Work. Such rights include the freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labor, the effective abolition of child labor, and, for purposes of the USMCA, a prohibition on the worst forms of child labor, and the elimination of discrimination with respect to employment and occupation. Accordingly, the Parties may not eliminate or diminish their labor rights regulations in a manner that impacts trade or investment among the Parties. As to collective bargaining, Mexico must establish and maintain regulations that recognize and protect workers’ rights to collective bargaining. Additionally, the Parties are prohibited from importing goods that have been produced in whole or in part by forced or compulsory labor, including forced or compulsory child labor. The Parties are also required to address violence or threats of violence against workers that impact trade or investment among the Parties. Chapter 23 also requires each Party to establish and maintain fair and impartial labor tribunals to hear labor cases in an open and transparent manner and make decisions based on the evidence presented.
III. LEGAL DISCUSSION
The most significant articles of Chapter 23 are summarized below:
Article 23.1: Definitions. A key definition is the definition of “labor laws,” which is defined as statutes and regulations of a Party that directly relate to fundamental internationally recognized labor rights and include freedom of association, the right to collective bargaining, elimination of forced labor, and acceptable work conditions with respect to minimum wages, hours of work, and occupational safety and health.
Article 23.2: Statement of Shared Commitments. The Parties affirm their obligations as members of the ILO, including those stated in the ILO Declaration on Rights at Work and the ILO Declaration on Social Justice for a Fair Globalization (2008), recognize the important role of workers and employers’ organizations in protecting internationally recognized labor rights, and recognize the goal of trading only in goods produced in compliance with Chapter 23.
Article 23.3: Labor Rights. Each Party is obligated to adopt and maintain, in its domestic labor laws and regulations, and practices thereunder, the following rights as stated in the ILO Declaration on Rights at Work:
Additionally, under Article 23.3.2, each Party is obligated to adopt and maintain laws and regulations, and practices thereunder, governing acceptable work conditions with respect to minimum wages, hours of work and occupational health and safety.
Article 23.4: Non-Derogation. The Parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in each Party’s labor laws. Accordingly, the Parties are prohibited from waiving or otherwise derogating from, or offering to waive or otherwise derogating from, its labor laws and regulations, which: (a) implement the labor rights described in Article 23.3.1, if such waiver or derogation would be inconsistent with any of such labor rights; or (b) implement the labor rights, including the work conditions described in Article 23.3.1 and Article 23.3.2, in a special trade or customs area in the Party’s territory, in a manner affecting trade or investment between the Parties.
Article 23.5: Enforcement of Labor Laws. No Party shall fail to effectively enforce its labor laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment between the Parties. Additionally, each Party must promote compliance with its labor laws through appropriate government action, such as appointing inspectors, monitoring compliance and investigating suspected violations, seeking assurances of voluntary compliance, and requiring record keeping and reporting. Article 23.5.3 affirms that the Parties retain the right to exercise reasonable enforcement discretion and to make good faith determinations as to the allocation of enforcement resources for the fundamental labor rights and work conditions described in Articles 23.3.1 and 23.3.2 respectively. A Party’s authorities may not undertake labor law enforcement activities in the territory of another Party.
Article 23.6: Forced or Compulsory Labor. The importation of goods produced by forced or compulsory labor is prohibited, and each Party must cooperate in the identification and movement of such goods, in order to prohibit the importation of such goods into its territory.
Article 23.7: Violence Against Workers. Each Party recognizes that workers and labor organizations must be able to exercise their labor rights in a climate free from violence, threats, and intimidations, as well as the imperative of governments to effectively address violence or threats of violence against workers that is directly related to exercising or attempting to exercise labor rights. Each Party must address violence or threats of violence.
Article 23.8: Migrant Workers. Each Party must ensure that migrant workers are protected by labor laws, whether they are nationals or non-nationals.
Article 23.9: Discrimination in the Workplace. Each Party is obligated to implement policies against employment discrimination based on sex, pregnancy, sexual orientation, gender identity, and caregiving responsibilities, provide job-protected leaves and protect against wage discrimination.
Article 23.10: Public Awareness and Procedural Guarantees. Each Party shall promote public awareness of its labor laws and make information relating to such labor laws, their enforcement and compliance publicly available. Each Party must ensure access to tribunals for enforcement of its labor laws, which tribunals may be administrative, quasi-judicial, judicial or labor tribunals and must ensure that the proceedings before such tribunals are fair and transparent, comply with due process, do not entail unreasonable fees or time limits, and that the hearings are open to the public. Each Party must ensure that the parties to such proceedings have an opportunity to present evidence to support their positions and that the final decisions on the merits of the case are based on evidence presented, state the reasons on which they are based, and are available in writing without undue delay. Each Party must provide, as appropriate, for an appeal procedure for the review and, if warranted, correction of the decision, and must ensure that the tribunal reviewing such appeal be impartial and independent. Additionally, each Party shall ensure that the parties to the proceedings have access to remedies under its laws for the effective enforcement of its labor laws and that the remedies are executed in a timely manner. Finally, each Party shall ensure that other types of proceedings within its labor bodies are fair, are conducted by impartial officials, do not entail unreasonable fees or time limits, and document and communicate decisions to persons directly affected by the proceedings.
Article 23.11: Public Submissions. Each Party, through its contact point designated under Article 23.15, must provide for the receipt and consideration of written submissions from persons of a Party on matters related to Chapter 23, in accordance with its domestic procedures, making readily accessible and publicly available its procedures, including timelines for the receipt and consideration of written submissions.
Article 23.12: Cooperation. The Parties recognize the importance of cooperation in order to improve labor standards, and to further advance common commitments regarding labor matters, according to the principles and rights stated in the ILO Declaration on Rights at Work, including cooperation through exchanging of information and sharing of best practices on issues of common interest, study trips and research studies to document and study policies and practices, collaborative research and development of best practices, specific exchanges of technical expertise and assistance, and other forms of cooperation. Article 23.12.5 provides a comprehensive list of areas in which the Parties may develop cooperative activities, including, for example, the promotion and effective implementation of principles and rights as stated in the ILO Declaration of Rights at Work, and labor laws and practices in compliance with ILO Convention No. 182 Concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labor.
Article 23.13: Cooperative Labor Dialogue. A Party may initiate dialogue with another Party on any matter arising under Chapter 23 by delivering a written request to the contact point designated under Article 23.15, which includes specific and sufficient information on the matter at issue, to enable the receiving Party to respond. Unless the Parties engaged in dialogue decide otherwise, the dialogue shall begin within 30 days of the receipt of a request and may be held in person or by any technological means. Parties must dialogue in good faith, address all the issues raised in the request, considering all available options, and jointly deciding on a course of action. If the dialoguing Parties resolve the matter, they must document the outcome, including, if appropriate, specific steps and timelines. Said outcome must be made generally available to the public, unless the Parties decide otherwise.
Article 23.14: Labor Council. A Labor Council established by the Parties, which is composed of senior governmental representatives from trade and labor ministries, must meet within one year from the effective date of the USMCA and every two years thereafter, unless the Parties decide otherwise. Upon reaching the fifth year after the effective date of the USMCA, the Labor Council will review the operation and effectiveness of Chapter 23 and undertake subsequent reviews. Each meeting must result in the issuance of a decision, report or statement made by consensus, which generally will be available to the Public, unless otherwise agreed by the Parties.
Article 23.15: Contact Points. Each Party must designate, within 60 days from the effective date of the USMCA, an office or official within its labor ministry or equivalent entity, as a contact point to address matters related to Chapter 23.
Article 23.16: Public Engagement. Each Party must establish or maintain, and consult with, a national labor consultative or advisory body, including representatives of its labor and business organizations, to provide views on matters regarding Chapter 23.
Article 23.17: Labor Consultations. The Parties must make every effort through cooperation and dialogue to arrive at a mutually satisfactory resolution of any matter arising under Chapter 23. Pursuant to Article 23.17.2, a Party may request labor consultations with another Party (based on a procedure similar to the procedure for a party to request dialogue pursuant to Article 23.13), which consultations must commence within 30 days after the date of delivery of the request, unless the consulting Parties decide otherwise. Pursuant to Article 23.17.3, a third Party that considers it has a substantial interest in the matter may participate in the labor consultations upon written notice to the consulting Parties, which notice must include an explanation of its substantial interest in the matter.
Pursuant to Article 23.17.5, the consulting Parties must make every effort to arrive at a mutually satisfactory resolution of the matter, which may include appropriate cooperative activities. The consulting Parties may also request advice from independent experts chosen to assist them. If the consulting Parties fail to resolve the matter, a consulting Party may request that the relevant Ministers or their designees of the consulting Parties convene to consider the matter and seek to resolve it, including, if appropriate, by consulting independent experts and having recourse to procedures such as good offices, conciliation, or mediation, as described in Article 31.5 of Chapter 31 Dispute Resolution.
Pursuant to Article 23.17.8, if the consulting Parties fail to resolve the matter within 30 days of receipt of a request for Labor consultations, or another agreed period, the requesting Party may request the establishment of a panel under Article 31.6 of the USMCA.
Worker Representation in Collective Bargaining in Mexico
Pursuant to paragraph 1 of Annex 23-A, Mexico is required to adopt and maintain the measures set forth in paragraph 2 of Annex 23-A, which are necessary for the effective recognition of the right to all aspects of collective bargaining, by enacting labor laws in accordance with such provisions and Mexico’s Constitution, to protect the enumerated rights of workers and prohibit activities aimed at interfering with any of such rights. This includes requiring legislation establishing an independent entity for conciliation and registration of unions and collective bargaining agreements, as well as independent Labor Courts for the adjudication of labor disputes.
Importantly, Annex 31-A Facility-Specific Rapid Response Labor Mechanism, applicable to the United States and Mexico, and Annex 31-B Canada-Mexico Facility-Specific Rapid Response Labor Mechanism, applicable to Canada and Mexico, contain procedures for the Rapid Response Labor Mechanism for alleged violations of workers’ rights to free association and collective bargaining. Under this new procedure, a person may file a complaint with the United States or Canadian governments alleging that a Covered Facility in Mexico is violating Mexico’s labor laws addressing its obligations under the USMCA regarding workers’ rights to collective bargaining. The United States and Canada each intend to establish their own respective domestic processes, under which their governments will strive to complete initial reviews of complaints about a Covered Facility in Mexico within 30 days of receipt by their governments.
The USMCA’s labor provisions were heavily negotiated and critical for the ultimate approval of the Agreement by the United States. Each Party is required to implement legislation to comply with Chapter 23. In May of 2019, Mexico amended its Federal Labor Law in order to comply with the requirements of the USMCA and the ILO Declaration on Rights at Work. In order to comply with such, employers must implement a protocol to prevent workplace discrimination and adopt policies to prevent psychosocial risk in accordance with the Official Regulation “NOM-035-STPS-2018,” which became effective on October 23, 2019. In the coming months, Mexico will need to implement a new labor judicial system, as well as further protections for workers’ rights to collective bargaining.
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