Mexico’s recent reforms with respect to tax and labor matters, which began in 2019, have led to an increase in labor inspections and resulted in the imposition of hefty fines. The fines imposed for alleged non-compliance in labor and social security matters are calculated based on the Unit of Measurement and Update (“UMA”). The fines for violations in labor matters range from 50 to 5,000 times the daily value of the UMA, depending on the violation, which is approximately between MX$4,481.00 and MX$448,100.00 Pesos (US$224.00 and US$22,405.00 Dollars at an approximate exchange rate of MX$20.00 Pesos per Dollar).
The fines to be imposed resulting from inspections conducted by the Mexican Ministry of Labor and Social Welfare (“STPS”) will be enforced by Mexican tax authorities and will be considered a current charge to the fined company. This means the fines will be reflected in the tax obligations compliance opinion issued by the aforementioned authorities, in accordance with article 32-D of the Federal Tax Code.
The following factors will be considered in determining sanctions for labor matters: (a) the intentional nature of the action or omission constituting the offense; (b) its severity; (c) the damages that have occurred or may occur; (d) the economic capacity of the offending party; and (e) their re-incidence. Therefore, when a single act or omission impacts several workers the sanction will be imposed for each of the affected workers, which can add up to substantial amounts. Note also that if one act or omission results in various infractions, the sanctions applicable to each infraction will be applied independently, which can cause the fines to further increase considerably.
Fines may be imposed for various reasons, such as: (i) discrimination against employees; (ii) terminating pregnant women employees; (iii) allowing sexual or workplace harassment, workplace violence or psychosocial risks; (iv) non-compliance with Official Mexican Standards in matters pertaining to safety and hygiene (e.g., compliance with the COVID-19 related restrictions); (v) breach of home office rules; (vi) omissions in the calculation or delivery of social security payments; or (vii) for violations of the labor subcontracting regime, among others. Given that the STPS has expressed its intention to conduct more in-depth and detailed inspections through information exchanges with other agencies (including the IMSS, SAT and INFONAVIT), it is vital for all employers to conduct internal audits and reviews to ensure they fully comply with all labor, tax and social security obligations, with specific emphasis on the aspects that are being reviewed in the corresponding inspections.