One issue that appears unclear under the recently adopted reforms to Mexico's Federal Labor Law involves profit sharing payments (reparto de utilidades de los trabajadores or PTU) to employees working for outsourcing companies that provide labor services to operating companies. Should PTU be calculated based on the net tax base of the outsourcing company providing the labor services, or on the net tax base of the operating company to which the outsourcing company provides such services? The answer to this question is controversial. Some argue that indeed, as a result of the new labor reform, PTU should be calculated based on the net tax base of the operating company to which the employees provide their services. Others, however, argue that PTU should continue to be calculated based on the net tax base of the labor outsourcing company. The reality is that given the legal uncertainty present in this case, it will be Mexico's federal courts - likely the Mexican Supreme Court of Justice - that will rule on the interpretation of this issue, especially given that few clear legal provisions addressing this important legal issue currently exist. In our view, except in very specific cases, PTU should continue to be calculated based on the net tax base of the outsourcing company that serves as the legal employer, not on the net tax base of the company to which labor services are provided. Unfortunately, the law is vague on this point and gives way to different opinions and interpretations. If Mexico's Congress had sought clarity when drafting the labor reform, it would have included a legal provision expressly stating that, with respect to outsourcing companies, PTU should be calculated in accordance with the net tax base of the company to which employees render services, establishing exceptions, if needed, to this general rule in the same provision. Given that the foregoing rule was not clearly established, doubt now exists regarding how to calculate PTU for employees of outsourcing companies. Upon defining the nature and scope of agreements with outsourcing companies, the 2012 reform of the Federal Labor Law establishes that activities of outsourcing companies should comply with three mandatory requirements: (i) outsourcing services may not encompass the entire range of activities of the company to which personnel services are provided ("Operating Company") or be entirely the same or similar activities as those carried out by the Operating Company; (ii) the need for outsourcing must be justified because of the specialized nature of the work; and (iii) outsourcing may not encompass work that is the same or similar to that carried out by the rest of the employees rendering services to the Operating Company. The law concludes by expressly stating: "If the contractor fails to comply with all these conditions, (the Operating Company) ... shall be deemed the employer, for all corresponding legal effects, including compliance with social security obligations." From a legal standpoint, it is difficult to interpret this legal provision with respect to the majority of outsourcing companies. What does it mean if the Operating Company is considered to be, constructively, the employer of the employees of the outsourcing company? Does this imply a joint and several liability for the Operating Company? Does this mean that failure to comply with all the referenced conditions implies that the outsourcing company is no longer the employer, thus meaning that all labor obligations of a tax and legal nature cease for the outsourcing company and apply to the Operating Company? Given all the fundamental legal implications surrounding this issue, it is virtually impossible to interpret this question as any other way than a situation that creates joint and several liability for the Operating Company if the outsourcing company fails to pay legal required labor benefits. Moreover, when analyzing the typical case of an outsourcing company, it is virtually impossible to determine compliance or noncompliance with the three conditions listed above because there generally is no frame of reference for comparing the outsourced workers to a group of employees working for the Operating Company. Since various activities are performed at the workplace, and numerous subcontractors are working there, it is impossible to determine compliance with the first requirement. How is specialized work proven or justified? Since no definition for this concept exists, and upon a general understanding of what such concept means, specialized work refers to work in a specific industry that requires employee training. Lastly, how can one analyze the third requirement if the Operating Company's employee roster and payroll has no employees who are comparable to the employees working for the outsourcing company? It follows that if all three requirements are not met, the Operating Company will be legally responsible for employer's labor obligations; however, in reality it is materially and legally impossible to fail compliance with all obligations in most cases. This situation will likely generate labor lawsuits that will be decided by Mexican federal courts, which will establish binding jurisprudence that will apply to and resolve the issue at hand. It should be noted that PTU is not a tax and is subject to statute of limitation. The first cases will not be presented until mid-2014, when payments of PTU under the new legal provisions applicable for the 2013 calendar fiscal year are made. PTU does not result in additional charges or interest, even though it may be subject to a fine for violation of the labor law, which some believe will be easy to contest before the courts. Our conclusion is that unless or until the Mexican federal courts rule otherwise, the viability of outsourcing companies will continue, and such will still be valid and appropriate in certain projects and situations. Nevertheless, it is now important to take precautions in order to draft agreements that include certain requirements to reduce the risks discussed above.