Mexico is in limbo in outsourcing matters, specialists warn

In the webinar on “Subcontracting in Mexico, the United States and Latin America”, organized by L&E Global Webinar in Spanish, specialists highlight the manner in which countries like Argentina and the United States have regulated or worked with this employment scheme.

While countries like Argentina have a “strong” regulation on outsourcing matters and the United States has the concept of “joint employment” in order to identify who the employer is, Mexico does not know whether this activity will be regulated or prohibited and has companies in limbo on which decisions to make in regard to the reform proposed by the federal government.

In the webinar on “Subcontracting in Mexico, the United States and Latin America”, organized by L&E Global Webinar in Spanish, specialists informed that the federal government has requested companies to “use this “stand by” period to regularize the workforces they have under the subcontracting scheme, but companies do not know how to do this while there is no clarity and certainty of what is going to happen with the changes to the Federal Labor Law”, explained Mexican specialist Oscar de la Vega, of D&M Abogados.

It was even reported that a new obligation on reporting all third-party contracting agreements to the authority and providing all of them in their original and a certified copy is already in force in Mexico City.

“Local authorities have been trying to regulate these subcontracting schemes; in the past they have tried to do this through restrictions of this tax because it was also evaded in outsourcing; therefore, withholding mechanisms were established; if you had outsourcing operations and they were not domiciled in the locality in which you were providing the service, you could get away with not paying the tax, this is why they re-established restriction mechanisms”, explained specialist Viviana Belauzaran.

In Argentina, Nicolás Grandi, of Allende & Brea, said “subcontracting is not prohibited, it is allowed, and it is strongly regulated and there are two cases: one in which one subcontracts a service in which a service is actually provided and then we have personnel subcontracting. It is only authorized in extraordinary circumstances and for a brief period of time and only through employment agencies that have to be expressly registered and authorized by the department of labor with a minimum capital and a very limited corporate purpose.”

The logic in Argentina is: subcontracting is permitted, complying with specific requirements, but, in all cases, one is jointly and severally liable for the obligations and it makes the subcontracting companies responsible, the specialist explained.

Meanwhile, in the United States, stated Juan Felipe de los Santos of the Jackson Lewis Firm, it is not prohibited in general terms and it is not regulated either, but the concept of Joint Employment exists “which is also used frequently when we want to see who is going to be responsible for a violation of any law, and the way in which the joint employment concept is applied will be determined depending on the type of law that is being violated.”

In the case of Mexico, Viviana Belauzaran emphasized, “we have several concepts, not legislation, right now, the bill says that, in order to be specialized, it must not be part of your corporate purpose or your economic activity, and we also have the definition of main activity, which is the activity that gave you the greatest income during a given year and, in order to register, I also have to state what my activity will be, but I have to focus on my main activity, if I do; but there is still no clarity on the legislation.”