March 26, 2019

The Importance of Properly Documenting Employment Terminations in Mexico

By Pablo Sáenz and Fernanda Magallanes

Under current Mexican labor and employment law, it is essential for companies to properly document all employee separations or terminations so that, in the event of labor litigation, the employer is well positioned to defend itself and reduce exposure to liability.

The following are instances in which labor terminations must be properly documented: (i) when an employee resigns, (ii) when the employer terminates the employee without cause and pays severance as set forth in Mexico’s Federal Labor Law (the “Law”), and (iii) when the employer terminates the employee for cause within the statute of limitations set forth in the Law, without paying severance.

It is important for all employers to maintain legally required documents so that such documents may be produced as evidence in case labor litigation arises.  Specifically, regarding items (i) and (ii) above, employers must have their departing employees sign a resignation letter and a detailed release. Further, it is advisable that employees execute separation agreements, whether at their workplace or at the local Labor Arbitration Board with jurisdiction over the case, although the latter affords much more protection to employers.

Separation agreements executed and ratified at the Labor Arbitration Board are tantamount to final, unappealable judgments.  On the other hand, severance documents executed at the workplace (letters of resignation, releases or separation agreements), and not approved by and filed with the Labor Arbitration Board, may be contested in a labor litigation case.  If such informal severance documents are objected to in a labor lawsuit, the party offering them for proof must submit testimony of an expert witness to prove their authenticity.

As to item (iii) above, note that each case is unique and requires individual analysis and attention.  Therefore, employers should investigate and analyze the available facts, as well as confirm that strong evidence exists to sustain a for cause termination.  Employers have a very high burden of proof in Mexican labor litigation cases.