Mexico’s Supreme Court Rules on the Constitutionality of the Three-Month Limit for Paying Employee Profit Sharing


Through its decision in amparo case number 633/2023 dated April 3, 2024, the Second Chamber of the Mexican Supreme Court confirmed the constitutionality of the maximum employee profit sharing limit of three months of an employee’s salary, or the average of the profit sharing received in the last three years, whichever is more favorable to the employee.

Such resolution stated that the terms of section VIII of article 127 of the Federal Labor Law do not violate the terms of articles 14, 16 and 123 of the Mexican Federal Constitution, nor the Guide for complying with employee profit sharing obligations issued by the Department of Labor and Social Welfare (the “Guide”), for establishing said limit of three months of the employee’s salary for profit sharing payments from the company.

The Second Chamber, by a unanimous vote, emphasized that the Mexican Congress has the power to legislate on labor matters and issue provisions regarding employee profit sharing.

Finally, the ruling clarified that the above three-month limit is not absolute, since the penultimate paragraph of the Guide leaves open the possible interpretation that, if the employee does not yet have a history of three previous years to calculate the average of profit sharing payments, the average of the amount paid to the same category, post, title, level or position of the employee during the last three years may be taken into account.

As a result, the limit on employee profit sharing is variable and will be granted in the best interest of the employee, based on the following assumptions:

  1. Three months’ salary;
  2. The average of the profit sharing payments received in the last three years; or
  3. In case the employee does not have three years of seniority, the average amount paid to the employee’s category, post, title, level or position during the last three years.

Please contact us should you have any questions regarding profit sharing.

CCN México Report™

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