CMS Expert Guide to employment termination law and legislation

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1. Dismissal of employees

1.1 Reasons for dismissal

The employer must establish a real and serious reason to dismiss an employee.

It may be:

  • a personal reason, notably a fault (disciplinary ground), poor performance, disablement of the employee when the employer is unable to relocate / redeploy him to another position or make reasonable adjustments to his post; or
  • an economic reason, such as economic difficulties, technological changes or the absolute necessity of restructuring to safeguard competitiveness. The economic reason is analysed at the level of the group’s companies established in France operating in the same business sector. The redeployment obligation for economic dismissal is limited to jobs available “in French territory in the company or in other companies of the group, the organisation, activities, and operating location of which allows mobility of some or all of the personnel“;
  • the refusal to amend the employment contract following a collective performance agreement

An employer may not dismiss an employee without a legally valid cause.

Dismissal may be based on personal grounds (e.g. disciplinary dismissal, dismissal due to professional inadequacy, dismissal due to incapacity) or economic grounds (e.g. economic difficulties, technological changes), or subject to specific conditions, without stating a specific motive.

At-will employment does not exist in Mexico, and termination at-will clauses are only applicable in favor of the employee, therefore employers may not terminate employment relationships without just cause, i.e. unfair dismissal.

There is a closed list of causes in the Mexican Federal Labor Law and a set procedure to terminate employees at any time without incurring in liability, which includes, inter alia:

  • false statements about work qualifications;
  • breach to the disobedience or honesty principles;
  • vandalism;
  • sexual harassment;
  • alcoholism in the workplace;
  • revealing company secrets;
  • refusing to comply with safety procedures; and
  • four unexcused absences in a 30-day period.

If there is no substantial motive or evidence, labour relationships can be terminated via a voluntary agreement where the employee is entitled to statutory benefits and possibly some form of compensation (each case must be treated individually through human resources).

If in any case there is no termination with just cause or a negotiated exit for an employee, the employee is entitled to claim for wrongful termination and sue either for substantial statutory benefits, lost salaries and the severance package, or reinstatement to the job.

Employees must claim within 60 days following alleged wrongful termination.

Before the employee is entitled to sue for either substantial statutory benefits or the job reinstatement, the employee and the employer will be subject to a "conciliation hearing", which shall not last more than 45 calendar days. If the conciliation is not successful, then the employee will be entitled to proceed with his/her claims against the employer.

1.2 Form

The stages in the individual dismissal procedure are as follows:

  • The employee is formally invited to a preliminary meeting.
  • At least five business days after the formal invitation, a preliminary meeting is held during which the employer explains the reasons for the contemplated dismissal and listens to the employee’s explanation.
  • The employee may be assisted by a third party (an employee of the company or an adviser of the employee mentioned on an official list prepared by the Prefect, depending on the existence of employee representative bodies in the company).
  • The dismissal letter must be sent to the employee at least two (or seven for a dismissal due to economic reasons) business days after the meeting (and within a month for a disciplinary dismissal).

The dismissal letter must be a registered letter whose receipt must be acknowledged by the employee, signed by either a legal representative of the firm or a person duly empowered by a legal representative, and who must belong to the company.

Applicable collective bargaining agreements can provide for a more favourable timeframe and / or procedure.

The letter must explicitly mention the grounds for dismissal. There are other mandatory provisions such as the possibility of choosing to benefit temporarily the supplementary health care scheme in force in the company, etc.

The grounds set out in the dismissal letter may be specified by the employer or at the employee’s request after the letter has been sent. If the employee does not make such a request, the letter’s lack of an adequate explanation will not in itself support a finding that the dismissal lacks real and serious cause, but will merely entitle the employee to compensation of no more than one month’s salary.

A special procedure (possible involvement of the works council, see below,
meeting and notification of the dismissal) applies in the case of a dismissal for economic reasons or when the dismissal concerns a ‘protected employee’ (e.g. members of the social and economic council, and trade union delegates notably).

A specific procedure prior to the dismissal exists for employees who have been recognised as physically incapable of performing their work by a labour doctor (redeployment obligation, possible involvement of the social and economic council, etc.).

For a dismissal based on a disciplinary reason, the employer should move rapidly as the procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovery of the facts.

The employee must be notified of the dismissal in writing.

If an employer has just cause to terminate an employment relationship, there is an obligation to give personal notice to the employee or, where not possible, to the competent Labour Board, and to prove the cause for dismissal. If the notice is not delivered, the termination will be deemed to be without cause.

1.3 Notice period

The notice period is set by the applicable collective bargaining agreement and the Labour Code, and generally lasts between one and three months. The contract may be terminated without notice in the event of gross misconduct or intentional misconduct.

In the event of dismissal, the law provides that an employee is entitled to a notice of a duration which varies depending on his seniority as follows:

  • Length of service of less than six months: no notice period applicable;
  • Length of service between six months and less than two years: one month;
  • Length of service of at least two years: two months.

For any dismissal, the employer may choose whether the employee works during the notice period.

In either case, employee is entitled to receive the same salary, including any benefits.

There is no obligation to serve a notice in advance to the employee in case of dismissal but only upon the dismissal moment. The notice shall contain the just causes for dismissal, and the date of their occurrence.

If not possible to deliver the notice to the employee, the employer shall serve the notice to the competent Labour Board and provide it with the last known domicile of the dismissed employee.

Failure to deliver the notice to the employee or to the Labour Board will be deemed as a dismissal without just cause.

1.4 Involvement of works council

The social and economic council must be informed and consulted (with an advisory but formal vote of its members) when a mass redundancy is planned, or for the planned dismissal of a protected employee or physically disabled employee.

Works councils do not exist in Monaco. A staff representative (if established) must be properly informed prior to a collective redundancies.

There are no works councils in Mexico.

1.5 Involvement of a union

When a company employs more than 50 workers, trade unions may be involved in a mass redundancy procedure to negotiate an ‘employment saving plan’.

No involvement for dismissals.

The involvement of a union in the dismissal will be tied to the actual rights and obligations assumed under the corresponding Collective Bargaining Agreement, which may provide for the right for the union to be present during the act of providing notice for the dismissal.

1.6 Approval of state authorities necessary

This is required when dismissing ‘protected employees’ and now the validation or homologation of the employment saving plan is also required for mass redundancy procedures.

Mandatory for employees with legal protection because of their private life or their mandate.

This protection applies to staff representatives, union delegates, pregnant women, employees taking maternity leave, paternity leave, adoption leave or family support leave, members of the Labour Court, harassment referents.

The relevant Labour Authority has to be informed of projected collective redundancies prior to their dismissal, and grant prior approval.

Not necessary.

1.7 Collective redundancies

Different procedures apply according to the company’s workforce and the number of employees concerned (the procedures are ‘lighter’ in small companies that dismiss fewer than ten employees).

The main principles are the same:

  • The employer has a duty to inform and consult the staff representative bodies;
  • All documentation related to the collective redundancy must be sent to the state authorities

In case of mass redundancies (more than ten employees in a company employing at least 50 employees):

  • The employer has a duty to inform and consult the social and economic council, involving at least two meetings (the social and economic council may be assisted by an accountant in some cases). Please note that, with the new law, the duration of the consultation has been regulated.
  • An ‘employment saving plan’ (a social plan providing real alternatives and social measures accompanying the redundancy, such as redeployment, redeployment leave, training, etc.) should be drafted. There are two options for drafting it: either through a collective agreement negotiated with trade unions or unilaterally by the employer (only in the absence of trade unions in the company or if no agreement is found and then only after consultation with the social and economic council).
  • This employment saving plan should then be sent to the state authorities that will either validate it (if agreed with trade unions) or homologate it (if unilaterally drafted by the employer). If the state authorities do not agree with the plan, the employer may present another draft after consulting the social and economic council.

The implementation of collective redundancies is mainly regulated by law and the National Collective Bargaining Agreement, which imposes some procedural steps prior to implementing any such decision.

Three main issues must be considered regarding the preparation and implementation of a collective social plan:

  • Drafting an information document containing all essential elements

regarding the decision to restructure, its motivation, its implementation and the measures taken by the employer to minimise any adverse impacts on employees;

  • Circulating the information to staff representatives, discussing it with them and collecting their comments and choices about measures taken to implement the restructuring (i.e., the measures adopted to minimise the number of dismissals); and
  • Implementing the restructuring plan, by obtaining the required authorisations as the case may be, notifying employees of their terminations and paying termination indemnities.

Collective redundancies are only permitted in Mexico as a consequence of the closure of the company or the definitive reduction of jobs.

Such circumstances can include, inter alia, as a result of:

  • Acts of God;
  • Employer’s disability or death (where the employer is an individual) that results in the termination of work;
  • Non-profitability of the business;
  • Depletion of the product (in the extraction industries);
  • Bankruptcy, if the same results in the closure of the company y or o a definitive reduction of jobs.

The employer must obtain the authorisation of the Labour Board to implement the collective redundancies. If they are approved, the employer must pay the affected employees the statutory severance package, except for the requirement to pay 20 days of daily wage per worked.

In case of a definitive reduction of jobs, the employer shall take into consideration the seniority of the employees in order to affect primarily the workers with less seniority.

1.8 Summary dismissals

The term ‘summary dismissals’ has no real meaning in France. Dismissal without a notice period is only possible where there has been a serious breach, but even in that case, the form described above for dismissal procedure, including the preliminary meeting and registered letter, must still be applied. In case of dismissal without notice, the employee has no dismissal indemnity or notice period indemnity, because there is no notice period. Such dismissed employees are still entitled to unemployment insurance benefits, however. The dismissal procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovering of the facts.

Dismissal without notice is only possible in case of gross misconduct. In such a case, the employee receives no dismissal indemnity or notice period indemnity. The employee is still entitled to unemployment insurance benefits.

Summary dismissals are not allowed under Mexican law; failure to provide the corresponding notice to the employee will lead to the dismissal being considered as a dismissal without just cause.

1.9 Consequences if requirements are not met

The amount of damages depends on the actual loss suffered by the employee. For dismissals notified on or after 24 September 2017, the ordonnance n° 2017-1387 provides that the damages have a preset minimum and a maximum amount depending on the employee’s length of service. The ordonnance also stipulates specific lower minimum amounts for companies that usually employ fewer than 11 employees, but the maximum remains identical.

In some circumstances, the dismissal will be void, allowing the employee to request reinstatement. (These circumstances may include collective redundancies without a social plan, dismissal after an occupational injury or in discriminatory dismissals, or dismissal of a protected employee without state authority authorisation). In such a case, the compensation cannot be less than six months’ salary.

Should the employer dismiss an employee on personal or economic grounds without a valid cause, the employer would have to pay a dismissal indemnity.

In addition, the employee could claim damages for injuries suffered due to his / her wrongful dismissal.

If the employer dismisses an employee without a just cause, or if it does not serve the notice of dismissal upon the dismissal, it will be obliged to pay the severance package and, in some cases, to reinstate the employee to his position.

1.10 Severance pay

Dismissal indemnity is payable unless the dismissal is due to gross misconduct or intentional misconduct. The amount payable is mainly set by the collective bargaining agreement but must not be less than 1 / 4 of the monthly salary per year of service for the first ten years of service, plus 1 / 3 of the monthly salary for each year of service after ten years. Indemnity is also payable for unused accrued holiday entitlement and for the notice period if the employer chooses to release the employee from performing it.

Dismissal indemnity is payable unless the dismissal is for gross misconduct. The amount payable is mainly set by the collective bargaining agreement, but must not be less than the French legal dismissal indemnity (since 27 September 2017: 25% of the monthly gross salary until ten years of seniority and one third of the monthly salary as of the tenth‘s year). A higher indemnity is payable in case of dismissal without a stated motive. Indemnity is also payable for unused accrued paid holidays and for the notice period if the employer chooses to release the employee from performing it.

Employees hired for an undetermined term who are dismissed without a just cause are entitled to claim reinstatement or the payment of a mandatory severance package comprised of the amounts described below. Please note that in order to determine the “daily wage” it shall be considered the daily proportion of any employment benefits paid on a regular basis to the employee (e.g. private medical insurance; performance bonuses):

  • 20 days of daily wage for each worked year.
  • 90 days of daily wage as Constitutional Indemnification
  • 12 days of daily wage as Seniority Bonus for each year of service that the employee has worked. For purposes of this concept, the daily wage is capped at twice the amount of the minimum daily wage.
  • Any accrued salaries and pro-rata benefits (including unused vacation days plus its vacation premium, Christmas bonus and any other accrued benefit).

Employees hired for a determined term who are dismissed without a just cause are also entitled to a severance payment, but this is calculated differently, as follows:

  • If the employment relationship was for a determined term of time less than one year, an amount equal to the amount of the salaries of half the time of services rendered
  • If the employment relationship was for a determined and exceeded one year, in an amount equal to the amount of wages of 6 months of wage for the first year and 20 days of daily wage for each of the following years in which the employee had rendered the services
  • 90 days of daily wage as Constitutional Indemnification
  • 12 days of daily wage as Seniority Bonus for each year of service that the employee has worked. For purposes of this concept, the daily wage is capped at twice the amount of the minimum daily wage.
  • Any accrued salaries and pro-rata benefits (including unused vacation days plus its vacation premium, Christmas bonus and any other accrued benefit).

Where an employee is dismissed for a just cause under the Mexican Federal Labour Law, that individual will only be entitled to the payment of accrued salary and benefits, and will not be entitled to any of the other statutory severance payments outlined above.

1.11 Non-competition clauses

A non-competition clause is only valid if provided in the work contract, and if:

  • The employer demonstrates that this clause is necessary to safeguard his interests and proportionate (e.g. the lower is the position the less the clause is justified);
  • Its scope is limited to a reasonable area, a reasonable period of time, and precise activities; and
  • The employee receives a monthly indemnity during the term of the clause (the indemnity amount is set by the work contract or collective bargaining agreement, but is generally between 20% and 50% of the employee’s monthly salary).

This clause can be waived by the employer in the letter of dismissal or according to the provision of the applicable collective bargaining agreement and / or employment contract.

The examination of the terms of the applicable collective bargaining agreement is key on this matter.

Non-competition clauses are enforceable in Monaco provided they are appropriately restricted.

A non-competition clause must comply with five cumulative conditions:

  • it must be essential to protect the employer’s legitimate interests;
  • it must be limited to a specific time period;
  • it must be limited to a geographical area;
  • it must take the characteristics of the employee’s job into account; and
  • most importantly, it must provide for a financial counterpart.

Independent consideration is required for a non-competition clause.

Non-compete arrangements on individuals are generally unenforceable under Mexican law, as they are perceived by courts to limit an individual’s constitutional rights to employment and to exercise a profession.

That said, the Mexican Supreme Court has ruled that under very limited circumstances (e.g., where there is proportionate compensation, and limitation of time and geographic scope), non-compete agreements may be enforceable. The enforceability of non-compete (and no-solicitation) arrangements in Mexico must be carefully analysed on a case-by-case basis.

1.12 Miscellaneous

Specific and restrictive rules and procedures apply in the case of pregnant women, women on and returning from maternity leave, young fathers, and employees recovering after a work-related accident or suffering from a work-related illness. Women on maternity leave cannot be dismissed during this period.

Since 2008, a new means of termination has been introduced, namely “by mutual agreement”. This new possibility is called ‘rupture conventionnelle’ (mutual termination of the employment contract). The termination is agreed by both employer and employee and there is no cause or reason to demonstrate.

The employee is entitled to unemployment insurance benefits and dismissal indemnity provided by law or the applicable collective bargaining agreement (or more if agreed).

A strict procedure including preliminary meetings and consideration periods should be followed (both parties have the benefit of 15 calendar days to retract, from the date on which the form is signed); a specific form must be filled in and signed by both parties.

The specific form must be sent to the state authorities for agreement. The state authorities have a 15-open day period to review the form. Within these 15 days, the state authorities can agree to the termination, disagree or stay silent (silence amounts to agreement). However, the state authorities must expressly agree for protected employees. Otherwise the termination is void.

Since September 2017 it has been possible for the employer to negotiate a collective agreement through a ‘rupture conventionnelle collective’ (mass mutual termination of the employment contract) with trade unions. Such an agreement can only implement voluntary departures and thus excludes any dismissals designed to eliminate jobs. This new method of terminating contracts is entirely excluded from the rules governing economic dismissals. The labour administration is informed as soon as negotiations to conclude such an agreement start and reviews the agreement’s contents before validating it.

Not applicable.

Relocation of the company / Change location of the work

There are some court precedents establishing that changing the working place is a unilateral change to the labour conditions. Therefore, it will allow an employee to terminate the employment with a just cause and consequently accessing to the severance package payment.

2. Dismissal of managing directors

2.1 Reasons for dismissal

The company may generally revoke the appointment of the managing director without cause, unless stated otherwise in the by-laws of the company or the resolution of appointment. However, a fair reason is legally required in certain forms of companies (e. g. the civil form or commercial forms such as certain limited companies (‘SA’) or limited liability companies (‘SARL’)).

A company may generally revoke the appointment of the managing director without cause, unless stated otherwise in the by-laws of the company or the resolution of appointment. This is particularly the case for limited companies (‘SA‘). However, a just cause is legally required in limited liability companies (‘SARL’) when revoking a managing director who is also a shareholder of the company. In any event, revocation must follow mandatory steps to be declared valid.

Pursuant to Mexican Law, employees who perform

  • direction, inspection, vigilance or supervision activities, when such are of a general nature (so that they apply to all the areas of a company); and / or
  • personal services for the employer (so that they are in personal / direct contact with the employer regardless of their position / activities). 

will be considered as trust-employees.

The classification of a trust employee depends on the activities performed and not on the name given to their position.

Based on this, Directors will be considered as trust-employees and therefore, some special rules will be applicable for their dismissal.

At-will employment does not exist in Mexico, and termination at-will clauses are only applicable in favor of the employee, therefore employers may not terminate employment relationships without just cause, i.e. unfair dismissal.

There is a closed list of causes in the Mexican Federal Labor Law and a set procedure to terminate employees, at any time without incurring in liability, which includes, inter alia:

  • false statements about work qualifications;
  • breach to the disobedience or honesty principles;
  • vandalism;
  • sexual harassment;
  • alcoholism in the workplace;
  • revealing company secrets;
  • refusing to comply with safety procedures; and
  • four unexcused absences in a 30-day period.

In the case of Directors, in addition to the regular causes, the employer may terminate the employment relationship with a trust-employee if there is a reasonable ground for loss of trust.

However, if the cause of dismissal of a Director is loss of trust, and if the trust-employee, i.e. the Director, was promoted from a non-trust employee position, the employer will have to switch him back to the non-trust position rather than to dismiss him.

If there is no substantial motive or evidence, labour relationships can be terminated via a voluntary agreement where the employee is entitled to statutory benefits and possibly some form of compensation (each case must be treated individually through human resources).

If in any case there is no termination with just cause or a negotiated exit for the Director, the Director is entitled to claim for wrongful termination and sue either for substantial statutory benefits, lost salaries and the severance package. Given that the Director is a trust-employee, it won´t be entitled to request reinstatement in the job position, but will be obliged to receive the statutory severance pay.

Trust-employees must claim within 60 days following alleged wrongful termination.

Before the Director is entitled to sue for either substantial statutory, the employee and the employer will be subject to a "conciliation hearing", which shall not last more than 45 calendar days. If the conciliation is not successful, then the employee will be entitled to proceed with his/her claims against the employer.

2.2 Form

A resolution taken by the shareholders or board of directors, depending on the form of the company and the internal organisation of the management. The managing director must be notified in writing of the revocation, and the change of managing director must be published in a public Corporate Register.

A resolution is taken by the shareholders and / or board of directors, depending on the form of the company and the internal organisation of the management. The managing director must be given the opportunity to explain himself or herself and the revocation must not be made vexatiously.

If an employer has just cause to terminate an employment relationship, there is an obligation to give personal notice to the employee or, where not possible, to the competent Labour Board, and to prove the cause for dismissal. If the notice is not delivered, the termination will be deemed to be without cause.

2.3 Notice period

There is no notice period, except where one is provided by the by-laws of the company or in the resolution of appointment of the managing director.

No notice period, except where one is provided by the by-laws of the company or in the resolution of appointment of the managing director.

There is no obligation to serve a notice in advance to the employee in case of dismissal but only upon the dismissal moment. The notice shall contain the just causes for dismissal, and the date of their occurrence.

If not possible to deliver the notice to the employee, the employer shall serve the notice to the competent Labour Board and provide it with the last known domicile of the dismissed employee.

Failure to deliver the notice to the employee or to the Labour Board will de be deemed as a dismissal without just cause.

2.4 Involvement of works council

No.

No involvement.

There are no works councils in Mexico.

2.5 Involvement of a union

Not applicable.

No involvement.

The involvement of a union in the dismissal will be tied to the actual rights and obligations assumed under the corresponding Collective Bargaining Agreement, which may provide for the right for the union to be present during the act of providing notice for the dismissal.

Pursuant to Mexican Federal Labour Law, trust-employees, such as Directors, cannot be members of the same union as of normal employees.

2.6 Approval of state authorities necessary

No.

For limited liability companies (‘SARL’), appointment of a new director is subject to government approval. For all companies, the change of director must be registered in the Monaco Companies Register.

Not necessary.

2.7 Collective redundancies

Not applicable.

Not applicable.

Collective redundancies are only permitted in Mexico as a consequence of the closure of the company or the definitive reduction of jobs. Such circumstances can include, inter alia, as a result of:

  • Acts of God;
  • Employer’s disability or death (where the employer is an individual) that results in the termination of work;
  • Non-profitability of the business;
  • Depletion of the product (in the extraction industries);
  • Bankruptcy, if the same results in the closure of the company or o a definitive reduction of jobs.

The employer must obtain the authorisation of the Labour Board to implement the collective redundancies. If they are approved, the employer must pay the affected employees the statutory severance package, except for the requirement to pay 20 days of daily wage per worked.

In case of a definitive reduction of jobs, the employer shall take into consideration the seniority of the employees in order to affect primarily the workers with less seniority.

2.8 Summary dismissals

Not applicable.

Not applicable.

Summary dismissals are not allowed under Mexican law; failure to provide the corresponding notice to the employee will lead to the dismissal being considered as a dismissal without just cause.

2.9 Consequences if requirements are not met

Damages may mainly be claimed:

  • for lack of fair reason in companies where such a reason is legally required to revoke a representative; or
  • if the revocation is notified under hurtful circumstances (e.g. is very sudden and unexpected, or is publicly announced before the director is informed), or if the managing director has not been granted a reasonable opportunity to make his point before the decision to revoke him is made (absence of due process).

Damages may be claimed, mainly:

  • for the lack of a just cause, in the event that such reason is legally required to revoke a legal representative; or
  • if the revocation is notified under hurtful circumstances (e.g. is very sudden and unexpected, or is publicly announced before the director is informed), or if the managing director has not been granted a reasonable opportunity to make his / her point before the board’s / shareholders’ decision to revoke him / her (absence of due process). However, the managing director cannot be reinstated.

If the employer dismisses an employee without a just cause, or if it does not serve the notice of dismissal upon the dismissal, it will be obliged to pay the severance package.

2.10 Severance pay

There is no mandatory severance pay for the capacity as director, unless stated otherwise in the by-laws of the company or in the resolution of appointment of the managing director.

Not applicable.

Trust-employees such as Directors, hired for an undetermined term who are dismissed without a just cause are entitled to the payment of a mandatory severance package comprised of the amounts described below. Please note that in order to determine the “daily wage” it shall be considered the daily proportion of any employment benefits paid on a regular basis to the employee (e.g. private medical insurance; performance bonuses):

  • 20 days of daily wage for each worked year.
  • 90 days of daily wage as Constitutional Indemnification.
  • 12 days of daily wage as Seniority Bonus for each year of service that the employee has worked. For purposes of this concept, the daily wage is capped at twice the amount of the minimum daily wage.
  • Any accrued salaries and pro-rata benefits (including unused vacation days plus its vacation premium, Christmas bonus and any other accrued benefit).

Employees hired for a determined term who are dismissed without a just cause are also entitled to a severance payment, but this is calculated differently, as follows:

  • If the employment relationship was for a determined term of time less than one year, an amount equal to the amount of the salaries of half the time of services rendered.
  • If the employment relationship was for a determined and exceeded one year, in an amount equal to the amount of wages of 6 months of wage for the first year and 20 days of daily wage for each of the following years in which the employee had rendered the services.
  • 90 days of daily wage as Constitutional Indemnification.
  • 12 days of daily wage as Seniority Bonus for each year of service that the employee has worked. For purposes of this concept, the daily wage is capped at twice the amount of the minimum daily wage.
  • Any accrued salaries and pro-rata benefits (including unused vacation days plus its vacation premium, Christmas bonus and any other accrued benefit).

Where an employee is dismissed for a just cause under the Mexican Federal Labour Law, that individual will only be entitled to the payment of accrued salary and benefits, and will not be entitled to any of the other statutory severance payments outlined above.

2.11 Non-competition clauses

The terms of any non-competition clause must be agreed between the parties. If the scope of the clause is too wide (according to its geographic area, its length, or the activities it concerns), its validity may be challenged.

Non competition clauses are only valid insofar as they specify a restricted application in time and space. They also have to include financial compensation in order to compensate the director for the loss of revenue they cause him or her. If the clause does not include those elements, it is null and void. In that case, the director may still be held liable for unfair competition towards the company if it is demonstrated that the director resorted to fraudulent practices intended to disturb the company’s activity such as denigrating it or employing key members of its staff.

Non-compete arrangements on individuals are generally unenforceable under Mexican law, as they are perceived by courts to limit an individual’s constitutional rights to employment and to exercise a profession.

That said, the Mexican Supreme Court has ruled that under very limited circumstances (e.g., where there is proportionate compensation, and limitation of time and geographic scope), non-compete agreements may be enforceable. The enforceability of non-compete (and no-solicitation) arrangements in Mexico must be carefully analysed on a case-by-case basis.

2.12 Miscellaneous

The director may also be an employee. In this case, a proper dismissal process will have to be implemented in addition to the revocation process and corresponding dismissal indemnities paid.

Not applicable.

Relocation of the company / Change location of the work

There are some court precedents establishing that changing the working place is a unilateral change to the labour conditions. Therefore, it will allow an employee to terminate the employment with a just cause and consequently accessing to the severance package payment.