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Notice period in Mexico
Employee termination in Mexico
Non-compete post-termination restraints in Mexico
Waivers in Mexico
Transfer of undertakings in Mexico
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When does employment end in Mexico?
Employment in Mexico can end for various reasons, ranging from mutual agreements and voluntary resignations to employer-initiated terminations or unforeseen circumstances like the closure of a business. Mexico’s labor laws provide clear guidelines to ensure that employment relationships conclude fairly and in compliance with legal requirements.
These regulations aim to protect both employees and employers, ensuring proper procedures are followed and that workers receive any benefits or compensation they are entitled to upon termination. Understanding the circumstances under which employment can end and the legal obligations involved is essential for fostering a fair and respectful workplace.
In this guide, we will cover everything you need to know about end of employment in Mexico, including the notice period, post-termination restraints, waivers, and more.
Notice period in Mexico
In general, Mexico’s Federal Labour Law does not specify a minimum notice period for terminating employment. However, in certain cases, employers are required to follow specific notice procedures:
Dismissal due to misconduct in Mexico
If an employee is being terminated for misconduct, the employer must:
- Provide the employee with a written notice within 30 days of discovering the misconduct.
- Clearly state the reasons for dismissal in the written notice, detailing the actions that justify termination.
- If the written notice is not issued directly to the employee, it must be delivered to the local labour board, which will notify the employee.
This written notice ensures that the employee understands the grounds for termination and provides legal documentation in case of a dispute.
Termination without cause in Mexico
While not legally required, it is common practice for employers to provide a two-week notice when terminating an employee without cause. This is considered a professional courtesy and helps maintain goodwill between the employer and the departing employee.
Resignation in Mexico
Similarly, employees are not legally obligated to provide notice when resigning, but a two-week notice is customary as a professional courtesy to allow the employer to prepare for their departure.
Severance pay in Mexico
When an employee is terminated without just cause, Mexican labour law requires the employer to provide severance pay. The severance package must compensate the employee for the abrupt end to their employment and includes the following components:
- Base severance payment: Employees are entitled to receive three months’ worth of their regular salary as the base severance payment.
- Additional payment for years of service: Employees with more than 15 years of service are entitled to 20 days’ pay for every year of service beyond the initial severance payment.
- Seniority premium: For employees with at least 15 years of service, a seniority premium of 12 days’ pay per year of service is added to the severance package. This premium recognises the employee’s long-term contribution to the company.
Employers must calculate these payments carefully and ensure timely disbursement to avoid legal disputes. It is important to note that severance pay is not required in cases of voluntary resignation or termination for just cause.
Probation period in Mexico
Probation periods in Mexico are optional and must be clearly stated in the employment contract if implemented. These periods allow employers to evaluate a new employee’s skills, performance, and suitability for the role before confirming their permanent employment.
For permanent employees, the probation period is typically 90 days but can vary depending on the nature of the job and the terms agreed upon in the contract.
On the other hand, for executive or managerial positions, probation periods may extend up to 180 days under certain conditions.
During the probation period, employers have the opportunity to assess whether the employee meets the job requirements, monitor performance, and determine if the employee fits into the company culture and team dynamics.
If the employee does not meet expectations during the probation period, the employer can terminate their contract without the need for severance pay, provided that the termination is justified and documented.
Employee termination in Mexico
In Mexico, the concept of at-will employment—where employers can terminate employees without cause or notice—does not exist. Under Mexican labour law, termination of employment must be justified, and employers cannot simply end an employment relationship without following established legal procedures. This is to protect employees from unfair dismissal while providing clear guidelines for employers.
Termination without just cause is prohibited
Employers in Mexico are generally required to provide a valid and legally recognised reason to terminate an employee. Unlike at-will employment systems, where terminations can occur at the discretion of the employer, Mexican labour law ensures that dismissals are justified, transparent, and fair. Termination without just cause exposes employers to significant legal liabilities, including the obligation to provide severance pay.
Interestingly, termination at will is only applicable to employees. An employee can resign voluntarily at any time without needing to provide a reason, although it is customary to give notice as a professional courtesy.
What are the just causes for termination in Mexico?
The Mexican Federal Labour Law provides a specific and exhaustive list of reasons that qualify as just cause for terminating an employee. Employers must strictly adhere to these guidelines to avoid legal and financial repercussions. Here are some primary reasons for terminations:
- False statements about work qualifications: If an employee provides false information about their skills, qualifications, or experience during the hiring process, it constitutes just cause for termination. For example, falsely claiming to hold a degree or specific certification that was a requirement for the job could justify dismissal.
- Breach of honesty or disobedience principles: Employees who engage in dishonest behaviour or repeatedly fail to follow legitimate instructions from their employer can be terminated. This includes acts of insubordination or refusal to perform assigned tasks without valid reasons.
- Vandalism: Deliberate damage to company property or assets is a serious offense that justifies termination. This could include acts such as destroying equipment, defacing company property, or intentionally disrupting business operations.
- Sexual harassment: Sexual harassment in the workplace is prohibited and grounds for immediate dismissal. Employers are also encouraged to implement clear policies and training programs to prevent such behaviour and protect all employees.
- Alcoholism in the workplace: Reporting to work under the influence of alcohol or consuming alcohol during work hours without authorisation is considered just cause for termination. This rule is in place to maintain workplace safety and productivity.
- Revealing company secrets: Disclosing confidential information or trade secrets to unauthorised parties is a serious breach of trust. This includes sharing sensitive business data, client information, or proprietary technologies, which can harm the company’s competitive advantage.
- Refusing to comply with safety procedures: Employees who fail to follow established workplace safety protocols put themselves and others at risk. Noncompliance with safety measures, especially in high-risk industries like construction or manufacturing, is grounds for dismissal.
- Unexcused absences: An employee who has four unexcused absences within a 30-day period may be terminated for just cause. Employers must document these absences to ensure they are justified in taking disciplinary action.
Termination process in Mexico
To lawfully terminate an employee for any of the reasons listed above, employers must follow a structured process, such as:
- Document the misconduct
Employers must gather evidence of the employee’s actions or behaviour that justify termination. This could include written warnings, reports from supervisors, or other relevant documentation. - Issue a written notice
A written notice must be delivered to the employee or the local labour board within 30 days of the employer becoming aware of the misconduct. The notice must clearly state the grounds for termination and provide detailed evidence or examples of the misconduct. - Notify the labour board (if applicable)
In cases where the employee refuses to accept the termination notice, the employer must file the notice with the local labour board, which will then notify the employee
Non-compete post-termination restraints in Mexico
Post-termination restraints such as non-compete, customer non-solicit, and employee non-solicit agreements are generally not legally enforceable. This legal stance is rooted in the country’s labor laws, which prioritize the protection of employees’ freedom to work and earn a living. However, despite their non-enforceability, these clauses are often included in employment contracts for practical and strategic reasons.
Non-compete clause in Mexico
The Mexican Constitution and Federal Labour Law emphasise an individual’s right to work and earn a living. Restricting an employee’s ability to pursue employment opportunities, even in the same industry, is viewed as a violation of this fundamental right. As a result, employers cannot legally prevent former employees from joining competitors or starting their own ventures.
Despite their non-enforceability, non-compete clauses are often included in employment agreements for their deterrent effect. These provisions can:
- Serve as a moral reminder to the employee of their commitment to the company.
- Dissuade employees from immediately competing with their former employer out of a sense of obligation or professionalism.
Customer non-solicit agreements in Mexico
Similar to non-compete clauses, customer non-solicit agreements are not enforceable under Mexican labour law. Employees cannot be legally restricted from reaching out to former clients once their employment ends.
Even though they are unenforceable, customer non-solicit clauses are still frequently included in employment contracts to:
- Highlight the importance of protecting the company’s client base.
- Create a sense of ethical responsibility for the departing employee to avoid poaching clients.
Employee non-solicit clauses in Mexico
Under Mexican labour law, employers are prohibited to restrict a former employee’s ability to interact with or recruit current employees after their departure. Such restrictions are seen as an infringement on individual rights to freedom of association and employment.
Although they lack legal enforceability, employee non-solicit clauses are often included in employment contracts as a preventive measure. They can:
- Serve as a reminder of professional ethics and loyalty to the company.
- Dissuade departing employees from attempting to recruit their former colleagues.
Waivers in Mexico
Waivers in employment contracts are legally allowed, but with strict limitations. While employees and employers can agree on certain terms or conditions within the scope of their working relationship, employees cannot waive their right to receive mandatory benefits or legally protected rights. This restriction ensures that all workers are treated fairly and have access to the protections guaranteed under Mexican labour law.
While mandatory benefits cannot be waived, certain non-essential terms or conditions in an employment contract can be adjusted through mutual agreement. Examples of waivers or agreements that may be enforceable include:
- Adjusting work schedules or locations for flexibility.
- Waiving the right to certain discretionary bonuses or non-statutory perks in exchange for other benefits.
These waivers must be clearly stated in the employment contract, and both parties must agree voluntarily, without coercion or undue pressure.
Transfer of undertakings in Mexico
Employment transfers in Mexico are formalised through a substitution of employer process, which typically requires the issuance of an employer substitution letter. This document serves as a legal acknowledgment of the change in employer and establishes the continuity of the employment relationship. For the substitution to be legally effective, the following key conditions must be met:
- Transfer of business assets: The substitution of employer is only valid if the assets related to the business—such as equipment, facilities, or intellectual property—are also transferred to the new employer. This ensures that the transfer is not simply a change on paper but reflects a genuine continuation of the business operations.
- Employee rights and conditions are maintained: Employees must retain all their existing benefits, such as salaries, vacation entitlements, bonuses, and seniority. The terms and conditions of their work, including job roles, responsibilities, and hours, must also remain unchanged after the transfer.
- Continuity of employment relationship: The transfer does not reset an employee’s seniority or other accrued rights. For example, an employee with 10 years of service under the previous employer will continue to have those 10 years recognised under the new employer.
Joint responsibility during the transition
To further safeguard employee rights, Mexican labour law establishes a period of joint responsibility between the outgoing and incoming employers. For a period of six months after the substitution of employer becomes effective.
The previous employer remains jointly liable with the new employer for any labour obligations or disputes that arise, including unpaid wages, severance payments, or unresolved benefits.
This provision ensures that employees are not left unprotected during the transition and that any outstanding obligations are fulfilled.
If an employee files a labour claim within the six-month period after the transfer, both the old and new employers could be held accountable for resolving the issue.
Minimise risk and missed opportunities with our end-to-end employment solutions
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Mexico — or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
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