Mexico Laws Protect Employee, Top Management Pay Emily Pickrell - The Bureau of National Affairs
go to original May 4, 2016

In an international environment where controlling executive pay through caps on bonuses and clawbacks has become widely accepted, Mexico's strong protectionist laws for employees means that these limitations do not exist even for senior management, although conditions apply to the awarding of bonuses.

“The sky's the limit,” said Monica Schiaffino, a Mexico City-based partner with Littler, an international human resources law firm, speaking at a global pay panel at the International Bar Association in Mexico City. “There are no limits for bonuses, and clawbacks are not known in Mexico. The laws are extremely protective for employees.”

The Mexican approach contrasts with that of the U.S., the U.K., Switzerland and other countries that have begun to introduce limitations and conditions to bonuses offered to top management, especially if the company's overall performance has been poor.

...In the U.S., the Dodd–Frank Wall Street Reform and Consumer Protection Act requires shareholder approval of executive compensation and golden parachute packages. It also includes a clawback provision, which allows companies to recoup bonuses paid if the reported results upon which the bonus is paid are found to be false.

Mexico's legislative history of strong labor protections largely precludes such limitations for executive compensation, Schiaffino said. For example, the laws governing dismissing an employee for cause keep the allowable timeframe relatively short, making it difficult to prove that an employee has not performed up to the standard on which a severance or golden parachute would be awarded.

“It is going to take three months or maybe up to six months to make an investigation,” Schiaffino said. “By that time, the short term you have to dismiss an employee for cause has lapsed. You might end up paying severance.”

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