The mining industry is both one of Mexico’s biggest income generators and one of the largest providers of direct and indirect employment in the country. As such, Mexico’s labor law and the way in which it is administered and regulated are critical in deciding in what ways the sector can function and develop. The recent reform to the labor law is for the most part viewed by legal experts to have been a vital modernization that will lead to economic growth for the whole country, and given the direct impact it has on activity in the mining industry, the sector must adapt to this new legal environment.

The 2012 Labor Reform represented the long overdue modernization of an outdated law that had been mostly unchanged since 1970, and the new law better reflects the reality of Mexico’s current social and labor environment. According to the National Institute of Statistics and Geography (INEGI), in the four decades since 1970 life expectancy has increased from 61 to 76 years, and the active working population as a proportion of the overall population has increased dramatically from just half to around two thirds. “The 2012 Labor Reform is a good opportunity for Mexico because it allows the country to reorganize and improve employment relationships. In general terms it was necessary, given that the last important amendment to the labor law took place in the 1970s. It may seem like a very aggressive reform, but it was a long-needed one,” says Rafael Cereceres Ronquillo, Partner at C&V Abogados.

The reform proposal was exhaustive, addressing 80% of the law’s 1,010 articles and integrating all aspects of the labor market, from contracting and discrimination to salary payment and dismissal. The Legislative ultimately approved modifications to a third of the Law’s original content. The mining sector is arguably one of the industries that will be more significantly affected by the labor law reform, principally because the law contains a new chapter dedicated solely to mining (articles 343-A to 343-E). The focus of the legislation laid out in this chapter is to improve health and safety regulations for mining operations in Mexico, based on requirements ranging from having a proper management system for health and safety issues and informing workers of the risks inherent in this type of work, to making both concession holders and mining operators responsible for ensuring that mines are managed in compliance with all safety regulations.

The mining chapter of the labor law also gives workers a more active role in the upkeep of health and safety standards. Article 343-D gives workers the right to refuse to work if their employer is not fulfilling certain security obligations, such as providing them with the proper training, protective clothing, and equipment. Another positive development in this area is that those found to have breached safety regulations, to the extent of potentially resulting in the loss of life, can now be fined up to 5,000 times the daily minimum salary (almost US$25,719). These are changes that have the aim of, and hopefully will succeed in, improving the industry’s security record.

The general areas of reform, outside of the mining chapter, also have an important impact on the way in which mining companies operate. Not the least of these is the tightening of regulations around outsourcing, which is common within the Mexican mining industry, for example at the construction stage or in the provision of catering or cleaning services. Besides the obvious practical advantages of outsourcing, it often has the additional benefit of bringing costs down because Mexican companies are obliged to share their net profit with their employees, whereas such payments are not made to those working for the outsourced company. Changes made under the 2012 Labor Reform, however, aim to eliminate this practice. For example, companies may now only outsource ‘specialist’ labor that is different to that provided by the company’s regular, contracted employees. The law also states that the outsourced labor may not account for the entirety of the company’s operations. Placing such limits on the conditions under which an organization may outsource will directly affect the ways in which mining companies conduct their business. “Most companies in the industry contract services through external providers,” says Alfonso Rodríguez Arana, Director General of LegalMex. “In many cases the staff provided through these channels play a direct and immediate role in the core business of the company, even though they are subcontracted.” According to Rodríguez Arana, those companies that hold a mining concession without having a single employee are greatly affected by these changes and will need to restructure as a result, if they have not already. If they do not do so, mining companies that are found to have created false institutions