Lawmakers Propose Higher Severance for Wrongful Dismissals

A new legislative proposal in Mexico seeks to amend Art. 50 of the Federal Labor Law (LFT) to significantly increase severance pay for workers who resign due to employer misconduct. The initiative, led by Napoleón Gómez Urrutia, Deputy, Morena, aims to improve compensation for employees who end their contracts because of employer violations, such as deceit, unsafe working conditions, or harassment.

“The proposal seeks to ensure sufficient and fair payment for workers who, after being forced to leave their jobs, must reenter the labor market,” stated Gómez Urrutia, as reported by El Economista.

Currently, Art. 50 of the LFT outlines compensation rules for when an employer is at fault for the termination of a labor relationship. The proposed reform would expand the severance calculation from 20 to 90 days of salary.

For indefinite contracts, employees would be entitled to 90 days of salary for each year worked if the termination is due to a breach from the side of the employer. For fixed-term contracts, the structure would remain the same for employees with less than one year of service, half a month’s salary per month worked, but would increase to six months of pay for the first year and 90 days per additional year beyond that.

These changes are rooted in Art. 51 of the LFT, which defines the legal causes that allow workers to resign without incurring responsibility. These include employer deceit, salary reduction, lack of integrity, physical or verbal aggression, sexual harassment, and any action that compromises the dignity or safety of the worker.

The reform also covers scenarios in which an employee, though seeking reinstatement through a legal process, is not required to be reinstated due to factors such as having less than a year of service, being in a trust position, or holding a temporary contract. In such cases, companies must provide the compensation established under Art. 50.

The proposal’s explanatory memorandum notes that workers should ideally maintain savings equivalent to three to six months of salary to manage job loss or emergencies. Yet, it acknowledges that many workers are currently unable to save the recommended 10% of their income monthly, despite increases in the minimum wage in recent years.

The initiative positions higher severance pay as a mechanism to provide economic stability to workers facing employment loss due to employer misconduct. Lawmakers backing the reform argue that a dignified compensation reflects the value of workers' time and labor, and supports their financial resilience in transitional periods. The proposal is currently under discussion in the Chamber of Deputies.