Profit Sharing Payments for Workers Could Have New Adjustment after Mining Union Obtains Injunction

August 15, 2023

Last week, Judge Rosaura Rivera Salcedo of the Eighth District in Labor Matters in Mexico City made a significant ruling in the case involving Section 120 of the Ciénega in Santiago Papasquiaro Durango, a division of the National Metallurgical Mining Union "Frente." The union was granted an injunction against the imposed limit on profit sharing payments in the mining sector. This ruling could lead to a new adjustment in profit sharing payments, highlighting the potential unconstitutionality of the cap enforced in the sector.

While this is currently just a single ruling, it sets an important precedent, suggesting that the changes made to the Federal Labor Law in 2021 may be unconstitutional. The Secretary of Labor and Social Welfare (STPS) had included the profit sharing cap as part of a negotiation to address concerns over outsourcing prohibition. However, the court ruling emphasizes that neither lawmakers nor senators should be above the constitution. A constitutional reform requires approval from two-thirds of the Congress and the majority of the state congresses, and it appears that the labor reforms were approved by a majority in the Congress in a manner inconsistent with workers' rights.

In early August 2023, Judge Rosaura Rivera Salcedo granted an injunction to Section 120 of the Cienega division in Santiago Papasquiaro Durango, belonging to the Sindicato Nacional Minero Metalúrgico "Frente" (National Mining and Metallurgical Union). The injunction was against the actions attributed to the Congress of the Union and the Constitutional President of the United Mexican States related to the discussion, approval, issuance, and enactment of the Decree that reformed Article 127, Section VIII of the Federal Labor Law.

This ruling potentially paves the way for the elimination of the section that places a cap on profit sharing payments. If this cap is eliminated, the payment of 10% of the profit may be reinstated, which could impact the profitability of companies. While this ruling is currently isolated, there is a risk that it may develop into a jurisprudence over time, affecting the entire sector. It is crucial to maintain Section VII of Article 127, as it safeguards employment opportunities. Otherwise, companies may find alternative ways to offset unlimited profit sharing payments, such as implementing profit control measures or reducing extra-legal benefits like bonuses.

This ruling has brought attention to the delicate balance between workers' rights and employers' interests, and the potential impact it may have on the mining sector's profitability. It will be essential to closely monitor any further developments in this case and assess the potential implications for both workers and companies involved in the mining industry.

We will continue to provide updates on this matter as it evolves.