Recent Case Decision – Parties Contracting for Contract Labor through Outsourcing Services

Recently, the Second Chamber of Mexico’s Supreme Court of Justice (Suprema Corte de Justicia de la Nación or SCJN) issued adecision under the heading “Parties contracting for contract labor for services. Article 15 of the Social Security Law, augmented by theDecree published in the Official Journal of the Federation on July 9, 2009 deciding that parties benefiting from such services have thefull responsibility to comply with Social Security obligations and is constitutional.” In its holding, the SCJN stated that Mexico’s FederalCongress “did not overstep its authority to enact legal provisions in labor matters” as provided in the Political Constitution of the UnitedMexican States, nor is it irrational taking into consideration the guaranties contained in Article 15 of the Social Security Law. Suchprovision establishes full liability on the part of the beneficiary of services when a specialized services provider (outsourcing) deliverssuch services. This is designed to protect and promote the well-being of employees and their families so that such workers are not leftwithout coverage, it being the responsibility of the party benefiting from such work or services, who is in the best position, as asupervisor and employer, to oversee the work, work hours, operations and other administrative functions. In this regard, Mexico’s highestcourt has determined that the beneficiary of work or services may be held fully responsible for complying with Social Securityobligations, notwithstanding the fact that such work has been outsourced to a third party to pay salaries, provide raw materials, worktools, etc. The full liability provision is not absolute in regard to all labor obligations, as Mexico’s Social Security Law establishes that aparty benefiting from such services, in case it makes payment of the due and owing benefits, has the right to pursue reimbursement fromthe third party services company. This case decision is pending publication in the Judicial Weekly of the Federation, and is a soledecision not constituting binding jurisprudence and not a decision which has general application.