Mexico Supreme Court Upholds One-Year Cap on Back Pay

On January 20, 2016, the Second Chamber of Mexico’s Supreme Court, in plenary session and by a majority vote, issued a decision holding that the reformed Article 48 of the Mexican Federal Labor Law (FLL) does not violate the Mexican Constitution. Therefore, the accrual of back salaries (or back wages) claimed by plaintiffs in cases that were filed after November 30, 2012) will be capped at one year from the date the plaintiff was allegedly discharged. The application of this amendment will not be retroactive to any case filed before November 30, 2012.

This decision is important because it gives certainty to employers and limits their liability. Prior to the amendment of the FLL, which occurred in December of 2012, Article 48 stipulated that employer that failed to prove their defense at trial will be required to either pay severance or reinstate the plaintiff, in addition to paying back pay from the date of the unjustified termination up to the date that the defendant-employer pays the amounts required in the trial’s final resolution.

Since December 1, 2012, Article 48 of the FLL has stipulated that there is a one-year accrual cap on back pay, which has now been confirmed by Mexico’s Supreme Court in this decision. This cap limits the payment of back salaries to up to a 12–month maximum of back pay in case the defendant-employer’s defense strategy does not prevail during trial and also requires employers to pay interest at a rate of 2 percent per month on a 15-month salary base.