By: Juan Felipe Sánchez, Legal Director
Verónica García, Tax Director
March 20th, 2020
In situations such as the one that is currently happening in our country and with the aim of preventing companies or establishments from stopping their operations permanently, the Federal Labor Law (LFT due to its initials in Spanish), grants companies certain alternatives, of which we will only mention those that we consider are relevant to a pandemic like the one of COVID-19.
The LFT provides for companies or establishments the possibility of temporarily suspending work relationships, as long as the competent authorities issue a declaration of health emergency, in accordance with the applicable provisions.
In this case, companies or establishments may temporarily suspend work relationships without the need for any approval or authorization from the corresponding labor authorities. However, employers will be obliged to pay their workers compensation equivalent to one day of the current general minimum wage, for each day the suspension lasts, without exceeding one month.
Therefore, for a company or establishment to reduce its fixed costs and/or expenses by reducing the payment of salaries, in the face of a pandemic such as the one we are currently experiencing, it is essential that the competent authorities officially declare that the country or city where the company or workplace is located, is experiencing a health emergency.
The Supreme Court of Justice of the Nation (SCJN) refers that “the parties may agree in their contract all those clauses that they deem appropriate, among which is the criminal clause, which consists of the early quantification of damages that may be caused by a breach of contract”. Likewise, it mentions that there are exceptions in the application of penalties or payment of damages, in case of breach of contractual obligations.
In addition, it also contemplates the causes in which some of the parties can be exempted from the fulfillment of their obligation and, therefore, from the conventional penalty. Being one of them the fortuitous cases or cases of force majeure.
The Federal Civil Code establishes that “the penalty may not be effective when the person obligated to it has not been able to fulfill the contract due to the creditor, acts of God or insurmountable force”.
The opinions expressed in this article are the sole responsibility of the author and do not necessarily represent the opinion of Grupo Consultor EFE™.