Biden Administration May Contemplate Labor Case against Mexico

January 20, 2021

Sen. Ron Wyden, D-Ore., who will lead the Senate Finance Committee, has recently declared his determination to hold Mexico accountable for potential labor violations under USMCA – a position which has support from unions and President Biden’s Trade Representative nominee.  Global companies operating in Mexico must be prepared for possible legal challenges related to the implementation of Mexican Labor Laws. 

Despite Lacking In Details, Sen. Wyden’s Complains Likely to be Pursued Under the USMCA’s Rapid Labor Response Mechanism.   

The USMCA’s “Rapid Labor Response Mechanism” allows public stakeholders, such as unions, workers, and other parties, to report labor violations in a specific facility.  After the report of the violation, an impromptu international dispute settlement panel will decide whether the facility is complying with Mexican Labor Law.  The decision may lead to factory inspections and further penalties to the company. 

Global companies operating in Mexico - particularly those in the “priority sector” such as aerospace, auto and auto parts, and mining sectors - are the most vulnerable under the new process. Meanwhile, multinational employers might continue being challenged by obstructive unions and unsupportive local government agencies, which makes it more difficult to comply. 

The Focus will be on Enforceability of Mexico’s Labor Law. Mexico passed its sweeping labor law in 2019 aiming at fulfilling the promises it made under USMCA by giving workers real freedom to organize and bargain.  However, reports indicate the labor law updates are not being sufficiently enforced.  Cases brought would have plenty of examples of failures.  

Labor Chapter in the USMCA Might be Used as a Template in American Trade Policy. If Wyden and his allies can prove the labor chapter and Rapid Labor Response Mechanism in the USMCA eventually can benefit American workers and prevent US companies from transferring jobs to overseas, similar labor provisions might be seen in future trade deals with other countries, like China. 

Outlook:  As HR Policy Global anticipated, Biden’s incoming administration will bring changes to US-Mexico relationship. It will not be a surprise if the new labor secretary nominee joins the force and further push such a claim to happen. HR Policy Global will monitor the developments and bring any key updates.