September 2021
U.S. Enforces Mexican Labor Rights: Companies with Cross-Border Operations Take Note
by E. Phileda Tennant, Senior Associate, Employment, Labor, and
Occupational Safety (ELO) Group, Vinson & Elkins LLP (Houston) 
judge's gavel
Within the last few months, U.S. employers doing business in Mexico have felt the effects of the enforcement mechanisms of the “U.S.-Mexico-Canada Agreement”. It is perhaps counterintuitive to many employers that the USMCA would result in labor enforcement actions against U.S. companies under Mexican law. But, it is – at least for U.S. companies with facilities or subsidiaries in Mexico.

Most readers – especially in Texas, whose largest trade partner is Mexico – will be aware that the USMCA (i) went into effect on July 1, 2020, (ii) is the result of President Trump’s renegotiation of NAFTA, and (iii) has a goal of (among other things) enforcing labor laws in Mexico, which was required to enact stronger labor laws as part of the USMCA. 

Considering the goal of enforcing workers’ rights in Mexico, the USMCA established an Interagency Labor Committee with the power to refer complaints of denials of labor rights in Mexican facilities to the U.S. Trade Representative – currently Katherine Thai – who, in turn, may take enforcement action. 

The first two such enforcement actions have been related to affiliates of American companies. It makes sense to a certain degree that the U.S. Trade Representative should have particular enforcement power with respect to U.S. companies with counterparts in Mexico. 

In May 2021, the first U.S. petition under the USMCA’s “Rapid Response Mechanism” asked Mexico to investigate a union vote at General Motors’ Silao, Mexico facility. The vote had been suspended over allegations of vote tampering. Ultimately, in July 2021, the U.S. and Mexico entered into a comprehensive remediation plan to address labor practices, requiring a new legitimization vote at the plant. The remediation plan mandated cooperation from General Motors de México, General Motors Company, and certain affiliates. Notably, had Mexico refused the U.S.’s initial petition for investigation of the allegations, the U.S. could have invoked an arbitration process pursuant to which sanctions or tariffs could have been implemented against the Mexican GM facility. 

Next, in August 2021, Tridonex, the Mexican based subsidiary of Cardone Industries – an American company with operations in Matamoros – entered into an action plan and agreed to pay damages including backpay to Mexican workers. The action plan was the result of a petition filed by the AFL-CIO and other unions alleging harassment and retaliation against collective bargaining.
Shortly thereafter, as a result of the remediation plan at the General Motors facility, workers conducted a new vote and voted to cancel their collective bargaining contract. The result of the new vote –which was live-blogged by the Mexican government – was 2,623 in favor of the existing collective contract, 3,214 against, and 39 null.

Employers with cross-border operations may ask themselves what rights a Mexican company has in the midst of all this. For example, in the void of a union contract at the GM Mexican facility, can GM – as it could generally under U.S. labor law – direct non-coercive and non-threatening communications to its employees regarding why a union is unnecessary, or how an employee is unable to deal directly with their employer in a unionized setting? The answer is somewhat unclear, at least under the new Federal Labor Law, which was significantly changed by the USMCA. For example, Article 390 Ter., Section (II)(d) provides that employers “no podrá tener intervención alguna durante el procedimiento de consulta,” or, translated, “may not have any intervention during the consultation procedure.” However, the “consultation procedure” is the procedure by which employees vote upon a collective bargaining agreement. Before a union arrives at that point, it will likely have significant interactions with the proposed bargaining unit. 

Notwithstanding uncertainty regarding next steps under Mexican law, American companies with cross border operations would be well-justified in already thinking about the impact that a USMCA-based enforcement action could have stateside. For example, on the “S” of their ESG disclosures. Due to the focus on ESG by investors and the SEC, now is the time for companies to evaluate international labor standards in Mexican operations. 
Calendar - Texas Roundup
Dallas Bar Association (DBA) International Law Section

Mon, September 13, 2021
12:00 PM - 1:00 PM (CST)
Topic: Recent Changes in International Dispute Resolution
Speakers: Steve Andersen and Yanett Quiroz, International Centre for Dispute Resolution (CDR)
Moderator: Karen Washington, Attorney at Law
CLE Credit: MCLE 1.00

Tue, September 21, 2021
12:00 PM - 1:00 PM (CST)
Topic: U.S.-Mexico Energy Integration: Challenges and the Consequences of the Texas Blackout
Speakers: James Colemen, SMU Dedman School of Law and Guillermo J. Garcia Sanchez, Texas A&M University School of Law
CLE Credit: MCLE 1.00

International Newsletter
In Case You Missed it...
Summer/Fall 2021 Issue
In this edition of the ILS International Newsletter, we celebrate the tenth anniversary of the adoption of the United Nations Guiding Principles on Business and Human Rights with various articles on the topic written by our members; include messages from our new ILS Chair and newsletter Editor-in-Chief, share news about upcoming events and CLEs, and introduce you to our new ILS Leadership for 2021-2022.