Friday, March 2, 2012

Mexico: US Department of Labor Accepts Petition Under NAFTA

U.S. Department of Labor accepts first petition filed against Mexico under NAFTA labor side agreement since 2006

On January 13, 2012, the U.S. Department of Labor Office of Trade and Labor Affairs (OTLA) and the Canadian National Administrative Office (NAO) accepted for review a petition filed by a consortium of over 80 trade unions in Mexico, the U.S. and Canada alleging that the Government of Mexico violated the its obligations under the North American Agreement on Labor Cooperation (NAALC) with the 2009 forced closing of the Mexican power company Luz y Fuerza Centro (Central Light and Power). This dual-filed NAALC petition was the first filed in the United States since 2006 and the first filed in Canada since 2008. The petition, filed in Canada on October 27, 2011 and in the United States on November 14, 2011, is a test case for the much-critiqued labor side agreement to the North American Free Trade Agreement (NAFTA) as well as for the Obama administration’s resolve in enforcing labor provisions of free trade agreements. Both countries have 180 days from the acceptance of the petition to issue a report and recommendations as to whether the petition should proceed to the next stage of conflict resolution, which is comprised of Ministerial Consultations between the Labor Ministers of the 3 NAFTA member states. The NAALC requires each signatory country to designate a “National Administrative Office” (NAO) in its federal labor ministry to consider and accept complaints that another signatory has failed to comply with its obligations under the NAALC.

According to the petition, on Sunday, October 11, 2009, President Felipe Calderón issued a decree dissolving the government-owned power company Luz y Fuerza Centro, an electric company that had been in existence for over a century. Ownership of the electric company’s assets and operations was immediately transferred to Mexico’s other government-owned power company, the Federal Commission for Electricity (Comisión Federal de Electricidad or CFE), giving CFE a monopoly over electricity services in the entire territory of Mexico. The night before, on Saturday, October, 10, 2009, 27,000 federal soldiers and police, as well as state and local police, were dispatched to immediately terminate the employment of 44,362 employees. This action resulted in the immediate dissolution of the independent trade union Mexican Union Electrical Workers (Sindicato Mexicano de Electricistas - SME) which had been in existence and legally recognized for over a century. Despite a series of administrative and judicial cases and complaints, the 44,362 employees and the SME have been unable to secure a reversal of the presidential decree under Mexico’s Constitution or labor laws. While the stated reason for shutting Luz y Fuerza was the excessive cost to run the company, the petition cites government communiqués that indicate the primary reason for the dissolution of the company was to dissolve the independent union SME. The petition indicates that the amount of government funds previously allocated to Luz y Fuerza have been allocated to the budget of CFE. Petitioners also argue that the Government of Mexico could have negotiated a modification of the collective bargaining agreement between Luz y Fuerza and SME by following a simple procedure outlined under Mexican labor law, calling into question arguments that the only way forward for the government was to precipitously dissolve the state-owned entity.

One of the key issues at the heart of the case is that of SME’s successor rights under the collective bargaining agreement SME negotiated with Luz y Fuerza. Petitioners cite a clause in the prescient collective bargaining agreement that requires transfer of the agreement to the new entity should Luz y Fuerza be made part of CFE. Mexican labor law allows termination of employees for only a narrow set of reasons, such as inability to perform the position, financial hardship or employee misfeasance. Like U.S. labor law, Mexican labor law specifies a set of procedures governing large lay-offs and the dissolution of companies. Petitioners allege neither the successor rights provision of the CBA nor federal labor law provisions governing individual and collective dismissals were followed in the dissolution of Luz y Fuerza. In addition, petitioners note that SME’s bank accounts have been frozen and several members of the trade union’s executive committee have been jailed since October 2009. Since the 44,000+ Luz y Fuerza workforce was terminated without notice, CFE has utilized private subcontractors to run what was formerly Luz y Fuerza, resulting in an increase of serious worker injuries and fatalities due to the employment of untrained workers by subcontractors and the reluctance to hire former SME members. The petition points to worker deaths on January 19, 2010, September 9, 2010, October 14, 2010 and August 11, 2011. The 44,000+ former Luz y Fuerza employees and the SME have been unsuccessful in numerous administrative and court challenges to the actions taken on October 10, 2009 and the Presidential Decree issued on October 11, 2009. Over 16,000 former Luz y Fuerza employees and SME members have refused to accept a severance deal that eliminates their re-employment rights. Mexico does not have an unemployment compensation system. According to the petition, these former employees have resorted to living with their parents, entering the informal sector and migration to overcome financial hardship. Fewer than 8,000 have been able to secure employment with CFE or its private subcontractors.

Petitioners request that the Canadian and U.S. NAOs (referred to as OTLA in the U.S.) enter into ministerial consultations with Mexico to address violations of a number of obligations under the NAALC, and if no change is made or action taken, that the Canadian and U.S. governments call for an Evaluative Committee of Experts (ECE) to investigate and draft an independent report about the alleged NAALC violations. Primary among the provisions alleged to have been violated is the NAALC Article 2 requirement that countries strive to set high labor standards. Other obligations alleged to have been violated include the NAALC Article 3 obligation to effectively enforce labor and employment laws as well as obligations under Article 4, 5 and 6 to ensure that dispute resolution bodies empowered to address labor law violations are open, fair and transparent and that administrative decisions and laws are published and made available to the public. In addition, petitioners argue that the Government has violated its the obligation to recognize the fundamental right of freedom of association under ILO Convention 87 by dissolving the SME and interfering with the trade union’s internal affairs.

According to the U.S. and Canadian NAOs, reports and findings should be issued in mid-July 2012.

More about the petition can be found at the following website:

Tequila J. Brooks, Washington DC