Caterpillar Plant Strike Highlights Mexico’s Evolving Labor Regulations
Since Mexico’s President Andrés Manuel López Obrador introduced labor reforms in 2019, challenges in navigating the relationship between Mexican companies and union workers have evolved. The reforms, which enable employees to directly and secretly vote to join new, independent unions, have opened the door for a handful of new labor federations to compete with the employer-friendly unions that have long held a monopoly on representing workers at Mexican companies.
While many companies have solid relationships with these newly created unions, changing conditions since the labor reform have prompted some conflicts to emerge. One recent example is a strike by unionized employees at a Caterpillar subsidiary in Nuevo Laredo. Along with demanding higher salaries, the union has accused the company of abuses before both US and Mexican authorities that include blacklisting striking workers so they cannot be hired anywhere else.
How Labor Tensions Unfolded at Caterpillar’s Nuevo Laredo Subsidiary
Initial disagreements between workers at Caterpillar’s Nuevo Laredo subsidiary and the company stem from these labor reforms, which allow workers to cast ballots to choose which labor union should represent them. Labor unions that win enough support then negotiate a collective labor agreement, which must be renegotiated annually.
Workers at that plant are now represented by the Mexican National Independent Union of Industry and Service Workers (SNITIS), one of the new independent unions formed since the labor law changes.
On the morning of 22 September 2023, SNITIS announced workers had called a strike at the Caterpillar subsidiary’s Nuevo Laredo assembly plant after failing to negotiate a collective labor contract with the company. The plant near the US border in Tamaulipas state employs 400 unionized workers.
The main disagreement between company management and the union was a demand to raise salaries. While the strike is ongoing, the Nuevo Laredo plant hired non-unionized workers, commonly called “strikebreakers” to continue operating.
The union said Caterpillar’s subsidiary retaliated by putting striking workers on blacklists, which are shared with other local businesses to prevent workers from being employed in Tamaulipas. SNITIS union representative Victor Manuel Vergara García said the company also fired several employees who initially invited colleagues to join the union. SNITIS claims that Caterpillar’s tactics stem from a previous alliance with the Mexican Workers Confederation (CTM).
SNITIS also revealed in a document that Vergara García had been fired in February 2023, allegedly for convincing workers to affiliate themselves with the union. The document stated that he has since been denied access to the premises to speak with workers, and the company has refused to acknowledge him as the union’s representative.
Soon after the strike started, SNITIS presented a formal complaint before the Office of the US Trade Representative under the provisions of the US-Mexico-Canada Free Trade Agreement (USMCA). The complaint alleged that the workers were denied their rights to free association and collective bargaining. About a month later, the office issued a statement saying that it had asked Mexican authorities to review the plant’s labor situation.
“Workers are entitled to organize for and select the union of their choice without retaliation or interference from their employer,” US Trade Representative Katherine Tai stated.
The US trade representative urged the Mexican government to review the Caterpillar subsidiary’s retaliatory actions, such as “dismissing workers for their union activity, surveilling workers to identify SNITIS organizers, making negative comments about SNITIS, and any other action taken in order to discourage support for SNITIS.”
Mexico’s Economy Ministry said it had accepted the request, and announced in December 2023 that a joint investigation with the Mexican Labor Ministry unveiled practices that could have limited workers’ rights to free association and collective bargaining. Both ministries issued recommendations to the plant’s management, including reinstating union delegate Vergara García. Later that month, the US government also announced that the subsidiary had taken actions including reinstating two dismissed workers under a USMCA provision designed to quickly enforce workers’ rights to free association and collective bargaining.
Nonetheless, Mexican authorities do not have the legal capacity to resolve strikes, which can only end through a private legal agreement between the union and the company. While global union federation IndustriAll and the US United Auto Workers Union (UAW) have both shown support for the SNITIS strike in Nuevo Laredo, US authorities have limited ability to weigh in on labor disputes in Mexican territory beyond requesting an investigation from their Mexican counterpart.
Mexico’s Labor Landscape: A History of Monopolies and Political Affiliations
Mexican labor laws and union regulations are a significant compliance factor for not only local businesses, but international companies investing in the country and outsourcing assembly operations there. In the past few years, labor reforms have prompted a wave of new unions and, in some cases, heightened tensions between companies and workers.
Politics and labor unions in Mexico have evolved in parallel for decades. After the Mexican Revolution, the Institutional Revolutionary Party (PRI) ruled over Mexico for about 70 years between 1929 and 2000. During that period, three worker federations affiliated with the PRI — the Regional Mexican Workers Confederation (CROM), the Mexican Workers Confederation (CTM), and the Revolutionary Confederation of Workers and Farmers (CROC) — monopolized union activity in the country. While negotiations between these unions and companies were largely amicable, each group had a strict hierarchy of union leaders that would control decisions about internal rules and procedures.
Independent labor unions such as the Mining and Metallurgy Workers Union (founded in 1934) and Independent Workers Unit (founded in 1972) did exist. However, they were the exception to the rule. They were the target of political harassment until 2000, when the PRI lost a presidential election for the first time since 1929 to the center-right National Action Party.
On May 1, 2019, five months after President López Obrador was sworn in, the federal government reformed the Federal Labor Law to allow workers at a company the right to directly choose their union representation. The reforms required any union representing a company to have support from at least 30% of its workers. The reform also required workers to vote via paper ballots, rather than through a mere show of hands.
These reforms have implied an element of uncertainty for Mexican private businesses, which had been used to friendly negotiations with PRI-affiliated labor federations for decades.
Labor Provisions Under the USMCA Agreement
While it is uncommon for Mexican unions to present a complaint before the US authorities, this could become a more frequent strategy as Mexican union leaders become more aware of the labor provisions of the USMCA trade agreement.
According to the US Department of Labor, USMCA “has the strongest and most far-reaching labor provisions of any trade agreement.” Among these provisions is the so-called Rapid Response Labor Mechanism, which SNITIS invoked in its complaint to the US Trade Representative.
Nonetheless, US authorities have limited power to resolve labor issues in Mexican territory beyond requesting an investigation from their Mexican counterparts. Even when subject to Mexican labor laws, collective labor agreements in the country are strictly a contract between two private parties — the private company and the labor union. A strike resulting from a contract negotiation dispute, as in the case of the Caterpillar subsidiary, can only be resolved by those two parties.
The Mexican government can mediate in negotiations and can also issue sanctions or penalties against a company for not complying with labor laws. However, it cannot forcibly bring the two parties to an agreement or dictate the end of a strike.
What Should Foreign Companies Know About Mexico’s Labor Laws?
International companies investing in Mexico should consider the following points about Mexican labor laws:
All industrial, logistics, and large-scale commercial operations will have unionized workers.
Most labor unions are affiliated with larger, sectorial, labor federations.
Workers are entitled to freely vote to decide which union they want to represent them.
A labor union must gain 30% of support from a company’s workforce through a ballot vote to represent those workers.
Such labor unions will negotiate a collective labor agreement with the private companies, and designate a union delegate or representative.
Collective labor agreements are usually renegotiated annually.
Mexican union dynamics and the implications of the recently reformed labor laws present a complex — yet manageable — factor for private investors in Mexico. While challenging, it is possible for foreign investors to successfully navigate the subtleties of Mexico’s unions. Any company with significant financial or operational interests in the country would be wise to seek specialized legal advice, as well as political and situational analysis.
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