As reported here, the new trade agreement between Canada, Mexico and the USA (USMCA) contains in its Chapter 23 important labour requirements that, if not complied with, could limit Mexican companies to export to the US or Canada.

Labour disputes for violation of Chapter 23 of the Agreement are dealt with under the so-called “Facility-Specific Rapid Response Labor Mechanism” (Mecanismo Laboral de Respuesta Rápida (MLRR)). Labour rights protected under Chapter 23 include freedom of association and the effective recognition of the right to collective bargaining.

The “Facility-Specific Rapid Response Labor Mechanism” allows the parties of the agreement to take action against companies in case of failure to respect Chapter 23 of the trade agreement. 

Internal guidelines have been adopted in Canada and in the US for the admissibility criteria of complaints.

Definition of complainant

In Canada, “a Submitter means a person (see definition below) who is submitting a claim to the Canadian National Administrative Office (NAO), pursuant to these guidelines” and “a Person means a natural person who is: a permanent resident of Canada, or a citizen of Canada, or an enterprise, or an organization of employers or workers that is established in the territory of Canada”. In the US, “Any person of a Party may, through the Office of Trade and Labour Affairs (OTLA), file a Rapid Response Petition or Labor Chapter Petition with the Committee”. A Party “means a Party to the USMCA”.

Content of the complaint

Both in Canada and in the US, complaints must be signed and be submitted in writing, either electronically or physically.

In Canada, basic requirements are:

• “the claim identifies a Covered Facility
• the claim identifies Mexico’s laws relevant to the alleged Denial of Rights (meaning denial of the right to: 
  • freedom of association, or
  • collective bargaining, or
  • other rights pursuant to an expansion of claims under Article 31-B.12 of the Agreement)
• the claim states the basis for the submitter’s claim that there is a Denial of Rights
• the claim explains how the matters complained of may constitute a Denial of Rights by the facility, and
• the claim indicates whether relief has been sought under:
  • Mexican domestic laws, or
  • through collaborative efforts with the owner of the facility being complained against”.

In the US, any Labor Chapter Petition must identify:

“a. The person filing the petition, as well as the person's physical or email address, and other contact information.

b. The other Party alleged to be out of compliance with an obligation under the Labor Chapter.

c. Reasons, including facts with sufficient specificity, supporting the petitioner's allegation that the other Party is out of compliance.

In addition, it is recommended that the information that supports the allegation also addresses:

“a. The particular obligation in the Labor Chapter with which the petitioner considers there is non-compliance.

b. Whether there has been harm to the petitioner or other persons, and, if so, to what extent.

[...]

d. Whether the matter referenced in the petition occurred in a manner affecting trade or investment.

e. Whether relief has been sought under the domestic laws or procedures of the other Party, and, if so, the status of any proceedings.

f. Whether any matter referenced in the petition has been addressed by, or is pending before, any international body”.

Process

This mechanism is rapid because the decision on the case and related sanctions must be taken within 5 months-time.

If the complaint is admitted, US or Canadian authorities shall transfer it to the Government of Mexico. The latter has 45 days to respond with an acknowledgment or rejection of violation. The Mexican Government refers the issue to the Secretary of Labour and Social Security (STPS in Spanish) to prepare the case and collect evidence. STPS works in close collaboration with representatives from workers’ in the affected plant, trade unions, and employers’ organisations.

If a violation of rights under the agreement is found, a remediation plan must be presented, followed by a consultative process between the two Governments (Mexico and the US or Mexico and Canada), for a period of 10 days. If both agree on the remediation process, and this is fully implemented, the case is closed. If there is no agreement, or poor implementation, Canada and the US may proceed with the imposition of sanctions on trade with Mexico.

The Mexican government can in any case request that the case is settled by the “Labor Panel”, that is an arbitration board composed of three independent and impartial members. One member of the board is chosen from the list of possible arbitrators presented by the complainant party, a second from the list presented by the defendant party and a third from the list of ‘no nationals’. The latter is also the Chair of the “Labour Panel”. The Arbitration Panel will take a decision within 60 days and, if it confirms a denial of rights, the complainant will determine the sanction. The defendant will have 5 days to negotiate the scope and length of the sanction.

Sanctions can range from the imposition of tariffs to sanctions on products and services and up to the block of import to the USA and Canada.

The first complaint under the “Facility-Specific Rapid Response Labor Mechanism” was triggered in May by the US Union American Federation of Labour and Congress of Industrial Organisations (AFL-CIO) against a Mexican auto parts subsidiary for not allowing a trade union to be recognised. The parent company is headquartered in Philadelphia and it is controlled by a Canadian company.

The complaint is currently pending before the US Office of Trade and Labour Affairs, which shall determine whether the complaint is admissible before heading to the Mexican Government for acknowledging or rejecting the complaint (in a maximum of 45 days).