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Non-Compete Agreements in Mexico

Non-Compete Agreements in Mexico

In the Mexican workplace, business is done a little differently than in the US, when it comes to con-compete/non-disclosure agreements. If your company is considering the possibility of doing business in Mexico, it is important to pay attention to and to avoid legal pitfalls regarding labor. One area in which this could occur is in the realm of non-compete agreements in Mexico.

By and large, post-employment contracts that restrict the rights of Mexican professionals to pursue their occupations freely are virtually impossible to enforce due to the fact that they non-compete agreements in Mexico are largely unconstitutional. The Mexican Constitution precludes such restrictions exclusively. Article 5 spells this fact out:

“The State cannot permit the execution of any contract, covenant, or agreement having for its object the restriction, loss or irrevocable sacrifice of the liberty of man, whether for work, education, or religious vows…A labor contract shall be binding only to render the services agreed on for the time set by law and may never exceed one year to the detriment of the worker, and in no case may it embrace the waiver, loss, or restriction of any civil or political right.”

This raises numerous questions as to what sort of agreements are enforceable and what an employer may reasonably expect by way of protection in the event of employment termination. Let’s look at a few specific points in question.

  • In place in a non-compete agreement in Mexico, employers may require the signing of a post-termination covenant or agreement. Such covenants are enforceable providing that the document evidences express knowledge and consent from the employee, and solely aims to protect confidential information on behalf of the employer.
  • Employers may include a clause prohibiting future contact with customers and clients. This type of clause is enforceable providing the employee’s express knowledge and consent. It can be written only for the purpose of restricting the use of corporate information in said contact to prevent an act of unfair competition.
  • Employers may include a clause prohibiting the future hiring of colleagues. As with the aforementioned points, this is enforceable providing express knowledge and consent by the employee is evident, and that it is written to only restrict the use of corporate information in said hiring attempts.

A Work Around
Some companies have found a way to work within a system that makes no provision for the use of non-compete agreements commonly employed in the United States to adequately protect their businesses from post-termination competition from former employees. They create financial incentives for a former employee to abide by bargained-for post-employment restrictions. A lump sum of money is often agreed upon and disbursed up front at the time of employment for voluntary compliance with non-compete restrictions, including those not limited to protection of only corporate information.

If the terminated employee reneges and violates the terms of the covenant, the employer may file a suit in court to, thus requiring the former employee that has violated a valid agreemen to return the funds that he or she received as part of the agreed upon settlement. The prospect of returning this money by court order is an adequately strong incentive in most cases to ensure compliance with a mutually agreed upon covenant.

In spite of differences that exist in the Mexican workplace, both legal and cultural, there are ways that exist to protect empolyers from potentially damaging actions of ex-employees.

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