NAFTA: Minimizing Risks as a North American Employer

1. NAFTA: Minimizing Risks as a North American Employer Rafael Medina Rachel Solyom Monica Schiaffino Carolyn Lam

2. “GoingNative” Last year’s winner of Project Walkway, Helen Sriracha, has big plans. Her new company, “GoingNative,” will be harvesting ecologically sustainable materials from right outside Canada’s Great Bear Rainforest. She’s confident that by hiring “First Nation” Canadian workers to gather the raw materials for her clothing, she’ll be able to bless the Mexicans garment workers who will be whipping the cloth into fashion forward headdresses. Putting aside your opinions on Helen’s business plan and design ideas, how do you advise her on…

3. Her plan to involve the employees in profit-sharing…….in exchange for a minimum wage of $5.00/hour in Canada and Mex$50/day in Mexico? What are the repercussions of ignoring your advice and proceeding with – in her eyes – a more innovative and market-driven plan?

4. Mexico • Minimum rights established by the FLL cannot be contracted out • Minimum wage (MXP$64.76/MXP$61.38 per day) • Mandatory profit sharing • Criminal liabilities • Administrative fines • Call to strike by Union • Individual complaints filed by employees requesting difference in salary and benefits

5. Canada • Each Canadian province has employment standards legislationthat sets out an hourly minimum wage (currently $9.50-$11 per hour). • Minimum wagerequirements are mandatory, or of ‘public order’, whichmeansthatyoucannotcontract out of them. • Profit-sharing incomeisincluded in the definition of ‘wages’ – however…. • If the profit-sharing incomeis not sufficient to bring the averagehourlywageabove minimum wage, employeeswill have claims for the difference.

6. In Canada, non-First Nation workers need not apply. In Mexico, Helen is willing to accept non-indigenous factory workers, but no Catholics! Helen doesn’t want the taint of the conquistadors anywhere near her headdresses. Your thoughts?

7. Canada • Every jurisdiction in Canada has human rights legislation that prohibits discrimination in employment on certain protected grounds, including race, ancestry and ethnic origin, among others. • A hiring condition that is on its face discriminatory, will only permissible if it is a bona fide occupational requirement (“BFOR”) – i.e. that there is a rational basis and that it is necessary for the job.

8. Mexico • The Mexican Constitution and the FLL contain prohibition to establish differences and/or exclusions based on religion • Decent and dignified work is understood as the work where the dignity of the employee is fully respected, including no religious discrimination • Express prohibition for employers to refuse to employ workers based on their religion • Administrative fines • Individual complaints? • Calls to strike?

9. To be honest, Helen hasn’t quite worked out how often she’ll need employees. Depending upon how quickly employees in either country work, there may be quite a few layoffs. Or maybe she’ll just fire all the employees and re-hire when necessary. Helen figures that shutting down the plant would give her (former) employees time to meditate upon GoingNative’s spiritual mission, and help her determine who’s really committed to the cause. What’s your suggestion for Helen? Does your country have employment-at-will? Laws about reductions-in-force?

10. Mexico • No employment at-will in Mexico • Reduction in forceisnot a cause of termination • Severance payment in case of termination • 3 month’s aggregate salary • 20 days’ aggregate salary per year of service • Senioritypremium • Advice: temporary or seasonal agreements

11. Canada • There is no employment-at-will in Canada! • Unlessthereisjust and sufficient cause for the termination(whichdoes not include downsizing or economichardship), the employer will have to give notice or pay in lieu of notice respecting: • Mimumum labour standards; • Common or civil law ‘reasonable notice’; and • Anycontractualseveranceentitlements.

12. In addition, what if Helen needs employees to work 80+ hours a week? Helen doesn’t believe in artificial lighting, so employees will be expected to be more profitable in the summer and work a reduced schedule in the winter.

13. Canada • Employment standards legislation in each province containsmandatory provisions for: • Overtimepay (withlimited exceptions; thereis no ‘exempt/non-exempt’ distinction); • In some cases, maximum hours of workand the right to refuse work over a set number of hours per week. • Hours of work must not compromise the health and safety of workers. • In some cases, averaging of hoursagreementscanbe made for seasonal or cyclicaloperations.

14. Mexico • OVERTIME • 200% of hourly base salary for the first 9 hours worked per week or more than 3 hours per day • 300% of hourly base salaryafterwards • New case lawresolution

15. “OatmealLace” Thanks to your good counsel, GoingNative is now OatmealLace, granola for the fashion-forward snacker. Better yet, her hourly workers seem to be in good hands and humming along. Helen, however, is surprised when…

16. Union organizers show up. In Canada and Mexico. Outraged, Helen is convinced that unions are just another social construct – damaging to the artistic soul and inhibiting creativity. She wants them gone. Now. What questions do you ask to guide her through this process?

17. Mexico • Isit a call to strike to execute a CBA with the Labor Board or an informal campaign? • Do you have a non-active CBA? • How are your working conditions? • Union’s right to strike • Non Active collectivebargainingagreements (akawhiteunions) • UnionCertification • Employer’sobligationtopublishCBA’s

18. Canada • Have youreceived a petition for certification? • If not: • Whoisorganizing? Are theyyouremployees? • Where are theydoingit? On yourpremises or not? • What are theydoing? Are theydisruptingyouroperations? • Who are yourtrusted managers? • Most importantly: Do you have a communications plan?

19. After her first brush with the unions, despite all that granola, Helen needs her own spiritual scrubbing in Tibet. To assist with the running of the company, Helen has hired Felicity Goodship. Felicity lost to Helen on Project Walkway; Helen’s assistant privately confides to you that he believes Felicity suffered severe depression and substance abuse issues since the show. You’re not surprised – on the show, Felicity lashed out at a seamstress, threw a mannequin, and used animal blood in her designs. What policies should OatmealLace have in place to address the risks Felicity poses? Is there any way to stop Felicity from walking out the door with all of Helen’s design plans?

20. Canada • Key Considerations: • Depression and addiction are considered handicaps underhumanrightslaws; • Workplaceharassment and health and safetylawsrequireyou to protectyourotheremployees; • Workplaceconduct and harassmentpoliciesshould set guidelines for acceptable behaviour; • There are legalconfidentiality obligations and protection of intellectualpropertyrights in workproduct; theseshouldbesupplemented by contractualundertakings.

21. Mexico • Employer’s obligation to provide a safe and free of harassment workplace • Employee’s obligation to disclose to the employer the use of any medication (including but not limited to depression medications) • Breach of notice to the Employee will lead to termination for cause • Confidentiality agreements • Termination for cause • Criminal liability • Obligation of the owner to protect confidential information

22. QUESTIONS? • United States: Rafael Medina McDonald’s Corporation Chicago, Illinois • Canada: Rachel Solyom McCarthy Tretault S.E.N.C.R.L., s.r.l. Montreal, QC, Canada • Mexico: Monica Schiaffino Littler Mendelson, P.C. Monterrey, Mexico • Moderator: Carolyn Lam PLH Group, Inc. Irving, Texas