A joint client alert of WilmerHale and Creel, García-Cuéllar, Aiza y Enriquez.1
On March 30, 2020, the Mexican General Health Council declared a national state of sanitary emergency, caused by force majeure, in response to the ongoing SARS-CoV2 virus pandemic (“COVID-19”).2 The General Health Council announced that the state of emergency would last until April 30, 2020 and that the Ministry of Health would outline specific actions necessary to confront the emergency. The following day, March 31, the Ministry of Health published an Administrative Ruling (the Administrative Ruling) establishing the extraordinary actions to face the sanitary emergency generated by COVID-19, suspending all “nonessential activities,” and urging people in Mexico to stay at home until April 30.3 The Administrative Ruling also sets out certain “Essential Activities” that may continue, in general categories.
The Administrative Ruling, which applies to all 32 Mexican states, became effective on March 31, and was followed on April 6 by a set of Technical Guidelines that further attempted to define the scope of the directive. However, these directives are technically flawed, vague and ambiguous. The Administrative Ruling calls for businesses to self-determine whether they qualify within the defined “Essential Activity” list, and it lacks provisions for regulatory oversight and governmental vetting, certification or qualification processes, and inspections, verification, enforcement or sanctions.
The Administrative Ruling echoes similar declarations of emergency—and similar “remain at home” directives—issued by individual Mexican states.4 Although these state and local directives remain in effect, the federal Administrative Ruling should govern in the event of a conflict. An unofficial English-language translation of the Administrative Ruling, along with the original in Spanish can be found here.
Together, WilmerHale and Creel, García-Cuéllar, Aiza y Enriquez have identified practical considerations for companies with operations and installations in Mexico resulting from the state and federal COVID-19 declarations. Specific questions about cross-border business may be directed to the authors of this alert at both WilmerHale and Creel, García-Cuéllar, Aiza y Enriquez.
Key Provisions of the Administrative Ruling and Technical Guidance
Suspension of “Nonessential Activities” and Description of “Essential Activities”
The Administrative Ruling announces the immediate suspension of all “nonessential” activities, and sets out categories of “essential” business activities that may continue to operate during the health emergency.5 Specifically, the Administrative Ruling lists the following categories of “Essential Activities”:
- Activities that are directly necessary to respond to the sanitary emergency, such as jobs in the healthcare sector, paramedics, administrative and support staff in the entire National Health System. Similarly, activities related to the health sector´s supply chain and services, especially the pharmaceutical sector, including manufacture and distribution (pharmacies); the manufacturing of supplies, medical equipment and healthcare related technology, as well as those involved in the adequate handling and disposal of infectious biological hazardous waste and the cleaning and sanitizing of all healthcare establishments.
- Activities involved in public security and citizens’ protection; in the defense of the integrity and national sovereignty; administration of justice, as well as legislative activity at the federal and state level.
- Activities in the fundamental sectors of the economy: financial; tax collection; distribution and sale of energy, gas and gas stations; generation and distribution of water, food and non-alcoholic beverage industry; food markets, supermarkets, convenience stores, grocery stores and sale of processed food; passenger and cargo transportation services; agricultural, fisheries and livestock production, agroindustry; chemical industry, cleaning products; hardware stores; courier and parcel services; private security guards; nurseries, nursing homes and homes for the elderly; shelters for women who are victims of violence and their children; telecommunications and information media; private emergency services; funeral homes and burial services; storage services and cold chain of essential supplies; logistics (airports, ports and railways), as well as those activities whose suspension could have irreversible effects for their continuation.
- Activities directly related to the operation of social programs run by the government.
- Activities necessary for the conservation and maintenance and repair of critical infrastructure that ensures the production and distribution of indispensable services, such as: potable water, electricity, gas, petroleum, gasoline, jet fuel, basic sanitation, public transport, healthcare and hospital infrastructure, among others that could be listed under this category.
Health Measures and Restrictions
The Administrative Ruling imposes strict health and sanitation guidelines to be followed throughout the country, and which apply to any Essential Activities that remain ongoing. The Administrative Ruling bans meetings or congregations of more than 50 people; requires workers to wash their hands frequently and to use proper etiquette when sneezing or coughing; prohibits greeting with kisses, handshakes or hugs; and provides that the Ministry of Health may issue additional requirements.
The Administrative Ruling’s directive that people remain at home applies more strictly to people over 60 years of age, to those who are pregnant or are within 6 weeks of having given birth, and to individuals who have been diagnosed with high blood pressure, diabetes, chronic heart or lung disease, a suppressed immune system, or kidney or liver failure—regardless of whether their work is considered essential. However, the Administrative Ruling carves out an exception for personnel in public interest Essential Activity roles, who may voluntarily continue to go to work.
April 6 Technical Guidelines
On April 6, the federal government issued another order setting out certain technical guidelines (the Technical Guidelines) that further define “Essential Activities.”6 The Technical Guidelines define the category of “businesses whose suspension could have an irreversible effect on their continuation” as including steel, cement, and glass production companies, as well as certain IT service companies. (The language of the Technical Guidelines does not make entirely clear whether the category is limited to these companies.) In addition, the category of mensajeria, or courier and messenger services, is clarified—though not limited—to include online messaging companies and trading platforms. And finally, the Technical Guidelines allow for coal mines and coal distribution companies to maintain the minimum activity and number of workers necessary to meet Federal Electricity Commission demand. The Technical Guidelines require those steel, cement, glass, and mining companies that remain operational to email the Secretary of the Economy, within 24 hours, to certify the number of workers necessary to maintain these minimum operations.7
Silence on Factories and Intermediaries in International Supply Chains
Although the Administrative Ruling and the associated Technical Guidelines include some national industries and projects by name as “Essential Activities,” the directives lack clarity as to whether “Essential Activities” also include the operations of factories and intermediaries that are part of production and supply chains that support essential sectors and operations in other countries, most notably, the United States. Mexico’s manufacturing and distribution are not only important parts of the national economy, but also critical to regional and global economic functioning and critical infrastructure.
Preemption, Enforcement and Penalties
The Administrative Ruling and Technical Guidelines apply in addition to all state and local rules, although the federal rules would control in the event of a conflict. Notably, on March 31, the governors of all 32 Mexican states conferred via videoconference, to discuss their commitment to following and enforcing the federal directive.8
The Administrative Ruling does not contain any specific provision for enforcement, and it does not set out penalties for failure to comply with its terms. As a practical matter, enforcement of the Administrative Ruling is likely to proceed under existing, general health and labor regulation enforcement mechanisms at the state and local level. This may result in inconsistencies in enforcement amongst different states and localities. Penalties at these levels range from fines to business closure to criminal misdemeanor charges, in extreme cases.
Mexican State Declarations and Actions
As noted, several Mexican states have also issued declarations of emergency and imposed stay-at-home orders. For example, prior to the Administrative Ruling, on March 25, the State of Sonora—which spans the entire border between Mexico and Arizona—declared a state of emergency and stay-at-home order to “prevent, control, combat, and eradicate the existence and transmission of COVID-19.”9 Similarly, on April 1, the Governor of Yucatan issued updates on his Twitter page, announcing a statewide emergency and closing all businesses, with the exception of specific categories of business which may continue operations with strict hygiene measures in place.10 On the same day, the Governor of Jalisco also suspended all “nonessential” activities.11 WilmerHale and Creel, García-Cuéllar, Aiza y Enriquez are both monitoring ongoing state-by-state developments as they continue across Mexico.
Implications for Businesses with Operations in Mexico
Compliance with Safety & Hygiene Requirements
Under the Administrative Ruling and Technical Guidelines (and corresponding state orders), businesses that remain open for covered “Essential Activities” nevertheless must comply with the hygiene and safety requirements laid out. Any inspection by government authorities will likely focus on compliance with those requirements—for example, the ban on congregations of more than 50 people and social distancing measures. Businesses conducting “Essential Activities” will need to identify employees who are over 60 years old, have pre-existing medical conditions or who are pregnant or post-partum in order to comply with the requirement that these employees stay at home, while still providing for effective operations. And at the same time, companies should consider processes that allow for employees to share a diagnosis of one of the enumerated medical conditions (heart or lung disease, hypertension, diabetes, suppressed immune system, etc.) without violating corporate personal privacy policies or other personal privacy laws.
Fuerza Mayor (Force Majeure) and Minimum Salaries
Companies must also navigate employee pay and labor relations during the emergency. To date, the Mexican federal government has not declared the pandemic a Contingencia Sanitaria (Sanitary Contingency). Under a Sanitary Contingency, labor relations across the country would be suspended and employers would be required to pay employees a daily minimum wage until the end of the sanitary contingency. Instead, the Administrative Ruling invokes causa de fuerza mayor (force majeure), allowing companies to adopt special measures as may be necessary to survive the pandemic. Although Mexico’s President López Obrador has repeatedly emphasized that employers must pay full salary during the COVID-19 emergency, federal officials from the Ministry of Labor have acknowledged that employers may negotiate labor conditions and pay during the pandemic.12
Interaction with United States Cybersecurity and Infrastructure Security Agency Critical Infrastructure Guidance
Although the Administrative Ruling resembles the structure of some US state orders, it does not copy, mirror or refer to the critical infrastructure guidance issued by the United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA). On March 28, CISA issued an advisory memo13 updating its guidance in light of the COVID-19 emergency, with the goal of ensuring community and national resilience during the pandemic. For more on the updated CISA guidance, please see the client alert published by WilmerHale on March 30, 2020.
The CISA guidance identifies 17 key sectors of essential services, similar to many of those articulated in the Administrative Ruling, but in greater detail, along with categories of essential workers within each sector. Notably, nearly all businesses that have been exempted from closure in each of the Mexican federal and state declarations to-date also fall within the key CISA sectors.
Practical Considerations for Companies Conducting “Essential Activities”
In anticipation of potential government inspection or inquiries, US companies with operations in Mexico that fall within the “Essential Activities” categories of the Administrative Ruling and Technical Guidelines should implement policies to ensure complete compliance with the health and safety measures of the Administrative Ruling, and should document those policies and procedures. In addition, they should assemble documentation demonstrating the essential nature of their business activities under the terms of the Administrative Ruling, and if applicable, document that those activities are part of a supply chain to US businesses with operations that CISA has deemed a part of “critical infrastructure.” Finally, companies should redouble their efforts during the crisis to maintain productive working relationships with local union officials and with their workforce. Maintaining safe working conditions, complying with safety and hygiene requirements, and addressing pay and employment issues are a foundation for those efforts.
The Mexican government’s response to COVID-19 continues to develop rapidly to keep pace with the spread of the pandemic. Attorneys at WilmerHale (linked below) and Creel García-Cuéllar (Jean Michel Enríquez D., Guillermo Govela Martínez and Esteban Valadez Jiménez) are monitoring the situation and will update this alert in the event of major developments. We are available to provide timely guidance on the Administrative Ruling and related legal matters as Mexico continues to take actions to address COVID-19 impacts.