ANALYSIS OF MEXICAN DECREE ISSUED ON APRIL 30, 2009 Federal order to suspend activities A special presentation for the WMTA By: Mariano Esparza

What to do?, How to face the decree?

1.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S ¿What important obligation describes the Decree Published on April 30, 2009? Suspend activities within government and Productive Sector in México from May 1 to May 5, Article First of decree Published on April 30, 2009 issued by the Federal Ministry of Health. Activities exempted to comply with such suspension and therefore, authorized to work are hospitals, clinics, pharmacies, laboratories, health and financial services, telecommunications, means of information, hotels and restaurants, as well as airports and highways.

2.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S Was the decree mandatory?, or in other words, Was my company obligated to suspend activities from May 1 to May 5, 2009? Yes Article 73, paragraph XVI, sub paragraphs II and III of the Mexican Constitution, states the legal faculty for the Health Secretary to dictate preventive measures.

3.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S ¿Did the Governor of Baja California assumed a position that helps to the Maquiladoras of the State? No (Officially) At the very beginning of the day (April 30, 2009), there was a rumor that allowed us to think that he was going to do something in favor of the Maquiladoras to be exempted from complying with the obligation stated by the Decree, HOWEVER, did not happen (Such circumstance caused confusion for certain moments).

4.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S Did the Governor of Baja California allowed to the Maquiladoras to work during those days? (Especially, May 4 and 5?) No (Officially) At the very beginning of the day (April 30, 2009), there was a rumor that allowed us to think that he was going to do something in favor of the Maquiladoras so they could be exempted from complying with the obligation stated by the Decree, HOWEVER, did not happen (Such circumstance caused confusion for certain moments).

5.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S Does my company has the obligation to pay the salary to employees during the days the activities were suspended? No according to our opinion, however, it is important to mention the following: a) May 1st was a mandatory holiday anyway, therefore, it has to be paid; b) Saturday 2 and Sunday 3 have to be paid IF it is usual for the company to rest those days. This is applicable to companies that work from Monday to Friday, since Saturday corresponds to the Special Work shift and Sunday is the Seventh Day (Payable by Law). The companies that usually work on Saturdays, then, will not have the obligation to pay such day. c) In regards to May 4 and May 5, our opinion is that payment of salary is not applicable, due to the fact that the labor relation was suspended by Decree (By Law), in other words, there will be no service from employee and therefore, there shall not be a payment Article 427 of the Federal Labor Law is applicable since indicates that the causes to temporarily suspend the obligations from employment, are the “Act of God” or “force Majeure”. Likewise, article 42 of the same Law makes reference within its first paragraph to “contagious sickness” from employee. Some might belive that such provision is applicable to this case, however, it is not for “Collective” cases, but for individual Due to the above, please note that your company has the following options: I.- Not to pay salaries during May 4 and 5; II.- Pay salaries on May 4 and 5 if you want to avoid to be subject to interpretation, or III.- Pay a percentage.

Reference of the Law: Article 427 of the Federal Labor Law indicates that: “Are causes of temporary suspension of the labor relations: I.- The “Force Majeure” or an Act of God”, not attributable to the Employer, …Etc.

ANALYSIS OF ADVANTAGES AND DISADVANTAGES IF YOU DID NOT WORK: I.- Pay the salary. ** ADVANTAGES: a) No controversy b) No subject to interpretation c) Possibly, be seen as good example by government. d) Possibility to apply for tax benefits published on May 7, 2009 by the Mexican IRS. ** DISADVANTAGES: a) Expense: Paying a salary with no service received from employee. II.- Not paying the salary. ** ADVANTAGES: a) Save the salary. ** DISADVANTAGES: a) Nonconformity from employees; b) Possible claims from employees before the Labor Board, which is not recommendable since non fulfillment with labor rules would be evidenced. c) Possible claims from employees before the IMSS. III.- Pay a percentage of the salary ** ADVANTAGES: a) Save a part of the salary. ** DISADVANTAGES: a) Nonconformity from employees, as explained within the above mentioned point.

6.- “KEY” QUESTIONSRESPONSEAPPLICABLE LEGAL PROVISION/COMMENT S ¿What are the legal consequences if my company did not obey the order of suspending work? It could possibly be applicable (Not for sure) any of the below described legal measures against the company: a) Fines for non fulfillment with the General Law of Health, which might be by the equivalent to 6,000 to 12,000 days of minimum wage; b) Fines for non fulfillment with labor provisions, equivalent to 3 to 315 days of minimum wage, by the Ministry of Labor. Worst case scenarios (Not probable at this point): c) Temporary of definitive closure or in fact, arrest of company’s legal representative, only in cases of reiterated violation of sanitary rules. d) Possibly, incurring in a crime known as Disobedience and Resistance from individuals. Applicable legal provisions: a) Article 421 in relation with article 411 of the General Law of Health; b) Article 1002 of the Federal Labor Law; c) Article 425 paragraph II and 427 paragraph III of the General Law of Health; d) Article 178 and 180 of the Federal Criminal Code.

A special presentation for the WMTA By: Mariano Esparza