Coordinate Wage and Hour Compliance Across North America

 

By Ius Laboris April 4, 2018
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​In today's global economy, understanding which wage and hour laws apply to various operations and the specific requirements in each applicable jurisdiction can be onerous. Not only do these requirements vary by country, but they can vary even at the local level. The differences between Canada, Mexico and the United States when it comes to regulating hours worked are just one example of the potential legal minefields that an employer must navigate to ensure compliance.

Hours Worked Generally

In the United States, wage and hour law is governed by the federal Fair Labor Standards Act (FLSA). The FLSA requires nonexempt workers to receive a minimum hourly pay (currently $7.25) and overtime pay for any hours worked over 40 in a given workweek. Many states have opted to implement a higher minimum hourly wage for workers, particularly since the federal minimum wage has not increased since 2009.

Conversely, in Canada daily and/or weekly hours of work regulations governing when overtime should be paid and what constitutes the applicable minimum wage are enacted at the provincial and/or territorial level and can therefore differ. Consequently, there is no single standard workday or workweek throughout Canada. 

Mexico's primary source of labor law is the Mexican Federal Labor Law (FLL). Unlike Canada and the United States, in Mexico there are no labor laws at the local or state levels. In addition, the Mexican legal system follows a civil-law tradition relying more on the language of the constitution, codes or statutes, rather than case-law interpretation, which is often a guiding principle in the United States and certain provinces in Canada. In Mexico, the national minimum wage is currently 88.36 pesos (approximately U.S. $4.87), and any hours worked after 48 hours a week are considered overtime.

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Overtime and Maximum Hours of Work

Although Mexico's overtime eligibility threshold of 48 hours a week is greater than that of the United States and the provinces and territories of Canada, Mexico's Constitution provides other additional rights to workers. Specifically, the law imposes a maximum work shift of eight hours for day shifts and seven hours for night shifts, and the maximum amount of overtime hours an employee can be required to work in Mexico is nine hours. The FLL also requires double pay for the first nine hours of overtime, and if there is a case when an employee voluntarily works in excess of the nine weekly overtime hours, such hours are to be paid at triple the normal hourly rate.

These protections are broader than those generally provided in Canada and the United States, neither of which have countrywide regulations governing maximum hours of work, except in limited circumstances (for example, with respect to minors in the U.S.). However, in Canada, some jurisdictions do have laws prescribing the maximum number of hours that an employee may work in a day or week. In the United States, certain states do have laws that require daily overtime once a certain number of hours in a day have been worked. In both Canada and the United States, the applicable overtime rate is typically 1 1/2 times the employee's regular rate of pay.

Both Canada and Mexico have common practices or mechanisms to work around some of the more stringent requirements regarding overtime. For example, in Mexico, it is common to have an agreement to distribute the work hours in a week such that, even though an employee may work in excess of the eight hours permitted in a day, that employee is allowed an additional day off. Such agreements have received approval from the Mexican labor authorities as long as the scheduled workweek is limited to a required 48 hours in a week. In Canada, certain jurisdictions allow employers to enter into an "averaging agreement," with employee—or union—consent and, in some cases, government authorization. These agreements permit the employer to average hours of work over a defined period to determine overtime entitlements. Employers in some Canadian jurisdictions may also obtain "excess hours" permits or agreements to exceed maximum hours-of-work regulations.

Conversely, in the United States, agreements to deviate from the requirements of the FLSA are impermissible, and instead employers must determine whether the law permits alternative methods of compensation or contains other exceptions.

Days of Rest and Breaks

Most Canadian jurisdictions require employers to give employees a minimum of one day (or an average of one day) of rest per week. Some Canadian jurisdictions also prescribe a minimum period of daily rest or rest between shifts. Canadian employees are also entitled to meal breaks during their shifts of generally 30 minutes for every five (or within every five) consecutive hours of work.

In Mexico, employees must be given one paid day off for every six days of work. In addition, employees should receive at least a 30-minute period for rest or meals per work shift.

By contrast, in the United States, the FLSA does not require employers to give employees rest breaks, meal breaks or any days of rest. Rather, the federal Department of Labor has determined that if an employer provides an employee with short rest breaks (between five and 20 minutes), such time must be considered hours worked and is compensable. Instead, state law governs meal breaks, rest breaks and days-of-rest requirements, and each state has different requirements.

So while the general concepts of minimum wage, overtime and breaks are common throughout Canada, Mexico and the United States, the nuances and details greatly differ. Therefore, employers must take care to ensure that they are compliant with the specific hours-of-work rules that apply wherever they operate.

Ius Laboris is the world's largest global HR and employment law firm alliance. The article was led by Dave Kim with Ford Harrison in Berkeley Heights, N.Y., and Sal Simao with Ford Harrison in Berkeley Heights, N.J., New York City and Washington, D.C. Other contributing members included Hilary Grice with Mathews, Dinsdale & Clark LLP in Toronto and Álvaro González-Schiaffino with  Basham, Ringe y Correa in Nuevo León, Mexico.

 

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