From Termination Agreement to Severance: Understanding Your Rights When Leaving a Job for a Valid Reason
Resigning from a job can stem from various motivations, such as seeking personal change or leaving due to unacceptable working conditions. Regardless of the reason, certain irrevocable labor rights remain, and resigning for a justified cause has specific treatment depending on the reason for leaving and the company’s actions.
Termination Agreement vs. Severance: The Differences
According to Factorial, when a resignation occurs for personal reasons, the company is obligated to pay a termination agreement. However, if the resignation results from employer misconduct or failure to meet obligations, the employer must pay severance according to labor law.
Severance for Justified Resignation
The severance package for a justified resignation depends on the duration of employment, as outlined in Article 50 of the Mexican Federal Labor Law (LFT).
- For a fixed-term position under one year, the severance will be half of the earned wages.
- If the employment exceeded one year, the severance will be six months of wages for the first year and 20 days per additional year, along with any applicable benefits.
- For indefinite employment, the severance will be 20 days of wages for each year of service.
The employee can leave their job within 30 days of any justified cause and receive the mentioned payments, plus an additional severance equivalent to three months’ wages, unpaid wages, and interests if applicable.
“The termination agreement includes proportional payment of benefits such as vacation, holiday bonus, Christmas bonus, and antique bonus if applicable. It must be provided even if the employee resigned voluntarily,” Factorial highlights.
What Are My Rights If I Resign to Change Jobs?
If an employee resigns for career advancement and announces their departure to join another company offering a better opportunity, Article 53 of the LFT states that the employment relationship can be terminated by mutual agreement between the employee and employer.
In this case, no severance is required; however, the employee is entitled to receive benefits such as holiday pay, vacation bonus, Christmas bonus, and antique bonus if they have been employed for at least 15 years. Additionally, the employee cannot waive any outstanding debts owed by the employer.
The Procuraduría Federal de la Defensa del Trabajo (Profedet) explains that employees have one year to claim unpaid severance, while employers face penalties for delays. “Employers must pay a daily penalty of one day’s wage for each day of late payment,” Profedet emphasizes.
The LFT imposes a fine of between 5,657 and 565,700 pesos (equivalent to 50 to 5,000 times the Unidad de Medida y Actualización or UMA) for failing to meet obligations, as stated in Article 1002.
Key Questions and Answers
- Q: What happens to my rights if I resign for a justified cause? A: Certain irrevocable labor rights remain, and resigning for a justified cause has specific treatment depending on the reason for leaving and the company’s actions.
- Q: What is the difference between a termination agreement and severance? A: A termination agreement is paid when resigning for personal reasons, while severance is required if the employee leaves due to employer misconduct or failure to meet obligations.
- Q: How is severance calculated for a justified resignation? A: Severance depends on the duration of employment, with specific calculations outlined in Article 50 of the Mexican Federal Labor Law.
- Q: What rights do I have if I resign to change jobs? A: Employees can resign for career advancement without severance but are entitled to benefits such as holiday pay, vacation bonus, and antique bonus if they have been employed for at least 15 years.
- Q: What are the consequences of late severance payment? A: Employees have one year to claim unpaid severance, and employers face penalties for delays, including a daily penalty of one day’s wage for each day of late payment.
