H1B out of status due to layoff more than 2 months ago. Visa stamp in passport has expired. I-94 has expired.

Found an employer who is willing to do H1B. Since stamp and I-94 have expired I have been told I must go out of US and re-enter.
If that is true:
Question is, do I have to go back to home country OR can I go to Mexico/Canada and re-enter.

While trying to book an appointment in Mexico, I came across this statement.
"Applicants who have been out of status in the US having violated the terms of their visas or having overstayed the validity indicated on their I-94 forms cannot apply in Mexico"

Would I fall under this category?

Thanks