CHINESE LABOUR LAW AT A CRITICAL POINT IN HISTORY Presentation to the Oxford Labour Law Discussion Group, Hilary Term, February 2011
Mimi Zou* 1. INTRODUCTION Over the past three decades, the rapid and unprecedented economic and social changes associated with China’s move from a centrally planned economy to a market-oriented economy with ‘Chinese characteristics’ have transformed the foundations of its employment relations and its institutional design. Such reforms led to the dismantling of the paternalistic, state-organised labour administration system based on the ‘three old irons’ of lifetime employment, fixed wages and controlled appointments, towards a more flexible and competitive labour market that would meet the demands of foreign and domestic capital.
As Chinese workers became increasingly exposed to market pressures, the transition generated conflicting interests, growing inequalities and rising disputes between labour and management. However, institutions regulating the new labour market have been slow to evolve, generally providing employers with significantly more leverage over workers. In its attempts to regulate the emerging market-based employment relations, the central government introduced eleven major pieces of labour legislation, including the first Trade Union Law 1992 (revised in 2001) and Labour Law 1994, and more recently, the Labour Contracts Law 2008 and Law on Labour Dispute Mediation and Arbitration 2008, as well as various regulations on labour issues ranging from minimum wage to collective bargaining.
While the latest reform of labour laws in 2008 is aimed at improving the substantive rights and interests of workers and enhancing existing labour dispute settlement mechanisms, there remains significant shortcomings in the overall legal framework. Most notably, there are serious institutional weaknesses that hinder effective implementation of and compliance with the new laws, such as the continued deficiency of a genuine employee ‘voice mechanism’ at the workplace. In this context, labour conflicts of different forms – from official mediation and arbitration claims to illegal wildcat strikes and street protests – have witnessed explosive growth over the past decade. It remains to be seen whether the effect of the new laws will achieve a more equitable balance between the interests of labour and capital, improve working conditions and provide greater voice for workers, and contribute to the government’s own social mandate of ‘building a harmonious society’.
* Bachelor of Civil Law Candidate, Christ Church and Faculty of Law, University of Oxford. Former Consultant, International Labour Organization China and Mongolia Office, Beijing. Email:
[email protected] DRAFT – DO NOTE CITE OR CIRCULATE WITHOUT PERMISSION OF THE AUTHOR
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This paper attempts to provide a historical overview of the development of labour law in China from the 1950s to present. There are arguably three identifiable stages in the transformation of Chinese employment relations during this period: 1) the ‘three old irons’ of lifetime employment and state-provided welfare, fixed wages, and state-controlled promotions (1950s-1978); 2) the emergence of an increasingly flexible labour market with contract-based employment relations (1979-1990s); 3) a policy shift towards stabilising labour relations with laws that enhance worker protection and the development of collective consultation mechanisms (2001-present). Section 2 examines the key features of each stage of change in the institutional and regulatory framework of employment relations in China, with a focus on the latest labour law reforms undertaken in 2007-2008. Section 3 analyses a key challenge to realising the stated goals of the most recent legal initiatives: the continued weakness of workplace institutions in providing an effective worker representation mechanism that could readjust the significant imbalance of bargaining power between workers and employers in China.
2. A HISTORICAL OVERVIEW OF THE CHINESE LABOUR LAW FRAMEWORK
A. 1950s - 1978: the ‘three old irons’ Under the former planned economy, the Chinese employment relations system was characterised by the ‘three old irons’: the ‘iron rice bowl’ of lifetime employment and ‘cradle-to-grave’ social welfare provided by the state (tie fanwan), the ‘iron wage’ of centrally administered and fixed wages (tie gongzi), and the ‘iron chair’ of state-controlled appointments and promotion of managers (tie jiaoyi).1
At the core of the ‘three old irons’, the organisation of labour was based on the work unit (danwei). Young workers were assigned to a danwei by the local labour administration department, which also formed the basis of their social and individual life, even past retirement. Members of a danwei and their families were provided with a wide range of social benefits including lifelong employment, housing, schooling, health care and pension. Wages were set according to a nationally standardised wage grid system, which was detached from any considerations of individual or danwei performance. The state administered wage system sought to minimise disparities within and across enterprises
1
Daniel Ding and Malcolm Warner, ‘China's Labour-Management System Reforms: Breaking the “Three Old Irons”’ (2001) 18 Asia Pacific Journal of Management 315.
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through a low wage policy and very small wage differences between grades of employees. Promotions within a danwei were based on an employee’s tenure as well as political orientation.2
Almost all enterprises under the centrally planned system were state-owned, and a ‘dual system’ of Party and management control became the basis of enterprise leadership. The basic institutional structure at the enterprise level consisted of the Party committee, the Workers’ Congress and the trade union. It was not uncommon that the general manager was also the Party Secretary and union secretary. All unions belonged to the sole state-sanctioned union body, the All-China Federation of Trade Unions (ACFTU). With a role as the ‘transmission belt’ between the Party-State and workers, unions were responsible for educating workers and dealing with their grievances. The danwei also represented the basic-level organisation that linked individuals to the Party, and enabled the Party to directly exert political control over workplaces.3
Due to the absence of a genuine labour market prior to 1978, the institutional framework for employment relations could be better described as a labour administration system. Efforts to introduce labour laws were short-lived during this period. For example, the operation of the Labour Union Law 1950 and several labour regulations concerning state-owned enterprises came to an end in 1956. Apparently this was mainly due to ideological reasons – since the interests of workers and those of the enterprise were theoretically aligned in a socialist society, labour disputes would not be an issue.4 Furthermore, there was a general breakdown in China’s legal system during the Cultural Revolution, with the courts and legislative systems entirely abolished.
B. 1979 - 1990s: towards greater flexibility in an emerging labour market China’s move towards a market-oriented economy from 1979 onwards led to greater decentralisation of state-owned enterprises (SOEs) in their personnel management, along with reforms to break the ‘three old irons’ that were seen to be associated with low labour flexibility and productivity.5 The new policies were introduced largely to promote economic reform and efficiency, with the aim of making labour less ‘rigid’ to facilitate China’s participation in global competition – thereby meeting ‘a key demand of the foreign capital that led China’s post-reform economic development’.6
2
Chun Lin, The transformation of Chinese socialism (Duke University Press 2006). Simon Clarke, Chang Hee Lee and Qi Li, ‘Consultative Consultation and Industrial Relations in China’ (2004) 42 British Journal of Industrial Relations 235. 4 Yun Zhao, ‘China’s New Labor Dispute Resolution Law: a Catalyst for the Establishment of Harmonious Labor Relationship?’ (2009) 30 Comparative Labor Law and Policy Journal 409. 5 Ding and Warner (n 1). 6 Feng Xu, ‘The Emergence of Temporary Agencies in China’ (2009) 30 Comparative Labor Law and Policy Journal 431, 433. 3
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From the 1980s onwards, changes in government policy resulted in the significant downsizing of SOEs, removal of the ‘cradle-to-grave’ social welfare of the danwei system, introduction of fixedterm individual and collective labour contracts, and development of new wage systems to reflect performance and skills levels.7 The pace of labour market reforms accelerated during the 1990s in the lead-up to China’s accession to the World Trade Organisation. A central feature of these reforms has been the creation of a labour contract system whereby workers are engaged on fixed-term contracts, usually between half a year and three years. This fundamental abandonment of the ‘iron rice bowl’ saw the rise and rise of temporary and contingent employment. Fixed-term contracts became the dominant form of employment agreements. This was the case for both the private sector and SOEs. Flexible employment was encouraged by the government as a specific response to the problem of re-employing the masses of redundant workers from the state-owned sector.
The growing emphasis on job creation in the burgeoning private sector generated new problems for labour relations as private employers gain increased autonomy in the workplace. While the economic transition brought about an increasingly flexible labour market, the pre-reform institutions became outdated and ineffectual in governing the newly developing labour relations which weighed heavily in favour of employers. Mounting inequalities and disputes between labour and management created the need for a new institutional framework that would cope with these changes. The tension between the pursuit of economic reform and the need to address emerging labour issues made it difficult for Chinese policymakers to reach consensus on labour legislation.8 In this context, the Labour Law 1994 was a significant breakthrough as the first national law of its kind in China, laying the foundation for a new industrial relations system.
The Labour Law 1994 formally established the system of labour contracts as the primary means for regulating employment relationships. Its provisions covered a wide range of matters, including the conclusion, variation and termination of labour contracts, a framework for ‘collective bargaining,9 reasonable working hours, paid leave, anti-discrimination, equal pay, and a dispute resolution framework among others. Further regulations pertaining to the Labour Law were promulgated in relation to special labour issues such as minimum wages, labour inspectors and redundancies.
On paper, the standards presented by the Labour Law 1994 did not appear ‘markedly inferior to those of comparable countries and indeed many developed nations’. 10 However, the legislative 7
Fang Lee Cooke, HRM, Work and Employment in China (Routledge 2005). Zhao (n 4) 410. 9 The official term used in the legislation is jitixieshang (collective consultation), not jititanpan (collective bargaining), since ‘consultation’ does not have a connotation of conflict or confrontation. 10 Sean Cooney, ‘China’s Labour Law, Compliance and Flaws in Implementing Institutions’ (2007) 49 Journal of Industrial Relations 673, 674. 8
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framework and institutions had significant shortcomings. In its institutional design, Cooney notes that the disorderly internal structure of Chinese labour law is a ‘major obstacle to its capacity to generate credible labour standards’.11 The complexity of the increasingly segmented, heterogeneous Chinese labour market presented a major challenge to the drafters to frame a law in general terms. The Labour Law 1994 left out significant details – for example, the law largely focuses on termination of employment yet does not address contract formation in any detail. There have been subsequent attempts to fill in the numerous gaps, however the clarifying provisions are scattered throughout various legal instruments and their legal status are not always clear – rendering them hardly accessible by employers or employees.
More importantly, there is the systemic failure of Chinese institutions to regulate employment relations in a fair and balanced manner, generally neglecting the interests of labour. Acute competition among localities to attract and retain investment has often led to local authorities relaxing their enforcement of labour standards. Furthermore, as local governments did not consider rural migrant workers as warranting legal protection, labour law meant little for China’s 225 million migrant workers. 12 As a result, widespread ‘sweatshop’ exploitative practices prevailed, with employers often failing to comply with labour regulations and forcefully repressing any forms of industrial activity. Underlying all of this was the state’s reliance on the growth of private employment as it was downsizing SOEs. This provided employers ‘much leeway in establishing an industrial relation system best suiting their needs’.13 As some commentators have further observed, regulating labour relations was assigned secondary importance in developing a legal framework for a market economy, especially compared to the principal priority of attracting foreign investment.14
Overall the new labour law framework has moved away from a state-organised administrative structure to a system where workers are ‘reconceived and reorganised as individual subjects, selling their labour on a labour market’.15 If the primary object of labour law is to ‘counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship’,16 then Chinese workers must rely on laws that are based on the status of a legal individual who is party to a contract. The Labour Law 1994, in its presumption that employers and individual workers are equal 11
ibid 675. Chang-Hee Lee, ‘Industrial Relations and Collective Bargaining in China’, Working Paper No.7, Industrial and Employment Relations Department, International Labour Office, Geneva, October 2009, 5. 13 Max Zenglein, ‘Marketization of Chinese Labor Market and the Role of Unions’ (2008) Global Labour University Working Paper 4, 8 < http://www.global-labour-university.org/fileadmin/GLU_Working_Papers/GLU_WP_No.4.pdf> accessed 5 February 2011. 14 Hilary Josephs, ‘Measuring Progress under China’s Labour Law: Goals, Processes, Outcomes’ (2009) 30 Comparative Labor Law & Policy Journal 373; Kai Chang, Laoquan Lun: Dangdai Zhongguo Laodong Guanxi de Falü Tiaozheng Yanjiu [Theory of Workers' Rights: Research on the Legal Regulation of Labour Relations in Contemporary China] (China Labour and Social Security Publishing House 2004). 15 Xu (n 6) 450. 16 Otto Kahn-Freund, Labour and the Law, Hamlyn Lectures Series (Stevens 1972). 12
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in a contractual relationship (for example, art.17 stipulates that ‘[C]onclusion and alteration of labour contracts shall follow the principle of equality, voluntariness, and agreement through consultation’), is still based on a pre-reform workplace mentality of Chinese enterprises that espoused common interests between management, workers and the Party.17
2001 - present: towards more ‘harmonious’ labour relations? China’s accession to the World Trade Organization further accelerated the pace of economic reform, bringing with it a more diversified and segmented labour market. Employment relations have grown increasingly complex – with different wages and working conditions for a heterogeneous labour force. The deficiencies of the existing institutional framework in addressing the problems of labour market liberalisation have become increasingly apparent. The rapidly escalating trend of labour disputes over the last decade reveals significant discontent and frustration among workers, particularly over the issues of unpaid wages and violation of workers’ rights. In 1996, China’s labour dispute arbitration committees handled 47,951 cases. The number of cases had increased to 350,182 in 2007.18 In 2008, after the passage of the Labour Contract Law and the Labour Dispute Mediation and Arbitration Law, the number of labour dispute cases reached 693,000. 19 While there is no reliable data on strikes, frequent incidences of spontaneous ‘wildcat’ strikes and collective workplace disturbances by unorganised workers in the private sector have been on the rise.20
In promoting a policy of a ‘harmonious society’ to address problems associated with the inequitable distribution of the benefits of economic growth, the Party-State has identified labour unrest as one of the most important threats to social stability.21 It is in this context that the central government has adopted a new set of legislation with the intention of improving the protection of workers’ rights and interests, enhancing existing ineffectual or absent institutional mechanisms for worker representation and dispute resolution, and adding to and clarifying provisions of the existing legislative framework.
The reform of Chinese labour law in the 2000s started with seemingly minor changes to the Trade Union Law 1992 in 2001. While this revision did not alter the political environment for union operation or address unions’ representational deficiency at the workplace, it opened up new and 17
Sean Cooney, Sarah Biddulph, Kungang Li and Ying Zhu, ‘China’s New Labour Contract Law: Responding to the Growing Complexity of Labour Relations in the PRC’ (2007) 30 The University of New South Wales Law Journal 786. 18 National Bureau of Statistics (Ministry of Human Resources and Social Security), 2007 Statistical Bulletin on Labour and Social Security, 8 May 2008
accessed 11 February 2011. 19 Ministry of Human Resources and Social Security, ‘One Year after the Labor Dispute Mediation and Arbitration Law’, 9 May 2009 accessed 11 February 2011. 20 Lee (n 12) 3. 21 Jackie Sheehan, ‘From Client to Challenger: Workers, Managers and the State in Post Deng China’ in Malcolm Warner (ed) Changing Workplace Relations in the Chinese Economy (Macmillan 2000).
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important institutional opportunities for the ACFTU. 22 First, it incorporates ‘safeguarding the legitimate rights and interests of workers’ as the basic duty of trade unions before protecting the ‘overall interests of the entire Chinese people’ (as stated in the 1992 version). Second, the reform provided for the set up of joint trade unions in small enterprises (employing less than 25 workers), expanding the scope for local and sectoral forms of union organising (beyond the enterprise-centred model). Third, it introduced a legal basis for union participation in labour and social policy and in tripartite consultation to improve coordination among the government, the ACFTU and the China Enterprise Confederation (the only officially designated employer association) at various levels.
Several major pieces of legislation were introduced in 2007 and went into effect in 2008, including the Labour Contract Law (LCL), the Law on Labour Dispute Mediation and Arbitration (LLDMA), and the Employment Promotion Law (EPL). The LCL is aimed at improving labour rights at the enterprise, especially the rights of rural migrant workers, and providing greater security for the increasingly precarious workforce. The central government’s intended goal of enhancing labour protection is reflected in new provisions in the LCL to strengthen employment contracts, impose broad obligations on employers to prevent the underpayment of wages, increase the rights of unions and workers representatives at the enterprise, provide legal recognition of sectoral and regional bargaining, provide for the transmission of employee entitlements when a firm restructures, and regulate the use of dispatch labour and agency work.
The LCL also seeks to address some of the ambiguities and gaps in the Labour Law 1994. For example there are clearer and more detailed provisions in relation to the formation of labour contracts. Employers are required to enter into a written contract with an employee within 30 days of full-time employment. Failure to have a signed contract after one year of employment would deem such a contract to be one of open-ended duration (i.e. without a fixed term). Furthermore, the LCL also imposes specific time limitations on probationary employment and provides for open-ended employment after two contract renewals. In addition, for the first time, the LCL provides for the regulation of dispatch labour, recognising the rapid expansion of this form of employment. The new legislation sets two years as the minimum employment period with a labour dispatching agency, and introduces a system of licensing and registration of such agencies.
While the LCL enhances the substantive rights of workers, the LLDMA focuses on the procedural aspects of labour disputes with the aim of impartial and timely settlement of disputes and protecting the legal rights and interests of employees. The Labour Law 1994 established a system for resolving labour disputes, including contract (both individual and collective) and statutory rights, through a 22
Lee (n 12).
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four-stage process of voluntary enterprise mediation, mandatory arbitration (through a government labour arbitration council), civil lawsuit and appeal in the courts.23 The original emphasis was on voluntary mediation but, in practice, the utility of enterprise mediation in resolving labour disputes was diminished by the perceived lack of fairness. Problems with the arbitration procedures included a very short limitation period for filing an application and lengthy delays in the process. There was also a lack of finality in mediation and arbitration awards, with the effect of increasing the judicial caseload and the burden on complainants in respect of legal fees and delays.24
The LLDMA aims to address some of the deficiencies of existing mediation and arbitration mechanisms. For example, new provisions seek to expedite dispute resolution by shortening the time period within which arbitration applications are dealt with, improve the quality of the mediators and arbitrators by requiring a certain level of professional qualifications, allowing the legal enforceability of mediation agreements, and providing increased finality to arbitration awards on certain issues. The LLDMA also seeks to improve access for workers to official dispute resolution channels, which indicates the limited capability of the existing system to regulate and resolve the growingly complex and large scale labour disputes, particularly those that have fallen outside the official labour relations system. For example, the LLDMA extends the limitation period (from 60 days to a year) for workers to lodge complaints, eliminates filing fees for arbitration, and expands the scope of disputes that can be addressed by mediation and arbitration bodies (including disputes over the existence of an employment relationship which would allow the growing number of contingent workers to bring claims).25
The third piece of legislation introduced in the 2007 reforms is the Employment Protection Law (EPL). Its espoused objectives are to promote employment and prohibit job discrimination. With respect to the goal of ‘actively promoting employment’, the EPL reads more like a policy document by setting out broad themes for local and national government departments to follow rather than set out any specific rules. In terms of anti-discrimination provisions, the EPL expands upon the grounds of prohibited discrimination in the Labour Law 1994 to include discrimination against migrant workers based on their residency status. Furthermore, the new law provides victims of unlawful discrimination a right to bring a claim in court against employers (previously individuals were never explicitly given the right, although the new law does not clearly stipulate the remedies). 23
There are no specialist labour courts in China. Labour disputes are dealt with by civil courts and in accordance with civil procedures. The civil courts operate at three levels under the Supreme People’s Court in Beijing. At the lowest level, district courts handle most labour disputes in the first instance. Either party can appeal to the intermediate court, at the municipal level, or the higher court, which operates at the provincial level. 24 Ronald Brown, ‘China Labour Dispute Resolution’, Rule of Law in China: Chinese Law and Business Series, The Foundation for Law, Justice and Society, 2008 accessed 11 February 2011. 25 Ronald Brown, Understanding Labor and Employment Law in China (Cambridge University Press 2009) 168-184.
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The latest labour law reforms represent an important step forward in the development of legal norms in individual and collective employment relations in China, particularly in the protection of workers’ rights and interests in an increasingly inequitable labour market. Notwithstanding the improvements in the substantive and procedural rules and the clarification of legal standards, there remain important shortcomings in the overall institutional framework that hinders the effective implementation of the new legal framework.
3. THE CHALLENGE TO THE FUTURE DEVELOPMENT OF CHINESE LABOUR LAW As is generally the case with laws in China, the real question is in whether the new labour laws are enforced, how they are enforced, and against whom they are enforced. The effective implementation and enforcement of labour law in China reflects a broader challenge of the country’s movement toward the rule of law. It has been widely recognised that pervasive corruption in government departments and in the courts at various levels is a significant impediment to China’s legal reforms. Furthermore, administrative resources for implementing labour laws are seriously deficient. Local governments, charged with the unfunded mandate of enforcement, may be reluctant to enforce labour laws at the expense of job creation and tax revenue from investment.26 This is particularly the case when local governments are under competitive pressures to attract foreign investment.
A number of specific weaknesses in the legal structure used to implement labour law in China have been identified by various scholars, including gaps in the detail of the law, 27 ineffective labour inspectorates,28 weaknesses in the dispute resolution mechanisms,29 and the limited ability of unions to engage in a monitoring and compliance role.30 This paper focuses on the role of the ACFTU, the only organisation that is officially assigned a mandate of protecting workers’ rights within the Chinese labour law framework.
The ACFTU: still a ‘transmission belt’? A key question is whether Chinese unions have truly seceded from their ‘transmission belt’ role and become a workers’ representative organisation instead of ‘an arm of state bureaucracy’.31 Competing
26
Josephs (n 14). Cooney (n 10). 28 Anders Reutersward, ‘Labour Protection in China: Challenges Facing Labour Offices and Social Insurance’, OECD Social, Employment and Migration Working Papers No. 30, 7 November 2005 accessed 11 February 2011. 29 Zhao (n 4). 30 Mary Gallagher, Contagious capitalism: Globalization and the politics of labor in China (Princeton University Press 2005). 31 Cooney (n 10) 681. 27
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enterprise unions independent of the official trade union structure are still not tolerated by law. The peak union body, the ACFTU, remains subordinate to the Chinese Communist Party. The position of the ACFTU in the Party-State structure has been described as a ‘double-edged sword’.32 On the one hand, the ACFTU has shown its significantly elevated political influence and effectiveness in pushing for the 2007 national labour law reforms and in the adoption of local regulations that are favourable to union operation and collective bargaining. On the other hand, its incorporation in the formal Party-State structure allows the Party-State to exercise direct control over trade unions.
Furthermore, while the Party-State may direct unions to act in the interests of workers, for example, in obliging unions to ensure employer compliance with the labour law, this is not always translated into practice when local government officials are more concerned with attracting investment and economic growth.33 There is still a prevailing practice where local union officials are appointed by Party officials – with the tendency for managers to serve in union leadership positions. According to a survey conducted by the China Institute of Industrial Relations, out of the 524 union chairs surveyed, 49.6 per cent held concurrently leading Party positions, while 34.9 per cent held management positions.34 Since there is no longer the former alignment of enterprise interests under the new market economy, Chinese unions are placed in a situation which prejudices their ability to represent their actual constituency when bargaining with management and their capacity to monitor management decisions and enforce observance with the law. It is unsurprising that enterprise trade unions have been perceived by local and foreign observers of Chinese labour relations as ineffective and lacking credibility among workers.35
Furthermore it appears that Chinese trade unions have not yet utilised much of their legislative rights to influence workplace practices.36 While the ACFTU has maintained a fairly visible presence in the legislative process, it has not been as effective in actually using its powers at the ‘shop-floor’ level. While collective bargaining has been officially promoted by the government and ACFTU as a mechanism to resolve workplace disputes and collective bargaining coverage has expanded at an extremely rapid pace,37 there is generally little participation by workers in the process and collective agreements become carbon copies of legal minimum conditions.38 Chinese unions’ bargaining power is further limited by the constitutional and legislative absence of a right to strike. This constraint
32
Lee (n 12)16. Feng Chen, ‘Between the State and Labour: the Conflict of Chinese Trade Unions’ Double Identity in Market Reform’ (2003) 176 China Quarterly 1006. 34 China Industrial Relations Institute, 2007 Beijing Gonghui Luntan Lunwenji [2007 Beijing Trade Union Forum] (China Industrial Relations Institute 2007). 35 Bill Taylor and Qi Li, ‘Is the ACFTU a union and does it matter?’ (2007) 49 Journal of Industrial Relations 701. 36 Cooke (n 7). 37 Lee (n 12) 15. 38 Clarke, Lee and Qi (n 3). 33
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significantly affects their ability to ‘use industrial pressure to secure (employer) compliance with the law’.39 Unions have also in general provided little legal assistance to workers, far less than other legal aid organisations and labour NGOs.40
There appears to be some promising signs of change as the ACFTU, with the central government’s political support, have in recent years pursued ambitious unionisation drives. Membership rose from 123 million in 2003 to 226 million in 2010. Importantly, more than half of the 14 million new members in 2009 were rural migrant workers.41 There has also been an attempt by the ACFTU to pursue ‘grassroots’ organising campaigns in large foreign enterprises such as Wal-Mart and McDonald’s that are known to have a strong anti-union stance. However, it is questionable whether the ACFTU’s presence in these foreign enterprises has largely been a ‘window-dressing’ exercise.42 Furthermore, these high profile cases involving well-known U.S. multinationals only cover a very small proportion of the foreign-invested sector. The sector is dominated by smaller, less publicly visible Asian-owned companies that are more likely pursue the ‘sweatshop’ path of exploitative working practices. 43 Furthermore, as Anita Chan’s research shows, less publicised, sweatshop conditions have also permeated SOEs.44 Since unions in these SOEs are more likely to be tied to a dual management-Party leadership structure, their true representativeness and organising autonomy are placed into question.
When evaluating the role of Chinese trade unions, it is important to consider the political and institutional structure in which they are embedded in.45 Comparing Chinese trade unions under the same microscope as their Western counterparts may prove to be a difficult task. Nevertheless, in order to develop into a more effective labour market institution to counter-balance management power, it will be necessary for unions to overcome their limited credibility among workers and further evolve beyond its current structure and operation at the workplace. 46 While their overall position is weak at the workplace level, trade unions may potentially be the only institutions able to improve the protection of workers’ rights in an employer-dominated environment.
39
Cooney (n 10), 682. Xu (n 6). 41 All-China Federation of Trade Unions, ‘Chinese Trade Unions’, 15 April 2010 accessed 11 February 2011. 42 Josephs (n 14). 43 Anita Chan and Hongzhen Wang, ‘The Impact of the State on Workers’ Conditions: Comparing Taiwanese Factories in China and Vietnam’ (2004) 77 Pacific Affairs 629. 44 Anita Chan and Jonathan Unger, ‘A Chinese State Enterprise Under the Reforms: What Model of Capitalism?’ (2009) 62 China Journal 1. 45 Simon Clarke, ‘Post-Socialist Trade Unions: China and Russia' (2005) 36 Industrial Relations Journal 2; Taylor and Qi (n 35). 46 Taylor and Qi (n 35). 40
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2010: the summer of discontent Notwithstanding the most recently adopted labour legislation, the limited development of official institutional avenues for workers to express grievances and press for their demands has seen the continual rise of labour unrest – both within and outside the formal industrial relations system. It is likely that the recent labour law reforms have further raised workers’ expectations concerning the improvement of their wages and working conditions, with claims to the arbitration council doubling within a year after the laws had been introduced.47 However, the significant pitfalls of these official dispute resolution mechanisms are exposed in the growing number of spontaneous wildcat strikes or ‘labour-related mass incidences’ (the official government term for strikes), particularly in industrial sectors with large numbers of unorganised rural migrant workers.
The series of high-profile wildcat strikes in foreign-owned enterprises throughout China’s coastal regions in the summer of 2010 reveal the inadequacy of worker representation arrangements in practice at the local enterprise level, against the backdrop of a Party-State and ACFTU engineered campaign to promote union organising, collective bargaining and tripartite consultation. Two major incidents captured the attention of both foreign and local media. First, there were 17 separate suicide attempts (10 fatal cases) of workers at Foxconn, a Taiwanese-owned enterprise which serves as a manufacturer for major international phone brands. A recent report by Chinese university researchers showed a strong connection between the suicides and a combination of low wages, extreme and often unpaid overtime (each worker had, on average, over 80 hours of overtime per month) and excessively harsh management.48 The second highly publicised incident concerned a wave of strikes across factories that supplied auto parts and components to Honda, Toyota and numerous global automakers. Some strikes lasted nearly two weeks and were successful in triggering ‘copycat’ strikes in other factories in southern China, paralysing auto production in China’s largest manufacturing hub. Along with demands for wage increases, the strikers also sought to elect their own union representatives to negotiate with management.
While the Foxconn suicides and auto strikes were unrelated incidents, they had similar causes: extremely poor working conditions and more importantly, the absence of formal channels at the workplace for workers to redress their grievances and to protect their legal rights and economic interests. While these workers had union membership fees automatically deducted from their 47
European Institute for Asian Studies, ‘Social and Economic unrest in China: A Wave of Social Unrest?’, EIAS Briefing Seminar Report, 9 December 2010 accessed 11 February 2011. 48 Students & Scholars Against Corporate Misbehaviour, ‘Workers as Machines: Military Management in Foxconn’, 12 October 2010 accessed 11 February 2011.
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monthly pay, the credibility, legitimacy and effectiveness of their enterprise unions were severely undermined by the heavy control of management. The strikes exposed widespread worker dissatisfaction with the ACFTU’s role in representing and securing their interests in contractual and statutory protections and benefits. 49 While the striking workers were not demanding union representation independent of the ACFTU, they sought a democratically elected, worker-led union leadership that is accountable and prepared to fight on behalf of its members.
The march towards a partial right to strike? In response to the above incidents, the Guangdong Provincial People’s Congress initiated the ‘Regulations on the Democratic Management of Enterprises’ (currently in draft form), which calls for the democratic elections of ‘employee representative councils’ and strengthening of collective bargaining rights for workers on the shop floor. For example, the latest draft provisions state that if one-third or more of employees makes a request for wage negotiations, the union shall organise the democratic election of worker representatives to engage in such negotiations.50 Where no union is set up at a particular enterprise, workers may ask the local union to supervise and guide the election of the negotiating representatives. Management is obliged to respond to the bargaining request within a set timeframe, provide information necessary for the negotiations, and bargain in good faith. If management fails to do so and as a result industrial action takes place, the employer may not terminate the striking employees. On the other hand, the draft provisions also prevent workers seeking wage rises from resorting to industrial action before they have lawfully demanded collective consultation or while consultations are ongoing.
This would be the first time that specific legal protection is given to striking workers since the right to strike was left out of the PRC Constitution of 1982.51 Despite this legislative absence of a right to strike, Chinese authorities have, in practice, tolerated some form of limited local protests by workers. Some commentators have stated that the draft regulation represents an attempt of the government to recognise and regulate what is already happening.52 The proposed law is also perceived as a localised pilot experiment which could allow the ACFTU to engage more actively in worker advocacy and collective bargaining at the shop floor, and to become more independent from management control.53
49
Ronald Brown, ‘Reform for the Benefit of Workers’ China Daily (Beijing, 14 July 2010) accessed 11 February 2011. 50 European Institute for Asian Studies (n 47). 51 The Trade Union Law 2001 refers only to ‘shutdowns’ and ‘slowdowns’, with Article 27 stipulating: ‘When a workstoppage or slow-down occurs in an enterprise or institution, the trade union shall … assist the enterprise or institution in its work so as to enable the normal production process to be resumed as quickly as possible’. 52 Dexter Roberts, ‘Is the right to strike coming to China?’ Business Week (New York, 5 August 2010) accessed 11 February 2011. 53 Ronald Brown (n 49).
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Despite the latest developments, there remains the important question of whether ACFTU, in its monopolistic representation of Chinese workers, could step up to the challenge of institutional reform without the legal guarantee of basic workers’ rights under ILO Convention 87 and 98, which China has not yet ratified.54 In the absence of freedom of association, the ACFTU does not face credible challenges which can trigger genuine union development. Its institutional relationship with the Party-State means that the ACFTU is also reliant on the Party-State’s strong support for the trade union agenda. In the absence of a clear and unambiguous legal right to strike, it will still be extremely difficult for workers to put pressure on employers to break a deadlock in the process of collective bargaining.
CONCLUSION Uneven institutional and regulatory development in the transformation of China’s labour market has profound economic, social, and political consequences for the country. Dealing with the challenges of employment relations in an increasingly complex and segmented labour market is an essential task the Chinese government must address. Growing labour unrest over the past decade has forced the central and local governments to reassess the legal framework of labour relations and bring the law into line with social and economic reality. The labour laws introduced in 2007 mark a turning point for the regulatory framework of employment relations in China. In an increasingly precarious market economy with greater possibilities for social dislocation and instability, institutional mechanisms with ‘Chinese characteristics’ for regulating employment relations will continue to develop and evolve.
54
Qiu Yang, ‘ILO Fundamental Conventions and Chinese Labor Law: From a Comparative Perspective’ (2006) 2 Chinese Law & Policy Review 18.
