Are Corporations Sacking Workers To Avoid China's New Labor Law?

A newspaper in China’s Guangdong Providence recently ran an article entitled "'The Labor Contract Law Made Me Lose My Bowl of Food." It relays the story of “a 50 year old worker Hua Yi, who was employed at a plant since 1996--until recently, when she was told there wasn't enough work for her. New workers, though, were hired in Hua's place. Another worker, A Yu, put in 21 years at a factory only to be informed that her work was unsatisfactory and fired. She was left to rely on her husband's 600 RMB per month salary to take care of aging parents and a daughter not yet four years old.”

As many GLS Blog readers know, last year US and EU corporate lobby groups launched a major campaign to block new protections for Chinese workers. They were successful in part—as one corporate lawyer put it “the business community appears to have had an impact…scal[ing] back protections for employees and sharply curtailed the role of unions”.  But their aggressive tactics also unexpectedly sparked major push-back from the international labor and human rights movements inside and outside of China.  This pressure forced companies like NIKE and others reverse their positions and support the new labor law, which was passed by the National People’s Congress in June 2007.

Good news right?  Not so fast. Recent reports like the one from Guangdong reveal that some companies are quietly firing workers before the new Labor Contract Law takes effect.  While passed in late spring of ’07, the new law does not become binding until January 1, 2008, giving employers a six-month window to continue to take advantage of China’s rights-free labor market.

According to recent postings by the China Labour Bulletin, there are reports of pre-emptive firings throughout China: “In Shanghai's Pudong district, several workers employed for over three years without a written contract have complained to their union about systematic intimidation from employers. Eight employees have already been made redundant, the Morning News (Xinwen Chen Bao) reported. Once the Labour Contract Law is implemented, these workers would have to be given written contracts specifying in detail the terms and conditions of their employment.”

At GLS we’re concerned that this is only the tip of the iceberg.  For some time we’ve been wondering why the US-China Business Council included in its list of demands that the new Labor Contract Law’s implementation be both delayed and not retroactive. Their official submission to the PRC requested that “the effective date of the law be at least 6 months after promulgation, and that the law not be made retroactive to labor contracts signed before the effective date.”

Was their insistence based on a strategy that if they failed to gut the legislation, at least they could dump as many workers off their payrolls as possible to avoid new European-style “just-cause” and layoff protections?

American and European corporations do business in China through a labyrinth of suppliers and middle men. Without corporate transparency of supplier chains and production practices how can consumers, policy makers or NGOs know whether or not companies are firing whole swaths of the their workforce before the bell tolls on January 1st 2008?  The answer is we can’t.  Without disclosure commitments to follow the law and raise standards of Chinese workers remain empty promises.

AmCham and other business spokespeople have repeatedly said that they will honor the law.  They should be asked to pledge that they will not honor it by firing the very workers who might be covered under it.

Comments

[Ellen David Friedman]

There are many reasons and opportunities for employers in China to fire workers all the time -- including a retaliatory response to public exposure of labor violations, coercive punishment of worker resistance, relocation to duck inflating real estate costs, lay-offs due to loss of business in the fiercely competitive supplier chain, and simply running away to avoid paying taxes and back wages. It is sobering, but not surprising, that the imminent requirement of providing labor contracts provides another incentive to dismiss workers.

Nevertheless, the potential benefits of the law -- most centrally, the requirement of a written labor contract -- are very great.

The biggest question is whether the Trade Union will be able to take up its task of educating workers to use their new rights under the law. Certainly the corporations are aggressively training their HR staff about the law's loop-holes.

There are indications that the ACFTU wants to apply itself seriously to this effort. Over time, that could be decisive about whether the law is really implemented, defended and enforced.

[Fons Tuinstra]

It is not only corporations sacking people, a larger shift is taking place. Here are some links to other stories linking the sacking of thousands of temporary workers at CCTV to the new law:
http://www.chinaherald.net/2007/08/cctv-fires-one-third-of-work-force.html