Global Labor Strategies

Beyond China's New Labor Contract Law

China’s new labor code went into effect on January 1. It could have important consequences for workers in China and in the rest of the world.

The Financial Times on January 2 reports that,

Employers in China fear that a new labour contract law that took effect on Tuesday will intensify growing pressures on manufacturing costs by enhancing the bargaining power of workers.

We estimate that, added together, labour costs [in mainland China] will be close to 40 per cent higher for this year [2008],” said Willy Lin, Hong Kong-based managing director of Milo’s Knitwear (International) Group.

Mr Lin says the new labour contract law, which will make it harder to dismiss workers, could increase costs by about 8 per cent this year, with the rest of the increase caused by higher minimum wages, social security payments and the renminbi’s steady appreciation against the US dollar.

The new law was designed to address some of the rampant abuses in Chinese industry including long hours, dangerous working conditions, and employers that cheat workers out of wages or delay payments.  But like all laws everywhere, the new law will be worth little if it is not interpreted broadly and enforced strictly. If the past is any guide, this could be a problem. China has been notoriously lax in enforcing labor laws. Absent vigorous enforcement, the new law could lead to workers being squeezed even harder in an effort to keep labor costs down. 

A Call to Action

China’s new Labor Contract Law will become effective on January 1, 2008. At that time companies will be required to provide a written contract to each employee and to provide a handbook of company policies and procedures developed in consultation with worker representatives.

The new law gives new rights to employees and imposes new responsibilities on employers. There is evidence that some companies are taking evasive action to avoid complying with both the letter and the spirit of the law. This has provoked a great deal of controversy in China.

Last year, as the new law was being drafted, foreign corporations and their business associations took strong exception to some of its provisions. As a result changes were made in later drafts to address corporate concerns. Following passage, foreign corporations and their business associations pledged to support the law and abide by its provisions.

Given the public controversy in China over corporate compliance with the new law, it is time for trade unions, worker rights advocates, and political figures around the world to insist that foreign companies and their suppliers prove compliance with the new law and respect for their employees’ rights under the new law. They should demand that foreign corporations take the following 3 steps to prove compliance:

1. Make public the templates of the contracts that they are offering to their employees.
2. Make public copies of company policies and procedures handbooks with a description of how they were written.
3. Make public any instructions that they have issued to their suppliers and the measures that they plan to take to insure compliance by their suppliers.

Foreign companies and their business associations regularly insist that they are law abiding and committed to promoting strong labor rights and legal standards in China. By making key documents public they can demonstrate that commitment, on paper at least.

The time to act is now in the run-up to the Labor Contract Law’s implementation date on January 1, 2008. How the new labor law is implemented in China should be of concern to everyone who supports labor rights and adherence to the rule of law. Trade unions around the world should demand compliance and transparency from the companies that employ their members, from companies which they hope to organize, and from companies in the industries in which they are active. Non-Governmental Organziations working on labor and human rights issues should demand compliance from the companies and industries that they target. And governments in countries around the world should take steps to insure that multinational companies headquartered in their jurisdictions comply fully with both the letter and spirit of China’s Labor Contract Law.

The Battle for Labor Rights in China: New Developments

Here is a review of the fast moving and important developments in the run-up to the January 1, 2008 implementation of China’s new Labor Contract Law.

As we reported in our last post, Huawei—the Chinese owned telecommunication company with ties to many foreign firms—recently instituted a personnel program widely believed to be an effort to avoid a key provision in China new Labor Contract Law.  That provision automatically grants open ended contracts to workers with either 10 years of service or two consecutive fixed term contracts.  Open ended contracts allow workers much more job security—since there is no renewal date and workers can only be removed for just cause—and they provide for more severance pay should a layoff occur. Under Huawei’s program 7,000 long term workers were offered economic incentives to quit and be rehired on 1 to 3 year fixed term agreements. The layoff program was widely reported in the Chinese press and roundly criticized by labor rights advocates inside and outside the government.

Now, under intense pressure from the public and the All China Federation of Trade Unions (ACFTU), China’s sole legal union, Huawei has suspended the program.

There is a widespread sense that many firms are engaging in similar practices as they position themselves for life under the new law.

And it's not just Chinese owned firms. Wal-Mart has also come under scrutiny in the Chinese media for some staff reductions. According to the independent on-line Asia Sentinel:

Dong Yu Guo, Public Relations director of Wal-Mart China, told the Jing Hua Times newspaper that the reshuffle of its employees is not aimed at the new labor contract law. Dong noted that Wal-Mart China has two business areas ‑ procurement for its worldwide operations and stores for the local market. Yu said the staff reduction is not going to affect its nearly 100 department stores and Sam’s Clubs, and that more hiring beyond the current 44,000 employees in the retail division is expected.

However, on October 22, the Global Procurement Center for Wal-Mart announced in an internal meeting that more than 100 employees had been laid off, including 40 in Shanghai and 60 in Shenzhen. A woman who works in the Shenzhen center, who asked not to be named, said she has been working there for four years and was laid off last month. She was told she would receive three months salary plus some additional compensation. She said she expected to be off for one to two months before returning to the company.”

Are US and EU Corporations Complicit in Evading China’s New Labor Law?

Evidence is mounting that they are. In a recent post we reported that some firms in China are firing workers in the run-up to the implementation of China’s new labor contract law which grants more rights to workers. Now it appears the problems are widespread and that foreign corporations--including Walmart--may be complicit.

In the interim period between the law's passage on June 29th, 2007 and its effective date on January 1, 2008 employers must bring personnel policies into compliance. Among its provisions, the new law requires a written contract for each employee; encourages open ended contracts rather than fixed term agreements; makes dismissals more difficult; automatically grants open-ended contracts to workers with 10 years of service; and requires that many company policies and procedures be negotiated with employee representatives.

Corporations are looking after their own interests: as 2008 nears, law firms and HR consultants are hard at work giving advice and holding seminars on how to best deal with the new law and HR staffs are drafting new contracts and policies. For workers it’s a different story. At a meeting here in the US last week a visiting Chinese scholar called the current situation “a-symmetrical”.  Citing the example of one firm that has laid off workers to avoid provisions of the new law he asked, “Who is looking out for the interests of the employees?”  Who indeed!   Against the power of the employers, workers have been left to their own devices.

China's New Draft Arbitration Law

With China increasingly setting wages and working conditions for workers the world over, the ripple effects from changes in Chinese labor law are likely to be felt in each of our home countries. So head's up: new Chinese labor legislation is in the works.

The latest draft law concerns labor dispute mediation and arbitration.  Since Chinese workers lack the right to strike, arbitration has been one of the few institutional ways for workers to address grievances with their employers. But the current system is failing, triggering an increasing number of worker protests and social unrest.

The new draft was submitted to the National People’s Congress for its first reading on August 26, 2007.  It comes on the heels of the Labour Contract Law passed last August, which extended an array of basic rights for Chinese workers—including protections for temp workers, just-cause firing provisions, etc.

The arbitration law is designed to address a number of government concerns.  According to the China Daily, PRC figures reveal that “labor dispute cases in China are continuously increasing in recent years. Statistics show that labor dispute arbitration organizations at various levels dealt with 1.72 million labor dispute cases involving 5.32 million employees from 1987 to the end of 2005, with a growth rate of 27.3 percent annually.”

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.

GLS: Why We Do What We Do

When we launched GLS nearly 3 years ago our goal was to contribute to building global labor solidarity through research, analysis, strategic thinking, and network building around labor and employment issues. It seemed to us then, as it still does today, that labor movements and their allies around the world are at a watershed moment.  Capital mobility and global outsourcing have allowed footloose global corporations—the dominant players in the world’s economy—to effectively outflank national labor movements. Workers and communities around the world are increasingly being pitted against each other to attract or retain decent jobs. Unions, labor laws, and social benefits are under attack in the name of global competitiveness. The choice for unions and worker organizations everywhere is to adapt to global realities and build a global labor movement or decline into irrelevance.

While it would be a stretch to say that great progress has been made toward this end, over the past few years some real progress has been made. There is widespread—if not universal—recognition of the need to go global among labor activists the world over. New institutional links between global labor movements have been forged or strengthened. (Although it should be noted that a significant part of the US labor movement—unions that are now part of CtW—have been barred from joining the new International Trade Union Confederation.)  But formidable obstacles remain to constructing a global labor movement that reaches beyond high level institutional contacts and inspiring rhetoric.

 

Economic nationalism continues to be a problem as unions seek to protect jobs, or poach jobs, by sometimes supporting counter-productive trade policies, tariffs, and subsidies to lure businesses. Unions sometimes make common cause with their employers to defend narrow sectoral interests rather than broader class and social interests. In the end these actions are generally unproductive and inhibit global solidarity. 

Global diversity in union structures and industrial relations systems rooted in national histories and national laws makes cooperation difficult.  Just look at the differences in the way unions bargain—and what they bargain about—in the US, Scandinavia, France, Brazil, and Japan and the difficulty in creating a common front against global corporations becomes apparent.

The lack of effective labor unions in many parts of the world—including China the former Soviet Union and East bloc countries—makes finding partners for building global alliances extremely difficult.

And, finally, the legacy of distrust from labor supported economic nationalism and cold war policies often puts an edge on efforts to work together.

But as difficult as these obstacles may be to surmount, we think there are many new opportunities for cooperation and a growing recognition in labor movements around the world that cooperation is needed.

There has been lots of discussion about how the race to the bottom harms poor countries, but there is an upsurge of general discontent with globalization and its consequences throughout the world. A recent poll shows people in the rich countries of the world overwhelmingly think that the current globalization process is having a negative effect on their lives. As the socially sanctioned representative of the interests of workers, organized labor has an opportunity to give voice to this discontent.

The technical obstacles to cooperation have been greatly reduced. Today, the internet, phone cards, and cheap transportation make communication across borders easy. Labor can use these advances in communication by exponentially increasing the flow of information among workers and their organizations at all levels over the web and through worker to worker exchanges. That alone would be a major advance in international cooperation.

Much more difficult is finding the issues and modalities to forge lasting links among workers and their organizations. Here in the States, where unions are much more focused on collective bargaining with specific companies than they are in many other countries, efforts to build international cooperation have generally revolved around support for contract or organizing campaigns. While necessary and important, such cooperation is not likely to build a global labor movement since it is episodic, touches only a small number of workers, and often is not about directly shared interests. In addition it runs into all of the obstacles that we list above. Instead, building real global cooperation will take collective action on critical issues that directly affect large numbers of workers and unions everywhere—regardless of their structures. There are many such issues. We at GLS have chosen to work on 3 which we think challenge workers and their organizations everywhere and which can only be effectively addressed through global cooperation: the emergence of China as a global powerhouse, the challenge of global warming, and creating worker friendly approaches to immigration.   

China

China is the essential country in the fight for a fair globalization. Workers, communities, and countries throughout the world are confronting the challenges posed by the emergence of China as a global economic powerhouse. About 25% of the global workforce is now Chinese. China increasingly sets the global norm for wages and working standards as it attracts jobs at both the high and low ends of the production chain. As a result, the hard-won gains of workers in the global North are being rapidly undermined while the aspirations of workers in other developing countries are being dashed as China becomes the wage setting country in many industries and attracts more capital. And within China workers are fighting to get their fair share, but lack effective unions or aggressive labor law enforcement. They need help in their struggle.

GLS proposes a new paradigm—one that we developed with activists inside and outside of China—that focuses on the role of multi-national corporations doing business in China as a strategy to find common ground among labor and their allies around the world. These companies wield enormous power yet they are potentially vulnerable to global public opinion in ways that the Chinese state is not. Foreign owned global corporations account for 60% of Chinese exports to the US. Indeed, if US retail giant Wal-Mart were a country it would be China’s 8th largest trading partner. The “Chinese threat” is less about trade with China than it is about trade with companies like Wal-Mart and GE.

This past year, GLS played an important role in exposing efforts by global companies to weaken China’s new Labor Contract Law in an effort to preserve the status quo in China’s labor markets. In the coming year we aim to expand our efforts by launching a China Corporate Observatory. It’s a project that we hope others will support or replicate.

Here’s how we think it can work. There is an acute need to know about what’s really going on in China’s economy and its workplaces, but it’s difficult to get accurate information. The recent consumer scares have made the need for transparency more pressing than ever.

It’s easy to blame the Chinese government for the information gap. But corporations in China—both foreign and domestic—are as much or more to blame. They generally do business through a labyrinth of suppliers and middle men which they control but do not own. The identity of the firms in most corporate supplier chains is generally considered “proprietary knowledge” and kept as a closely guarded secret. This is at odds with the transparency needed for the rule of law and social accountability. If labor laws, product safety standards, and environmental regulations are to be enforced, public access to a wide range of information is required.

The China Corporate Observatory will promote transparency by conducting research and analysis inside and outside of China. The Observatory will enlist Chinese and non-Chinese activists and scholars to research the Chinese press, corporate and government documents, academic and business journals, and other rarely accessed data. Information gathered will be made widely available to people inside and outside China through reports, web posting, and other means and will, we think, help build links between them.

Global Warming

The need to confront global warming offers another potential for building global labor cooperation. Both global warming and the effort to combat it will directly affect workers and unions.  Global warming, if not halted, will lead to massive economic disruption and job loss.  Some anti-warming measures will lead to job losses in particular sectors and this presents a challenge to the unions that represent those workers as well as to traditional notions of labor solidarity.  At the same time, there are huge opportunities for job growth presented by many anti-warming measures.

Corporations are already launching well publicized “business friendly” approaches to global warming.   Now, labor must develop a coherent response that meets the specific needs of its members at the bargaining table and the general needs of its members as human beings confronting a potentially catastrophic event.  Labor must stake out a position if it is to remain a vital social and political force. Tackling the tension between the specific sectoral interests of unions and their more general class and social interest is the essential first step in that process.               

Now that even energy corporations are admitting the reality of global warming, a serious “climate debate” is finally underway throughout the world.  Labor is one of the few organized forces that can represent the interests of ordinary people in that debate.  A constructive labor involvement is essential both for establishing the measures needed to counter global warming, and for ensuring a “just transition” in which workers and the poor are not forced to bear the burden while corporations and the wealthy further enrich themselves. The search for constructive involvement offers an important way for unions and worker friendly organizations from around the world to work together. GLS has produced a discussion paper on labor and global warming. In the coming year will expand on some of the ideas and actions outlined in that report.

Immigration

The UN estimates that there are some 200 million migrants in the world. Most are on the move in search of work. Fierce debates are underway in the US, Europe, and elsewhere on how to handle this flow of people. Right-wing forces in the rich countries are using the immigration issue to promote a nativist agenda among working and middle class people worried about globalization and its consequences. As organizations that represent all workers—immigrant and non immigrant alike—unions can play a critical role in this debate. And in many countries they are doing so.

Yet, up to now the debates on immigration have been generally a series of national debates that treat the problems of sending and receiving countries as if they were unconnected. But the global movement of people is taking place in the context of a global deficit of decent jobs. That creates pressures for migration in the sending countries and it generates tension with established workers in the receiving countries. Just immigration policies will need to protect the interests of both established workers and newcomers. Effective policies must also address the decent jobs deficit in both the rich and poorer countries.

We have written in many posts over the last year or more of the need for a hemispheric approach to US immigration reform. US labor—with its relationships throughout the hemisphere and its diverse membership—should help convene such a hemispheric dialog. But international migration is not just an issue for the Americans Europe faces a major migration crisis. We need a global dialog in which to learn from each other and find common solutions.

Over the next year GLS will continue to focus on immigration reform in the US through our writings and through workshops with workers. We think there are approaches that can reconcile the rights and the needs of immigrants with those established workers that are often over-looked or dismissed as reactionary or racist. In an effort to expand the debate we are also planning look at how the immigration debate is played out in countries and labor movements around the world as a way to contribute to the search for global solutions to a global problem.

If trade unions are to survive as vibrant institutions they will have to move beyond representing just the national and sectoral interest of workers to representing broader global interests of all workers. We at GLS have selected 3 issues to work on—China, global warming, and immigration—that can help build global solidarity.

The GLS Team

In Memoriam: Tim Costello has over 40 years of work and union experience in the area. He helped organize and served (until July 2005) as Coordinator of the Boston based North American Alliance for Fair Employment a network of 65 unions and community based organizations in the US and Canada. Costello was a truck driver and workplace activist for many years; following that, he worked on the staff of SEIU.  He has extensive collective bargaining experience in a number of industries.

Brendan Smith is a legal expert (J.D. Cornell University Law School) specializing in national and international labor law and policy.  He is currently co-director of the UCLA Law School Globalization and Labor Standards Project.  He has worked previously as a senior legislative aide for Congressman Bernie Sanders and staffed the Subcommittee on Domestic and International Monetary Policy, where he organized a series of hearings and legislative efforts on the Asian and Russian financial crisis.  Smith has also consulted for the AFL-CIO Solidarity Center, International Labor Rights Fund and Service Employees International Union, as well worked extensively throughout Asia, including China.  He has also been a lead organizer on global campaigns targeting NIKE, child labor abuse, and solidarity fights to free imprisoned trade unionists. He has published two books and his commentary has appeared in a wide variety of publications, including the Los Angeles Times, The Guardian, Baltimore Sun, CBS.com, Yahoo.com, New Labor Forum, the Nation and Advertising Age.

Jeremy Brecher is a leading labor historian, writer, and documentary script writer best known for the labor history Strike!.  For more than two decades Brecher and Costello have studied and written about labor and globalization, writing such well-known books as Building Bridges: The emerging Grassroots Coalition of Labor and Community and Global Village or Global Pillage. For the past 8 years they have been joined by Brendan Smith, who collaborated with them on the book Globalization from Below: The Power of Solidarity.  Their Emmy-nominated documentary Global Village or Global Pillage? has been used by unions and other groups in the US and throughout the world to present an international grassroots response to globalization.

Claudia Torrelli lives and works in Montevideo, Uruguay. Torrelli handles GLS’s Latin American networking. She is an activist the in labor—community based Hemispheric Social Alliance, and in other social movement organizations in Latin America. She speaks Spanish, Portuguese, and English.

China’s New Contract Labor Law

China’s new Labor Contract Law was enacted by the National People’s Congress on June 29th. It will go into effect on January 1, 2008.

The law was enacted with an unusual amount of debate and controversy both in China and worldwide. GLS has written extensively about the attempts by foreign corporations to gut important provisions of the law. The law's final version has received mixed reviews from the foreign corporations and their lawyers doing business in China.

According to the New York Times:

Many multinational corporations had lobbied against certain provisions in an earlier draft of the new labor law. An early draft gave unions greater powers and made it more difficult to fire workers.

Companies argued that the rules would substantially increase labor costs and reduce flexibility, and some foreign businesses warned that they would have little choice but to move their operations out of China if the provisions were enacted.

International labor experts said several of the most delicate clauses had been watered down. But lawyers representing some big global companies complained that the new law still imposed a heavy burden.

''It will be more difficult to run a company here,'' said Andreas W. Lauffs, head of Baker & McKenzie's employment law group, which represents many of America's biggest corporations in China.

The Christian Science Monitor reports,

"As is always the case with China's laws, the real question will be in whether the new laws are enforced, how they are enforced, and against whom they are enforced," says Dan Harris, an expert at the law firm Harris & Moure.

But, he adds, "there is a feeling the new labor law is more likely to be enforced than the old and, in particular, will be enforced against foreign companies."

Challenging Corporate Secrecy in China

It’s hard to get accurate information about what’s really going on in China’s economy or its workplaces. This is a big problem for unions that need information about the companies they bargain with and the industries within which they operate. It’s also a problem for consumers who need to know about product safety and regulatory standards—as  recent scandals involving contaminated pet food, toothpaste, and children’s toys make clear—and for environmental organizations, human rights advocates, and other watchdog NGOs—all of which play important roles in the civil societies of the industrialized world.

It’s easy to blame the Chinese government for the information gap. But corporations in China—both foreign and domestic—are as much or more to blame. While how much information corporations can keep secret from the public as “proprietary knowledge” is contested in every country, in China corporations have far exceeded acceptable bounds by creating a raw capitalism based on secrecy and short term advantage. This is at odds with the transparency needed for the rule of law and social accountability. If labor laws, product safety standards, and environmental regulations are to be enforced public access to a wide range of information is required.

Now pressure is building for more transparency. For instance, on a recent trip to China US labor leaders agreed to an information exchange with their Chinese counterparts—something that could serve as the basis for further cooperation between Chinese and non-Chinese unions.  Some corporations are also questioning the corporate climate of secrecy and have even taken steps in the direction of transparency that could serve as the basis for a campaign by labor and civil society organizations to tear down the wall of secrecy that characterizes corporate business practices in China.

New Approaches to Promoting Labor Rights in China

 

A 10-day trip in May by a high profile delegation from Change to Win (CtW), and a recent letter on China’s proposed draft labor law from the General Secretary of the International Trade Union Confederation (ITUC) to China’s President spotlight new approaches by the world’s trade unions as they grapple with how to deal with China’s emergence as a global economic powerhouse—and how to promote labor rights for Chinese workers.

The Change to Win delegation which included Teamster President James Hoffa, SEIU President Andy Stern, United FarmWorkers President Aruto Rodriguez, CtW Chair Anna Burger, and CtW Executive Director Greg Tarpinian  met with Chinese government officials, executives from US based companies doing business in China, and significantly, with officials from the All China Federation of Trade Unions (ACFTU), the government controlled union federation to which all Chinese unions must belong.