Global Labor Strategies

Trouble at Wal-Mart: The Rocky Road to Labor Reform in China

The industrial relations system in China is in play as workers, peasants, corporations, and a variety of civil society, state, and party actors vie to determine its future.  Now the collapse of the global financial system and the likelihood of a deep global recession/depression add a whole new dimension to the struggle of Chinese workers and reformers for a more equitable system. Global markets for goods made in China will shrink. Thousands of foreign companies with operations in China could be swept away or be forced to significantly downsize. Indeed, even global giants like automaker GM, one of China's biggest auto producers, are teetering on the brink of bankruptcy. China’s banking system—while somewhat isolated from global pressures—is likely to feel the effects of the financial crisis. No one knows what effect the crisis will have on the value of the vast quantities of the US dollars and debt that China currently holds.

Against this back-drop we take a look at aspects of the Chinese industrial relations system before China is sucked into the vortex of a global recession.

Trouble at Wal-Mart

It has been two years since the ferociously anti-union Wal-Mart recognized the ACFTU in its stores. The event made headlines around the world.

Under Chinese labor law if 25 workers petition for a union, a committee can be elected and the union must be recognized. Normally this is a top-down pro-forma affair in which both management and the official union play a part, but in this case, Wal-Mart’s refusal to play by the normal rules forced the ACFTU to actually recruit workers at the workplace and establish the union without management participation. Once Wal-Mart recognized the first union branch, at its Fujian store, recognition quickly followed at Wal-Mart’s other Chinese facilities. Today, the ACFTU says it represents 50,000 Chinese workers at 108 Wal-Mart locations in China. Many hoped the Wal-Mart experience would be a breakthrough in the development of the Chinese industrial relations system and in the evolution of the ACFTU. Things have not turned that way.

We have a good glimpse into the world of Wal-Mart’s workers through voices of the workers themselves as they discuss and debate--and criticize--the actions of Wal-Mart and the ACFTU in on-line blogs. Some of these discussion threads, as well as relevant articles from the Chinese press, have been translated by the excellent, and increasingly indispensible, China Labor News Translations (CLNT). Read them here.

Wal-Mart has not engaged in serious collective bargaining and the ACFTU has fallen into a typically cozy relationship with Wal-Mart’s management. After Wal-Mart and the ACFTU signed a substandard contract at a store in Liaoning province, the company presented the agreement as a template for contracts at stores throughout China and essentially refused to bargain any further. Among the contracts provisions were a pay increase that did not keep up with inflation and which will not come into effect until mid-2009.  According to CLNT report, “Many individual store unions were not even given a chance to sign the template themselves. Indeed in Shenzhen City, for example, the Buji store has signed a collective contract on behalf of fifteen other outlets in surrounding areas.”

For its part, the ACFTU defends its approach to bargaining with Wal-Mart. According to Zhang Jianguo, the ACFTU’s director of collective bargaining, the new contracts require annual negotiations, wages above the minimum wage, and contain language on working hours, vacations, and social security and training.

But workers at Wal-Mart’s Bayi store wanted to negotiate a better agreement. A grassroots leader, Gao Haitao, who has become a hero to Wal-Mart workers throughout China for his combative defense of Wal-Mart workers’ interests, organized a fight back and made new demands in negotiations with management. Instead of negotiating, “Wal-Mart simply bypassed Gao by convening the staff and workers’ congress and finding a trade union chair from another store to sign the contract in his place!”, according to CLNT.

The ACFTU—which says it supports Gao—stood by while Wal-Mart refused to bargain leading the CLNT to conclude. “….the experience of Gao Haitao and the farcical top-down collective bargaining contract negotiation procedure shows that there is no genuine collective bargaining by workers’ representatives. When a Wal-Mart union did come out to negotiate a good contract, the ACFTU did not tender its support.” As a result of Wal-Mart’s actions Gao resigned from his job in frustration in September in a move that many see as a blow to authentic union development in China.

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.

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.

False Representation?

In a statement posted on its website dated April 5, 2007 the US-China Business Council (USCBC) alleges that “A group called Global Labor Strategies has repeatedly mischaracterized the US-China Business Council (USCBC) position on China's proposed new Labor Contract Law” and accuses GLS of making “false representation.”  In a letter to the Washington Post April 17 it charges GLS with “misrepresentation.”  On the contrary, it is the USCBC that is misrepresenting GLS.

GLS has indeed issued two extensively documented reports, BEHIND THE GREAT WALL OF CHINA:  U.S. Corporations Opposing New Rights For Chinese Workers and UNDUE INFLUENCE: Corporations Gain Ground In Battle Over China’s New Labor Law – But Human Rights And Labor Advocates Are Pushing Back, which detail the actions of the USCBC and other representatives of U.S. corporations in China.  Along with its reports, GLS has also directly posted or linked to all of USCBC’s comments on the draft law so that readers could examine them in their entirety.

An examination of the USCBC’s statement and letter reveals that they do nothing to refute GLS’s charges.  Indeed, the USCBS makes a number of allegations that are simply false.

The Global Battle Over New Rights for Chinese Workers

Editor's Note: GLS has taken the lead in exposing the role of U.S. corporations in opposing the proposed Chinese labor contract law.  Here’s an update on the campaign of the “sweatshop lobby” – and the response by labor worldwide.

In a historically unprecedented visit, the influential Chinese scholar and labor law expert Liu Cheng arrived in Washington, D.C. this week to garner support from US legislators and labor leaders for a law that is pending not before the US Congress but before the National People’s Congress in China.  Liu Cheng has been a key advisor to the drafters on a new labor law reform bill currently working its way through the Chinese legislative process.

His visit is part of a behind-the-scenes battle that is raging worldwide over reforms in China’s labor law.  On the one side are Wal-Mart, Google, General Electric and other global corporations who have been aggressively lobbying to limit new rights for Chinese workers. On the other side are pro-worker rights forces in China, backed by labor, human rights, and political forces in the U.S. and around the world.

Liu Cheng’s visit to Washington was part of that international support campaign.  He warned in an interview that support for the new law within China is not enough “if there is no support from labor supporters outside China…Some National People’s Party Congress representatives are influenced by the employer lobby.  Although the principles of the amendments are secure, there may be concessions on the details, so we call for help.”

New GLS Report: UNDUE INFLUENCE: Corporations Gain Ground in Battle over China's New Labor Law

A behind-the-scenes battle is raging worldwide over reforms in China’s labor law.  On the one side are U.S.-based and other global corporations who have been aggressively lobbying to limit new rights for Chinese workers. On the other side are pro-worker rights forces in China, backed by labor, human rights, and political forces in the U.S. and around the world.

A new report by Global Labor Strategies, entitled UNDUE INFLUENCE: Corporation Gain Ground in Battle Over China’s New Labor Law, details how lobbying by American Chamber of Commerce in Shanghai (AmCham), the United States-China Business Council, and U.S.-based global corporations have forced significant changes in contract, collective bargaining, severance, and other rights guaranteed for Chinese workers under a law to be voted on later this year by the Chinese National People's Congress.  UNDUE INFLUENCE follows on GLS's groundbreaking report: BEHIND THE GREAT WALL: U.S. Corporations Opposing New Rights for Chinese Workers.

US Congress and Others Take Action on GLS's China Report

As many of you know, GLS recently released a report detailing US corporations' efforts to block Chinese new labor law reforms.  Our report and the resulting New York Times story has spurred a flurry of debate and activity.

We've heard from US and global unions, maquiladora activists, trade lobby groups, political campaigns, outsourcing campaigners, Chinese academics and legislators, even American banks, all asking for more information and how to get involved.  Letters have been sent to Wal-Mart and other corporations; the EU Chamber of Commerce has been condemned; the Spanish version of the report has been distributed in the Mexican maquiladoras...this all just in three weeks time.

We are also encouraged that US members of Congress have so quickly stepped forward to address the concerns raised by our report.  U.S. Representatives Lynn Woolsey (D-CA), Barbara Lee (D-CA), George Miller (D-CA), Barney Frank (D-MA and twenty-three other House Members recently sent a letter to President Bush "protesting the efforts US corporations to undermine the most basic human rights of Chinese workers and block proposed new worker rights and labor standards protections in the proposed new Chinese labor law."  They are urging President Bush to stand up and speak out to underscore the commitment of all Americans and our government to support internationally-recognized worker rights. [Here is a copy of the letter: Download china_labor_letter_final.pdf]

When Wal-Mart Workers Unionize, Plan for the Counter-Attack

Bill Hardgrave, professor at University of Arkansas’ Sam Walton’s School of Business, recently described Wal-Mart’s idea of utopia:

“'Contactless checkout' that’s kind of the utopia, right for the retailer…take the product off the shelf, you put it in the cart, you wheel it through the portal as you go out the door, it sees everything, it charges your credit card, takes it off you debit card, you wheel it out to your car, you take it out…couldn’t be any easier. I mean to me that’s great when we get to the point.”

Wal-Mart: The Homefront

Wal-Mart is the world’s largest private employer with 1.6 million employees world-wide. It is the largest retailer in North and South America. It has steady supply contracts with over 5,000 firms in China that employ many hundreds of thousands of workers. It is the largest corporate trading partner with China; if it were a country it would be one of China’s top 10 trading partners. Wal-Mart, which currently does business in 14 countries, has launched an aggressive global expansion which has caused concern and provoked a response from workers and others in countries around the world. Wal-Mart currently does about 20% of its sales outside the US.