ACFTU and Trade Unions

Staff and Workers Representatives Congress under Chinese Labour Law

Introduction

The aim of this research paper is to present the legal context of an aspect of Chinese industrial relations that is rarely mentioned outside China, let alone understood. The term zhigong daibiao dahui is generally translated as ‘staff and workers representatives’ congress’, which we have shortened to SWRC.

The working title for this project was originally ‘Workers’ Councils under Chinese Labour Law’. However, this is confusing on two fronts. Firstly, the term “workers’ council” is too similar in name to the institution of Works Councils that operate under law in Germany and are a feature of labour relations in some Multinational Corporations.[1] Secondly it is evocative of the phenomenon of Workers’ Councils that tend to emerge during profound social unrest. Such bodies are generally shop-floor based committees of workers that may or may not fall under trade union control. Their emergence is usually indicative of a revolutionary challenge to the political and economic order.[2] In contrast, SWRCs are a top down institution the purpose of which is to head off social upheaval, not lead or reflect it. However, as we discuss in the later stages of this paper, workers often refer to the SWRCs when they take on the State and/or employer in China.

The format of this paper is as follows. This introduction will be followed by an examination of the relevant laws and regulations that govern SWRCs and, where appropriate, provide examples of how workers have attempted to use the institution to defend wages and conditions. This format will hopefully also shed light on the relationship between ‘democratic management’, (see below) the official trade union (ACFTU) and the SWRCs.

The methodology has been to use exclusively Chinese-language research material in the form of academic papers, laws and media reports and meetings with mainland labour law experts as well as interviews with workers.

Before concluding this introduction, we attempt to summarise the official discourse on how SWRCs fit into labour relations in China, firstly with regard to state-owned and collectively-owned enterprises (SOEs and COEs) and then in relation to foreign-invested and private enterprises.

In the former, they are seen as the basis and main form of so-called “democratic management” (minzhu guanli). Democratic management refers to the traditional and still constitutionally-recognised concept that:

“All working people in State-owned enterprises and in urban and rural economic collectives should perform their tasks with an attitude consonant with their status as masters of the country.”[3]

In theory, SWRCs are one of the vehicles through which workers can give concrete expression to their status as “masters of the country”. At the same time, democratic management is not an institution through which workers decide on enterprise policy – as has historically been the case under the aforementioned “workers’ councils” – but rather a channel through which workers can, in certain carefully defined and regulated circumstances, veto or reject management decisions. SWRCs give form to the expression of such rights.

In foreign-invested and private enterprises democratic management is scaled down to trade unions having the right to sit on management boards, carry out normal trade union activities and to merely ‘discuss’ issues related to workers’ rights in the enterprise.

It should be noted that the increasing privatisation of state-owned enterprises (SOEs) and hazy ownership status of collectively-owned enterprises (COEs) limit the usefulness of these summaries. In a country where the issue of ownership remains at the apex of China’s political struggles at all levels – from the courts, to the politburo to the shop floor and the street – defining and explaining the actual status of enterprise ownership would be another paper altogether.

SWRCs and the Law

Apart from the Constitution itself, there are two laws which refer to democratic management in general and SWRCs in any detail. There are also a crucial set of administrative regulations that set out a detailed procedural framework for SWRCs in publicly-owned enterprises (state and collective), their relationship with trade unions and the rights and duties of worker’s representatives. The two laws are the Labour Law (1995) and Trade Union Law (2001), and the regulations are entitled Regulations on SWRCs in public-owned enterprises (hereafter Regulations). Also important is Article 20 of the Bankruptcy Law (Trial Implementation) 1988, which stipulates that the views of the staff and workers’ congress must be actively listened to prior to a formal declaration of bankruptcy. For reasons of space, this paper will not examine the Company Law which addresses democratic management in both public and private companies but only makes brief reference to the actual term “democratic management” (Article 16). It should be noted that worker representation either on the company board or shareholders’ committee is mentioned fairly extensively in the Company Law (1993, amended 1999) and is a topic worthy of further research by trade unions.

The Labour Law

There are two articles in the national labour law that make reference to SWRCs. Article 8 states that:

“Labourers shall, through the assembly of staff and workers or their congress, or other forms in accordance with the provisions of laws, rules and regulations, take part in democratic management or consult with the employing units on an equal footing about protection of the legitimate rights and interests of labourers.”

There are two important points. The Labour Law is applicable to all types of enterprise which is why Article 8 refers to the assembly of staff and workers or their congress – an SWRC. The former is included because most private- or foreign-invested enterprises do not have SWRCs and so democratic management is meant to proceed via an assembly of all staff and workers. Except in small-scale enterprises this would obviously be an unwieldy and impractical arrangement. Indeed in private and foreign-invested enterprises, the All China Federation of Trade Unions (ACFTU) has prioritised the setting up of union branches – at least in name – and SWRCs are seen as something to tackle further down the road to regulate industrial relations in the private sector. SWRCs are thus just one of four manifestations of democratic management that focuses on the trade union role. These are:[4]

• The establishment of a regular management-trade union consultation system to discuss issues related to management, labour, wages, and workers’ welfare.
• Trade union participation in company board meetings and the union’s right to question board decisions related to the bonuses and punishment, wages, welfare, labour protection and labour insurance.
• The union’s duty to reflect its members’ opinions on major company issues such as production plans and division of labour, occupational safety and health, and training.
• The establishment of an SWRC system to discuss all matters relating to workers’ rights in the enterprise.

The second point to note is that Article 8 makes no reference of the SWRC representing – or upholding – workers’ interests. We will expand on this point in the section on SWRC regulations, but it needs to be stressed that the SWRC is not meant as an alternative to trade unions and indeed its structure rules out any potential capacity to represent class, specifically working class, interests.

This said, Article 33 presents an opportunity for a possibly more concrete role for the SWRC should an employer agree to negotiate a collective contract:

“The staff and workers of an enterprise as one party may conclude a collective contract with the enterprise on matters relating to labour remuneration, working hours, rest and vacations, occupational safety and health, and insurance and welfare. The draft collective contract shall be submitted to the congress of the staff and workers or to all the staff and workers for discussion and adoption.”

It is important to note that the employer is not legally obliged to provide or begin negotiations for a contract with his or her workforce. The onus is on the workers to take the initiative. This lack of compulsion becomes a major obstacle when placed in the political context of China lacking freedom of association and the nature of the ACFTU. More positively however, there is some room to manoeuvre. At least on paper, workers can combine and demand a collective contract in the absence of the ACFTU and if the enterprise refuses, it is breaking the law.

Such an act of combination could theoretically be extended to take organisational form: a workers’ committee operating under the auspices of a SWRC or even a preparatory committee to set up an SWRC. Research suggests that such a scenario has not been seen to date. This doesn’t mean that it can’t happen, especially in the context of so many large multinationals who deal with and sign collective contracts with their employees in other countries. Article 33 also states:

“A collective contract shall be concluded by the trade union on behalf of the staff and workers with the enterprise; in an enterprise where the trade union has not yet been set up, such contract shall be concluded by the representatives elected by the staff and workers with the enterprise.”

As always, political realities can easily force such idealistic initiatives, based as they are on what appear to be legal loopholes, back into an oppressive actuality. Nevertheless SWRCs, in the context of China’s national labour law at least, have the capacity to influence the process of forming a collective contract with an employer.

The Trade Union Law (TUL)

TUL goes some way to clarify the often confusing relationship between the SWRC and the trade union itself. Article 6 awards the trade union the role of organising workers and to participate in democratic decision-making, management and supervision. The SWRC is the principle conduit for such activity. Article 20 reaffirms the SWRC’s role of deliberating on and approving a collective contract negotiated by the trade union. It is interesting to note that no mention is made of a meeting of union members to approve such a contract, which is perhaps a tacit acknowledgement of the ACFTU’s organisational weakness on the shop floor, particularly in the private sector.

Articles 35 and 36 speak to the complex interface between ownership, trade union and SWRC which we examine more closely when we come to the SWRC regulations. After reaffirming that the “congress of the workers and staff members is the basic form of democratic management of the enterprise and the organ by which the workers and staff members exercise their right to democratic management” Article 35 states:

“The trade union committee of the State-owned enterprise is the working body of the congress of the workers and staff members and takes care of the day-to-day work of the congress, checks and supervises the implementation of the resolutions adopted by the congress.”

The sentence successfully puts the running of the SWRC into the hands of the union. In theory this maintains workers’ status as ‘masters of the enterprise’ as – again in law and theory as opposed to practice – the SWRC is made up of workers, technicians and managers in varying proportions. By awarding the day-to-day running of the SWRC to a workers’ organisation (the union) the law is passing a great deal of potential power to that organisation. No doubt law makers felt able to do this safe in the knowledge that Article 10 of the same TUL excludes independent workers’ organisations at all levels and furthermore the ACFTU’s own constitution entirely accepts that its activities are guided and led by the main source of power in Chinese society, the Chinese Communist Party.

Article 36 refers to COEs and brings the SWRC and the trade union even closer together:

“The trade union committee of a collectively-owned enterprise shall support and organise the participation of the workers and staff members in democratic management and democratic supervision, and defend their rights in electing, removing managerial personnel and deciding on major questions concerning operation and management.”

The exact definition of a collectively-owned enterprise is difficult. In urban areas COEs are generally small-scale SOEs nominally ‘owned’ by the workers and subject to the same political culture as SOEs. In the countryside COEs became known as township and village enterprises (TVEs) during the 1980s. Despite offering generally dreadful working conditions, they soaked up huge amounts of rural surplus labour throughout the eighties and first half of the nineties. Most of the township enterprises were operated by township and town governments, but a large number of very small units were operated by private cooperative organisations called ‘rural economic unions’.

The fact is that most rural COEs (later TVEs) do not have trade unions or SWRCs. And moreover, the specific and seemingly spectacular powers that Article 36 gives to the trade union and SWRC in COEs are duplicated in the regulations on SWRCs which apply to all publicly-owned enterprises’ powers anyway.

Regulations on SWRCs in publicly-owned enterprises

(Quan min suo you zhi gongye qiye zhigong daibiao dahui tiaoli)

These important regulations became effective in 1986. This was the same year that enterprise managers were given dramatically expanded power over hire and fire, wages and working conditions in SOEs. The long haul to smashing the ‘iron rice bowl’ or job security was officially embarked upon and the resurrection of SWRCs, which had been dormant for three decades, was clearly aimed at providing a check on the raw new power of SOE managers. A comparison of the industrial landscape of 1986 with that of today (2004) would reveal extraordinary changes as SWRCs along with the ACFTU have proved largely incapable of defending workers’ interests against either government policies or illegal corruption.

But if the Regulations were introduced as an attempt to place a check on the authority of managers, avoid abuses and hopefully head-off labour unrest which the CCP undoubtedly saw coming, their failure does not mean they are going to go away anymore than increased management autonomy has done. Despite their being something of a political maverick in a country whose current policies are mostly concomitant with its membership of the World Trade Organisation, the State in general, the ACFTU in particular and the working class on occasion continue to see a future in both democratic management and SWRCs that distinguishes the ‘socialist market economy’ from other ‘capitalist’ economies.

The Regulations are divided into five chapters and 29 articles. This section will summarise and comment on the most important articles – mainly contained, for the purposes of this report, in the first three chapters.

Chapter One: General Principles

Article 3: States that the trade union looks after the day-today running of the SWRC. This implies that without a trade union an SWRC cannot function and this certainly seems to be the case in practice. However, as noted above, other regulations state that in enterprises where a trade union does not exist, important decisions such as approval of collective contracts can be put to a congress of staff and workers or their representatives. As these regulations appear to be exclusively addressed to publicly-owned urban enterprises, the drafters appear to have assumed a trade union is in operation, an assumption that has since proved to be incorrect, especially after the mass lay-offs of the nineties “washed away”, to use the words of former chairman of the ACFTU, so many trade union branches.

Article 4: States that an SWRC shall accept the ideological leadership of the enterprise’s Party Committee. Obviously the impact of this clause, especially when workers are struggling against a ‘false’ bankruptcy of their SOE, depends on the situation on the ground. Generally speaking, it can be assumed that an enterprise Party Committee is going to back and implement State policy and that the ideological influence it exerts over the SWRC is going to be negative in terms of defending jobs and conditions from restructuring, privatisation and bankruptcy.

Chapter Two: Rights

Article 7 maps out five basic rights. The right to:

1. Consider and make suggestions on major production-related issues. Although management is responsible for drawing up and implementing company plans and proposals, it is legally obliged to consider the views of the SWRC on matters pertaining to operational policy, long term plans, annual reports, staff training and wage allocation.
2. Examine and Approve. Namely enterprise rules and regulations pertaining to wages adjustments, bonus allocations, labour protection, and general bonus and punishment schemes. The SWRC has the right to veto any management decision on these matters.
3. Consider and decide on matters pertaining to workers’ housing and general welfare. Obviously the dramatic selling off of enterprise housing in home ownership reforms as well as the replacement of enterprise welfare with pay-as-you-earn social insurance schemes have substantially reduced the capacity of this right which now mainly deals with charity and welfare relief rather than administering social insurance schemes.
4. The right to evaluate and monitor. The SWRC has the right to evaluate the performance of “leading cadres”, a category which includes factory management right up to and including factory director. The evaluation includes suggestions on management pay levels and the promotion or dismissal of managers.
5. The right to elect the factory leader. While the final decision that results from a vote has to be approved by relevant local government departments, this right along with the right to dismiss a manager provides the SWRC with considerable potential power – on paper at least.

These rights must be tempered with the fact that all major decisions require the approval of “relevant” government departments. Moreover, Article Six states that the SWRCs shall follow the organising principle of democratic centralism and thus each decision must be in line with leadership policy – i.e. government policy. As the ACFTU serves as the SWRC “operating mechanism” (gongzuo jigou) and is in charge of day-to-day running of the SWRC, it is more or less inconceivable that it will defend or implement an SWRC decision that goes against government policy. SWRC decisions which run counter to government policy – as was the case with the SWRC decision featured in the cover photo of this report in which an SWRC rejected a private buy out of an SOE in Hebei – have led to direct intimidation by the State. The famous case of the Liaoyang City Ferrous Alloy Factory’s bankruptcy and the employees’ four-year struggle against the corruption, which local government officials admit contributed to the bankruptcy, is instructive. According to a report sent to a Hong Kong labour group, the SWRC was viewed by management and police as a key flashpoint. On October 19, 2001, the Ferrous Alloy management convened a meeting of the SWRC:

“The Liaoyang government and Ferroalloy management made it clear that no opposition to the bankruptcy would be permitted. On the day of the meeting, riot police in dozens of vans and cars were deployed near the factory gates; police cars and plainclothes officers on foot cruised local neighbourhoods monitoring activists. In an apparent effort to prevent a majority vote against bankruptcy, management and trade union officials split the worker representatives at the meeting into thirteen groups. Two plainclothes police officers supervised each group, reportedly destroying any opposition votes. In the circumstances, many worker representatives walked out without voting. The bankruptcy decision ‘passed’.”[5]

Chapter Three: Staff and Worker Representatives.

In fact management and union officials splitting workers’ representatives into 13 voting groups at the Ferrous Alloy Factory SWRC was not necessarily illegal. According to Article 10, representatives are directly elected from different shifts and workshops within a factory. In the case of large-scale SOE with more than one factory, candidates are elected on the basis of plant sites and workshops. In effect workers are split up into groups according to the nature of their work in the factory, and/or the workshop they are employed in and/or their shift times.

Article 12 illustrates the cross-class nature of SWRCs and our earlier assertion that they do not have either the capacity or legal space to defend working class interests as separate and independent. This is not to say, as can be seen by the example cited above, that they are always neutral in the face of privatisation. Article 12 stipulates that staff and worker representatives shall be selected, via direct election from shop floor workers, technicians, managerial personnel, leading cadres (senior managers) and other divisions of staff and workers in the factory. Generally speaking, the numbers of leading administrative personnel shall not exceed more than a fifth of the overall number of representatives. Young workers and women shall be represented in proportion to their numbers at the plant.

Chapters four, five and six of the Regulations deal mainly with the administrative procedures such as times of meetings, reporting, the establishment of small groups to work on certain issues and the trade unions’ responsibility to educate SWRC delegates.

Conclusion

This paper has confined itself to explaining the basic functions and procedures of SWRCs under Chinese labour law, their political context in the form of democratic management and also briefly mentioned two examples of how they have become embroiled in disputes between laid off SOE workers and SOE management and/or the State. A longer and more detailed report would certainly reveal more examples of SWRCs role in labour disputes and allow a more thorough appraisal of whether they are a viable channel of support to Chinese workers. Our conclusion is that SWRCs are undeniably a concept from the command economy that has been practically panel-beaten into the ‘socialist market economy’. The inevitable ideological dents notwithstanding, their legal status provides a forum at which workers assemble in the work place specifically to discuss work place labour rights issues. In this context, the point is not so much the inherent weaknesses in the institution itself, but the capacity for individual workers to make use of it and forge a collective critical mass that can translate into a collective voice at the very least.

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Footnotes:

[1] For example in the French-based transnational corporation, Danone

[2] In Germany 1919-1923 workers marched for a ‘republic of workers councils’ after such bodies assumed political control of towns and cities at various times during the period of social upheaval that followed World War 1.

[3] Constitution of the People’s Republic of China (2004), Article 42 [Work], Clause 3.

[4] Gonghui baike sidian Trade Union Encyclopaedia, Edited by Yu Shiwei, People’s Publishing House, Beijing, 1993.

[5] Chen Tai “Causes and Effects of the struggle by workers from the Liaoyang Ferrous Alloy Factory” and “Paying the Price: Worker Unrest in Northeast China ”, Human Rights Watch, August 2002.