ITUC/GUF Hong Kong Liaison Office 國際工會聯合會香港聯絡處

IHLO Comments on Democratic Management of Enterprises Ordinance of Guangdong Province (Third Draft)

ITUC/GUF Hong Kong Liaison Office (IHLO)

20 September 2010

The issuing of the Democratic Management of Enterprises Ordinance of Guangdong Province (Third Draft) (known as the Draft hereby) by the government of Guangdong Province is a step taken towards formal regulation of workplace labour relations in the province. The IHLO notices that the Draft contains some positive initiatives in this direction. In the absence of a specific law on collective bargaining in China, the ordinance is drafted to encourage employers and employees to resolve the contradictions over wages through collective negotiation. Yet, between regulation and protection of the right of both sides in negotiation, the Draft contains many grey areas. The ambiguities in these areas may run into the risks of making the ordinance un-operational, mitigating the level of support of both sides to the collective negotiation mechanism. These grey areas include:    

1. Specification about the Employees Covered by the Collective Negotiation
The Draft does not define the “employees” to be covered by the enterprise’s democratic management, and protected by the collective wage negotiation and the collective wage contract. With the increasing use of dispatch labour, part-time workers and intern workers in China, it is necessary that the Draft defines the “employees” that are entitled to participating in the collective wage negotiation, and protection under the collective wage contract.

2. Employees Initiate the Collective Wage Negotiation
The Draft allows employees to initiate the demand for a collective wage negotiation to the trade union when more than one-third of the employees demand it, and the trade union should make the demand to the employer. This is in principle a democratic practice that widens the right to initiate a wage negotiation to the employees. However, the Draft does not define the initiation mechanism to be used by employees for making such a demand. The “more than one-third of the workforce” quota is a high bar, and vague in terms of operation as no specification on the steps and procedures of putting forth the demand to the trade union is given. No detailed provision is made either about the initiation mechanism in the Collective Wage Negotiation Guidelines of Guangdong Province newly released by the Ministry of Labour and Social Security (MoLSS) in August. In the absence of stipulation about the setting up of an initiation mechanism in the workplace, the actions taken by employees in preparing the demand on wage negotiation run the risk of meeting obstructions from the enterprise or informal administrative barriers from the trade union. The protection of the right of employees from discrimination and retaliation taken by the enterprise while preparing and making the demand on collective wage negotiation to the trade union is also a blank page in the Draft.

3. Representation of the Trade Union in Collective Wage Negotiation
The Draft gives a more active role to the upper level trade union in the collective negotiation with the enterprise in order to monitor the enterprise trade union in performing the duties. A better model of monitoring should be the combination of the upper level trade union’s intervention, as well as the employees’ and trade union members’ exercising their monitoring rights over the enterprise trade union on the ground. Since the Draft allows employees to initiate the demand for a wage negotiation, this ordinance should also allow employees to exercise their rights as stated in the Trade Union Law of the PRC (Revised, 2001) to recall the trade union committee members that fail to perform their duties based on the trade union constitution. This would further demonstrate the principle of democratic management of enterprise, improve the performance of the trade union in the negotiation and mitigate the level of conflict between employees and the trade union committee members who have breached their duties.

4. Equal Rights in Collective Negotiation
The mechanism of restricting strikes or go-slow actions taken by employees, and lock-outs on the part of the employers in exchange for a regulated model of collective negotiation delivers only under the conditions of voluntarism, efficiency and procedural democracy. Administrative and mandatory restriction is used only in limited occasions. The cooling-off period in collective bargaining in international practices in general is not long. The Draft proposes a 60-day cooling-off period when the collective negotiation fails to reach an agreement, and no time limit is set for the second negotiation and the dispute mediation period. This is likely to undermine the level of support given by both sides to the negotiation mechanism.

Besides, collective bargaining usually allows for both sides to resort to industrial actions and other self-protective actions in case of exhaustion of the means of negotiation and mediation in reaching an agreement. Despite the fact that a specific law on collective bargaining and strikes is absent in China, and that regulation in this area does not exist within the legal framework at the moment, the Draft could allow for a shorter cooling-off period, and a reasonable and specified mediation period to give both sides an acceptable time frame to be subject to regulations. The Draft should also allow both sides the freedom to declare break down of the negotiation and reservation to the right to resort to other actions when no agreement is reached beyond the time frame.

Below are comments on the specific articles in the Democratic Management of Enterprises Ordinance of Guangdong Province (Third Draft).

I.    Definition of “Employees”
Article 8: Enterprises should follow the law and establish Employee’s Representatives Assembly or Employees’ Assembly.

To ensure that all workers in an enterprise is entitled to the same right of participation in the democratic management of the enterprise, it is suggested that reference be taken to Article 2 of Methods of Implementation of the Trade Union Law of the PRC in Guangdong Province (Revised, 2004) regardingthe definition of “employees” : “Employees’ Representatives Assembly or Employees’ Assembly is constituted by the whole workforce, including both manual and non-manual labourers whose major source of income is their wages, without discrimination of the status of the household registration, terms of employment and forms of employment.”

II.   Rights of the Employees in the Employees’ Representatives Assembly
Article 12 : Employees of an enterprise are entitled to the right to elect and be elected as Employees’ Representatives to take part in the Employees’ Representatives Assembly.
Article 16 : The Employees’ Representatives are entitled to the following rights: (1) To elect, to be elected and to vote in the Employees’ Representatives Assembly;

To demonstrate the democratic rights of employees and the employees’ representatives in the Assembly, it is suggested that besides the right to elect, to be elected and to vote, that Article 12 and Article 16 of the Draft include the right to nomination.

III. Collective Wage Negotiation
III.1 Making a Demand for Collective Wage Negotiation
Article: 38: The enterprise-based trade union represents the employees to demand collective wage negotiation to the enterprise. Employees who find it necessary to conduct collective wage negotiation with the enterprise should make the demand to the trade union. The trade union can proceed to represent the employees to negotiate with the enterprise and inform the latter of the results.
With more than one-third of the employees demanding collective wage negotiation to the enterprise-based trade union, the trade union should make the demand to the enterprise; where a trade union is not present in the enterprise or that the enterprise-based trade union fails to perform the duties, the industrial, regional trade union or the regional federation of trade unions shall make the demand to the enterprise for collective wage negotiation.

To ensure the equal rights of all the employees to put forth a demand for collective wage negotiation to the trade union, this article needs to make specifications on the following issues:

1. A consistent definition of “employees” should be applied. The provision, “Employees who find it necessary to conduct collective wage negotiation”should be specified as “Employees without discrimination of the status of the household registration, terms of employment and forms of employment” based on Article 2 of Methods of Implementation of the Trade Union Law of the PRC in Guangdong Province (Revised, 2004).

2. The bar of “more than one-third” of the workforce to make a collective demand to the trade union for a wage negotiation is too high. Setting a high bar, with un-clarities named in the below that cannot be met by employees will render this article a provision on paper, and create more instability if not tensions and unforeseeable reactions. Moreover the article does not define the method of soliciting, presenting and verifying the employees’ collective opinions in putting forth their demand for a wage negotiation to the trade union. No protection is laid down to ensure that the employees that are making the demand are free from discrimination. The lack of clarity in these areas makes it difficult for the article to be applied in practice. The following issues need to be specified:

1. The form and method of making the demand for collective negotiation – how should the collective demands given by the employees be organised and presented to the trade union? Should it be in the form of a written petition and with the employees’ signatures? Or should it be done in other ways?
2. The addressee of the demand – is it the chair of the enterprise trade union, the workers’ representatives, or the chair of the upper level union?
3. Protection to the employees –a clause should be integrated in this article to ensure that employees making a demand to the trade union and enterprise shall be protected by law from discrimination.
4. Further specifications concerning the key issues in this provision can be supplemented by revising the Collective Wage Negotiation Guidelines of Guangdong Province (MoLSS, Guangdong), namely: (a) the enterprise and the trade union has to publicise the size of the workforce in order to enable the employees to calculate the quota for the submission of the demand; (b) the method of submitting the demand for a collective wage negotiation by the employees after having reached the quota; (c) the method of verifying the demand; (d) and the time limit to the enterprise trade union or the upper level trade union in giving a reply to the employees.

III.2 The Formation of the Negotiation Delegation
Article 39: The number of delegates for collective wage negotiation from both sides should not be less than three and more than nine. A Chief Delegate shall be appointed by both sides.
The delegates for negotiation of the enterprise are appointed from the management by the Legal Representative of the enterprise or the Representative endorsed by the former.
The Chief Delegate can be the Legal Representative of the enterprise, or the Representative endorsed by the former. The Chief Delegate can also be a representative appointed from the delegation.
The delegates for negotiation of the employees shall be decided by the trade union. The Chief Delegate is the Chair of the enterprise-based trade union, or the representative endorsed by the Chair of the enterprise-based trade union by letter; where a trade union is not present in the enterprise or that the enterprise-based trade union fails to perform the duties, the regional federation of trade unions which the enterprise-based trade union belongs to shall organise the employees for democratic election of the delegates. The Chief Delegate shall be nominated and agreed by the delegates participating in the negotiation.
Employee with an employment contract to be expired in less than a year cannot be a negotiation delegate. The Chair of the trade union with an employment contract to be expired in less a year is exempted from this restriction.

Consistency regarding the approval procedure of the negotiation delegates elected in an enterprise where there is no trade union as stipulated in this article and in other existing legislations should be maintained. The Interim Provision on Collective Wage Negotiation (MoLSS, 2000) and Article 12 of the Enterprise Collective Contract Ordinance of Guangdong Province (People’s Congress of Guangdong Province, 1996) both states that the election of the negotiation delegates in an enterprise where there is no trade should be approved by more than 50% of the workforce present in the Employees’ (Representatives’) Assembly. The specification of approval of more than 50% of the employees present in the Assembly should be included in this article.

III.3 　Regulation during Collective Wage Negotiation
Article 47: During collective wage negotiation, the enterprise should protect the legal rights of the employees, and must not act in the following ways:

1. refuse or obstruct the employees from entering the workplaces;
2. refuse to provide the production tools and labour conditions to the employees;
3. restrict the personal freedom, insult, threaten, intimidate, or use violence to cause hurt to the employees;
4. insist in paying the statutory minimum wage standard as the wage standard for work during the normal working hours;
5. other radical acts not beneficial to the negotiation.

III.3.1 Regulation to the employer during negotiation and mediation period
Article 47 regulates the behaviours and actions taken by the enterprise during collective wage negotiation. The regulation should be applied in the mediation period as well.

III.3.2 Regulation to employees’ industrial actions
Article 48: Should the employee side fail to make a demand for collective wage negotiation according to the law, work stoppage, go-slow or other provocative actions that could intensify conflicts must not be used to demand the enterprise for wage adjustment.
During the period of collective wage negotiation, the employees should maintain the normal production and operation order of the enterprise, work stoppage, go-slow or other provocative actions that could intensify conflicts must not be used.

In applying mandatory restriction on the strike or go-slow actions taken by the employee when the latter is found to have failed to make a demand to the trade union in the first place, specifications should be distinguished. The mandatory restriction on employees’ actions should not be applied if the failure to notify the trade union is due to the fault or administrative obstruction of another party. The tensions likely to be created under such circumstances could be eliminated by integrating a specification clause to the article:

“Excluding the situation of administrative obstruction caused by another party, should the employee side fail to make a demand for collective wage negotiation according to the law, work stoppage, go-slow or other provocative actions that could intensify conflicts must not be used to demand the enterprise for wage adjustment.”

III.4    Approving the Draft Collective Contract
Article 49: Where an agreement is reached in the collective wage negotiation by both sides, the enterprise shall prepare the draft of the Special Collective Contract on Wage within 7 days.
After passing the draft of the Special Collective Contract on Wage passed in the Employees’ (Representatives) Assembly, the draft shall be signed and stamped by the Chief Delegate of both sides and shall take effect.
After signing the Special Collective Contract on Wage, the enterprise should provide a copy to the authorities administering labour and social security for documentation.

To ensure that the draft contract is supported by the employees, this article should include procedural democracy in approving the draft in the Employees’ Assembly. This is already stipulated in Article 15 of the Enterprise Collective Contract Ordinance of Guangdong Province (1996):

 “The daft of the contract should be submitted to the Employees’ Representatives Assembly or Employees’ Assembly for discussion. The Employees’ Representatives Assembly or Employees’ Assembly should be attended by more than two-third of all the employees’ representatives or the workforce. The draft collective contract shall be passed by more than 50% of the employees’ representatives or the employees present.
Should the draft collective contract fail to get the approval in the assembly, both sides should revise the draft and re-negotiate.”

III.5 Implementation of the Collective Wage Contract
The Draft does not have any provision regarding the implementation of the collective wage contract. Reference should be taken from the Enterprise Collective Contract Ordinance of Guangdong Province (1996) on implementation as stated in Article 21, Article 25, Article 26 and Article 31.  
A new article should be added to the Draft to lay down the specifics of a collective contract monitoring mechanism in the workplace:

“The collective wage contract that has taken into effect should be strictly abided to. Monitoring mechanisms and regular inspections shall be established in the enterprise.
Alteration or dissolution of the collective wage contract should be approved by both sides. Should there be a disagreement the procedure of dispute handling should be applied.
Where a dispute arises about the implementation of the collective wage contract, and both sides fail to reach an agreement in negotiation, application to the labour dispute arbitration organization can be made. Should there be a disagreement to the result of arbitration, the party can file a case to the People’s Court within 15 days from the date of the issuing of the arbitration result.” (Enterprise Collective Contract Ordinance of Guangdong Province (1996))

III.6  Failure to Reach an Agreement in the Negotiation
Article 50: Where no agreement is reached in the collective wage negotiation by both sides, the negotiation can halt with the approval of both sides. Both sides shall agree on the time, place and content of the next negotiation. The halt period shall not exceed 60 days in general situations.
Where no agreement is reached in the collective wage negotiation, or where no agreement is reached in the subsequent negotiation, a third party endorsed by both sides can be invited to conduct the negotiation.

The cooling-off period of 60 days is too long which is liable to abusive procrastinations. As suggested in this article the negotiation can be dragged on for half a year should there be more than 2 negotiations which is likely to cause greater instability to the negotiation and render the restriction imposed on both sides unfair. In many countries the cooling-off period is limited to 14 days. Moreover, when no agreement is reached in the negotiation, is the choice of using an external agency for mediation on voluntary basis given to both sides?  Can both sides choose to declare break down of the negotiation and reserve the right to action without being bound by the restrictions under this ordinance?

Setting a cooling-off period that is reasonable is one of the conditions to the conduction of a good negotiation. If both sides cannot reach an agreement in the negotiation, they should be given the option of mediation, and the option of not accepting the result of the mediation. The collective negotiation has to come to an end at this point in respect of the right of both sides to take actions deemed to be serving their best interests.

It is recommended that :
The cooling-off period must not be more than 14 days.
Should there be no agreement in the subsequent negotiation, both sides can invite a third-party or the administrative authority of labour and social security for mediation. The mediation period must not be longer than 30 days, to be consistent with the stipulations in the existing regulations on mediation.
Should there be no agreement in the mediation, both sides shall declare the collective wage negotiation to an end.

1. Mediation and Handling of Disputes

Article 60: Where disputes arising from the violations of the legitimate rights of the employees by the enterprise are in contravention to the labour laws and regulations, the authorities administering labour and social security shall handle the disputes in accordance to the law; where violations of other laws and regulations are involved, the mandated authorities shall handle the disputes in accordance to the law.
Where disputes arise out of other reasons, the federation of trade unions of all levels and the people’s government should direct the employees towards legal and rational expressions of the demands, and facilitate negotiation between both parties as a means in resolving the dispute.

IV.1 Disputes arising from the implementation of the collective wage
Disputes arising from the implementation of the collective contract should be included into the scope of disputes mediation and handling under Article 60.

IV.2      Time line in disputes mediation
Article 60 does not give a time line to the mediation and handling of disputes. Reference can be taken from Article 29 and Article 30 in Enterprise Collective Contract Ordinance of Guangdong Province (1996):

“When handling disputes related to the collective contract, the labour administrative authority should complete the handling within 30 days from the filing date of the case. An extension not exceeding 15 days shall be given under special circumstances and with reasons given by both sides in writing.”

V. Legal Responsibilities
Article 64: Where the employee side has sent a letter of intent and the enterprise fails to give an answer or arrange negotiation within the validity period stated in Article 43 of this ordinance, the authorities administering labour and social security shall order for rectification with a time limit and issue warning to the enterprise. Enterprise failed to make rectification within the time limit shall be fined between RMB10,000 and RMB30,000.
During the collective wage negotiation, should the enterprise be found to have violated Article 43, Article45, Article 46 and Article 47 of this ordinance thereby leading to collective stoppage of work and go-slow, it must not be used by the enterpriseas excuse to terminate the employment relation with the participating employees.

Article 67: Where the enterprise or the employees are found to have taken actions stated in Article 46, Article 47, Article 48 and Article 62 of this ordinance in contravention with the public security administration, the public security departments shall handle the contravention according to the law; where criminal offences are committed, legal responsibilities shall be claimed.

V.1Consistency
Article 64 and Article 67 specify the legal responsibilities of both parties in breach of the provisions stated in this section of the Draft. For the sake of consistency, these two articles should include responsibilities regarding violation on the implementation of the collective wage contract as suggested earlier in this paper.

V.2       Responsibilities of the Trade Union
Article 68: Enterprise trade unions that fail to perform the responsibilities stated in this ordinance shall be ordered by the federation of trade unions of the county and above level for rectification.

Besides giving out orders for corrections by the upper level trade union to the enterprise union for breach of duties, the responsibilities of the trade union should be enforced also by the employees and members of the trade union through exercising their rights as laid down in the Trade Union Law of the PRC (Revised, 2001) in Article 55; and Article 26 (iv) of the PRC Trade Union Constitution (Revised, 2008) , to recall the trade union committee members in breach of the duties. These two articles should be integrated to Article 68 of the Draft to supplement the monitoring over the enterprise trade union:

“Should the staff of the trade union found to have the following situations, the trade union of the same level or the upper level trade union shall order for corrections, the staff directly held responsible and the supervisors shall be subject to penalty; where the situation is serious, a recall shall be made based on the Trade Union Constitution of the PRC.” (Article 55, Trade Union Law of the PRC (Revised, 2001); and

Article 26 (iv) of the Trade Union Constitution of the PRC (Revised, 2008), the Trade Union Members’ Assembly or the Trade Union’s Representatives’ Assembly has the authority to “replace or recall the representatives or the trade union committee members elected in the Assembly.”

End