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The new Contract law of China – opportunities and threats


This report looks at the serious obstacles that are endangering the probability of the new Labour Contract law promoting and protecting worker’s rights in China. While the new law does contain significant reforms and concrete penalties for abuse, ongoing problems such as the failure of the authorities to issue implementing guidelines, coupled with past experience of non-implementation of labour legislation along with the current wave of dismissals in advance of the new law show clearly the problems ahead. Recent draft contracts designed to comply with the provision of the new law add to the worries that the law will not be able to live up to expectations.

IHLO has translated a draft contract issued by the labour department in Dongguan, South China issued to comply with the new law. This new contract, rather than promoting labour rights contains retrogressive clauses which restrict industrial action and contradict the new law itself. Contracts (and behaviour by both companies and the authorities) which fail to follow current laws are all too common. The failure of actual practice to comply with the law is one of the most pressing problems of existing legislation and we hope that the draft contract issued is revised to ensure that it complies with the new law in both its spirit and its letter.

Hopes that the new contract law would quietly help promote freedom of association at the same time as promoting other rights are now very much in question. However, recent protests and media coverage of illegal dismissals suggest that at the very least the law will be a focus for worker activists and their supporters in their campaign to demand more rights and that worker’s knowledge of the law (both new and existing) can only increase with each day leading to a rise in collective action and legal consciousness. The role of the ACFTU remains very much unclear. [A forthcoming article will look more closely at the new law’s provisions regarding trade union action and the possibilities for the ACFTU to step up and support growing worker action]


Shedding workers in the run up to 1 January 2008

Reports of mass lay offs in the last few months have been intensifying as the implementation of China’s new labour contract law looms closer.

The new law – on paper at least – makes it harder for companies to fire workers at will and outlines specific compensation terms.  The new law also imposes specific penalties for hiring workers without a contract – as of now hundreds and thousands of workers have no contract.

China’s largest communications device producer, Huawei Technologies has shed almost 12 per cent of its 60,000 employees (around 7,000 to 10,000 workers) since the end of September in the form of voluntary retirement. “Although these former employees were paid compensation in accordance with the total number of years they had worked, most of them believe they had to leave against their will. Many of them had more than eight years of experience at Huawei.”  [NOTE 1] Since the new law requires employers to guarantee the jobs of workers with more than ten years of experience until their official retirement age, these layoffs are an obvious attempt to avoid such obligations.

Since this news emerged the ACFTU announced that it was investigating the reports of mass lay-offs with the result that “Huawei Technologies Co Ltd agreed to suspend its controversial "voluntary resignation" scheme after holding talks with trade unions, the All China Federation of Trade Unions (ACFTU) said on Saturday”. Xinhua also reported that “The ACFTU said it had called on China's biggest maker of telecommunications network equipment to protect workers' interests after its plan sparked fears the company was trying to sidestep a new labour law. The ACFTU and unions in Guangdong Province and Shenzhen called on Huawei to solicit workers' opinions and respect their rights while making regulations that will benefit them. Huawei will soon hold a workers' conference to review the interim regulations, sources with the ACFTU said on Saturday. A company source confirmed on condition of anonymity that a consensus had been reached with the trade unions. He said the company had agreed to suspend the plan, but the exact date for when the decision will become final will be decided after workers' have their say at the conference.” [Xinhua 12 November 2007]

Since then all has been quiet. According to one observer, since the public debate over the legality of the sackings emerged, authorities issued an order last week to cease all coverage of the Huawei employment issue and to make no attempt to question Huawei staff about it. Xinhua only reported the ACFTU findings because the trade union federation is an “official” source.

“The fact that the media has been silenced has presumably got something to do with the influence of Huawei president Ren Zhengfei, formerly a senior People’s Liberation Army officer. Incidentally, an article in Forbes back in 2004 spoke of Huawei’s “opaque ownership”:  The company says 1% belongs to Ren (enough to land him on the FORBES list of China’s 200 richest people at $96 million) and the rest to a “union” whose principals Huawei has never identified. Adding to the air of mystery, Ren rarely accepts press interviews (including the one requested for this article); instead, he dispatches insiders to public events. Set against a global wariness among businesspeople regarding China’s dismal record of intellectual-property protection, it’s an approach that makes Huawei a magnet for suspicion, even as it consistently delivers winning products (routers, switches and wireless networking equipment, among other things).[Beijing Newspeak; The harmonization of the Huawei debate]

The media spotlight and the actions of the ACFTU have sent a clear message to other high profile companies not to try to shed jobs to avoid the new law. But first hand reports from inside China show that many companies – those under the radar of the media – continue to shed their longer term employees.

A translation of the 15 July issue of the Guangdong newspaper "Yangcheng Evening News" gives an article entitled "'The Labor Contract Law' Made Me Lose My Bowl of Food" which gives two examples of two long term workers being dismissed. It tells the story of 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 however 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.” [Old Tales Retold: The Labor Contract Law and lay-offs]

Earlier China Labour Bulletin wrote that The Southern Metro News (Nanfang Dushi Bao) on 12 September reported that several substitute teachers from a number of different schools in Shenzhen have been given notice while five substitute teachers from the Longhua Primary School, who had worked at the school for an average of 15 years all were given notification of early retirement on the same day.  While the Morning News (Xinwen Chen Bao) wrote that in Shanghai, several workers employed for over three years without a written contract have complained to their union about systematic intimidation from employers. Eight employees have already been made redundant.   [NOTE 2] Although workers are supposed to be given contracts, the new Labour Contract Law gives specific and concrete penalties for failing to provide a detailed written contract.

CCTV has also fired 1,800 employees, or 20 percent of its total workforce in October and early November. All those dismissed were temporary workers and under current law, can be dismissed without compensation. However under the new law, temporary workers, who have had their contracts, renewed more than twice are eligible for permanent employment. According to some sources recent scandals at state owned media stations, notably Beijing News, have led to central media authorities ordering CCTV to dump contractors and other freelance staff - some 2000 in all.

China Digital Times sources cite another key motive for the staff cuts, however. In late June, the country passed its new Labour Contract Law, which comes into effect at the turn of 2008. CCTV, they’ve been told, has been maneuvering in recent weeks to comply. The law essentially forces employers to put contracts into writing within one month of employment, making it much trickier for them to hire temps. For an institutional work unit (事业单位) like CCTV, which has a limited number of staff positions and thousands more working informally, full compliance would appear quite the conundrum. Of course, as the sources acknowledged, the law could be just another excuse to clean house.” [China Digital Times 2 August]

Many smaller manufacturing plants in Guangdong are also shedding workers – indeed the recent attack on the Dagongzhe Centre which was helping workers claim compensation for recent lay offs is a clear indication of the widespread sackings.
[A report on the Attack and the ITUC appeal can be seen here]

Wal-Mart has also dismissed some 100 people in a global lay off (of around 250 people). Although Wal-Mart insists the cuts were part of a global “re-prioritizing” plan.

For a company that has long embraced the virtues of global sourcing, Wal-Mart’s decision to cut its global procurement headcount by over 250 has come of something of a surprise. And with China the region hit most severely by the cuts – reports suggest that more than 100 staff could go in the company’s Shanghai, Putian and Dongguan divisions – the move seems to suggest that the US retail giant is intending to shift its focus away from the far east and could soon be switching its attention to India. The company’s PR head Jonathan Dong has insisted that the cuts have nothing to do with the China’s new Labour Contract Law, which comes into affect on January 1 2008, but the decision has already brought a chorus of derision from Chinese law experts who claim that the headcount reductions go against existing legislation which states that companies can only implement job cuts once all other avenues have been explored."

Others have claimed that Wal-Mart is cutting jobs to both cut costs and give them an excuse to go to countries where labour prices have not soared to the extent they have in China, something Dong, who pointed out that his company’s direct procurement in the country currently runs at $9bn a year, has strenuously denied.”  [Procurement Cuts Raise Questions Over Wal-Mart Strategy , 6 November, Global Sourcing] The lay-offs come at the same time that Wal-mart is reportedly quadrupling its distribution centres in China. [Chinaview.cn 4 November 2007]  

[See here for an IHLO translation of a domestic report on the dismissals at Wal-Mart]

Companies Leaving…??

Media attention has also been given to several high profile so-called “defections” because of the impeding law and the fear of rising wage bills.

For example one report in CSR China gives the headline “New Chinese Labor Law Causes Olympus to Flee to Vietnam”. It writes that the Japanese camera manufacturer Olympus has decided to combine its two factories in China into one before 2009 to reduce costs. “According to local media, the company says that China's new Labor Contract Law will be enforced in January 2008 and by that time it can not easily dismiss employees or hire temporary workers, which will lead to an increase of its operational costs. So in order to reduce costs and transfer risks, it will close one factory in China and move the facility to a new location in Vietnam." Olympus has two factories in China, one in Fanyu District, Guangzhou and the other in Nanshan, Shenzhen. The Guangzhou factory has about 4300 employees and the one in Shenzhen has about 7000. Media reports do not say which of the two factories Olympus will close. [CSRChina 13 November 2007]

Foxconn, which was the subject of a prolonged and intense criticism over a report that it was mistreating its workers at a factory in Shenzhen which made iPods for Apple inn the summer of 2006 has recently been reported as expanding its production in Vietnam with a view to reducing its reliance on China because of rising wage costs ; “Foxconn International, the largest contract maker of mobile phones in the world, plans to open its first factory in Vietnam next year to benefit from labor costs that are lower than China's.” [Foxconn looks away from China for factory, Bloomberg News, 5 December 2007].

At the same time however, another report sates that Foxconn “will invest at least $500 million in the next years on a new factory in Huizhou, Guangdong Province, China to expand production” and plans to double production capacity in China to meet rising orders, “Company spokesman Vincent Tong disclosed that Foxconn's Shenzhen's operations may reduce its size as the Huizhou site may eventually become larger.” So it is not clear if Foxconn is increasing in Chain and Vietnam or decreasing in China. It certainly looks as if the headline, Foxconn “looks away” was a bit dramatic to say the least – perhaps showing the trend of companies and business analysts encouraging alarmists headlines about the dangers of the new law for business.

[ After Apple tried to refute the reports of abuse and Foxconn attempted to sue two mainland journalist (they later dropped the case), Foxconn’s name became synonymous with foreign-invested bad management and was, as the biggest Taiwanese investor in Shenzhen city (employing some 240,000 workers in Longhua town alone) was set as a priority for the Shenzhen municipal ACFTU. For an IHLO analysis of the ACFTU’s role in organizing the Foxconn union – which incidentally showed a much more pro-active and independent approach to unionizing that the ACFTU Wal-Mart unions please see: ACFTU Union established at Foxconn on the very last day of 2006]

The Role of the ACFTU

As many know the ACFTU, while not playing a particularly strong role in defending worker rights to say the very least, has had a history of some success in terms of legislative influence )(both the labour law and the Trade union law show this clearly). It has a strong input into the drafting of the New Labour Contract law. While the final version certainly watered down many more pro-union aspects it remains a potential tool for both ACFTU internal goals of strengthening its footing within companies and for the ACFTU to help campaign rights such as collective bargaining and the drafting of (good) collective contracts

 [For an analysis of the Draft law please: The New Draft Contract law of China: Resistance versus reform but no freedom. The law itself is found here

Not only did the ACFTU very publicly intervened in the case of Huawei but  Xinhua reported on 3 December 2007 that the All-China Federation of Trade Unions has warned employers they will face dire consequences if they try to evade their responsibilities under the new Labour Contract Law by coercing staff into accepting less favourable employment terms. ACFTU officials stated that local ACFTU branches would investigate any complaints filed by union members and provide legal help to complainants who wanted to sue their employers.

SO far however no more news has been heard on this announcement and as far as we know the brunt of workers in South China facing lay offs are not members of the ACFTU and, given the prime role of the labour groups in protecting their rights, face severe problems in claiming compensation given the current wave of repression against labour groups. In terms of longer term implementation of the law we will have to wait and see to what extent the ACFTU will play a strong role in enforcing the law.

But how to Implement and Interpret?

The new law is being touted by many as the most significant labour related reform for decades. Many officials in China appear to be using the introduction of the new law as a cure for almost all the ills of the current condition of the working classes – from lack of contracts, to easing social unrest to resolving the issues of overtime. Certainly the law will have significant impacts but a lot is riding on both the interpretation of the law and its implementation.

For this reason companies and business law experts are investing a great deal of effort into analyzing the law and working out its possible interpretations and what this will mean or them. At the same time, activists in the mainland and in Hong Kong are also looking at ways to both influence the outcome of discussions around interpretation and looking for the best tools of the new law in order to campaign and lobby for expanded worker rights.

The new law contains some clauses on how to bridge this new law and the previous legislation but there has been little discussion on how to implement the new law. Currently the labour law sets out specifically those written contracts must be signed between the employer and the employee and yet according to official figures less than 20% of workers have signed contracts in small and medium sized enterprises.
In August 2007 it was announced that according to officials at the Ministry of Labour and Social Security (MOLSS), the MOLSS will issue implementing rules before the end of this year. The implementing rules may address key issues such as the required procedures for implementing company rules as well as when an open-term contract must be provided to an employee who has completed two fixed terms of employment. On July 12, 2007, the MOLSS also issued a notice requiring local labour bureaus to revise employment-related laws and regulations for compliance with the new law. Among the areas of concern were probation periods, economic layoffs, severance payments, agency workers, and part-time employees. [NOTE 3]

However as of December there have not yet been any national guidelines. At the start of December, after the spate of high profile dismissals of long term employees by domestic and foreign companies, Outlook Weekly, a magazine under the official Xinhua News Agency, reported on 3 December that an implementation regulation of the Labour Contract Law was expected by the end of the year. It also reported that a judiciary interpretation, drafted by the Supreme People's Court, would also be adopted soon to regulate loophole jumping. It is rather late in the day to be issuing implementation guidelines – with only three weeks or so until the new law takes affect but we certainly hope that the guidelines are clear, concise and uphold both the spirit and the letter of the new law with all its promises for workers,

The ACFTU held a press conference on 6 December where it pledged to work closely with other authorities in applying the law. The China Daily report quotes Liu Jichen., the head of the legal affairs department as saying; "We'll actively promote and participate in the legislation and relevant legal interpretations to make the law more applicable, especially by making suggestions on some hotly debated issues,"

Liu did not elaborate or disclose a timetable, but Outlook Weekly, a magazine under the official Xinhua News Agency, reported on 3 December that “an implementation regulation of the Labour Contract Law was expected by the end of the year. It also reported that a judiciary interpretation, drafted by the Supreme People's Court, would also be adopted soon to regulate loophole jumping such as that which occurred at Huawei”.

The report continues; “However, the legislative affairs commission of the Standing Committee of the National People's Congress, the country's top legislature, made it clear on Saturday that such sidestepping is useless, because although the contracts end, employment relations still exist. At yesterday's conference, Liu said Huawei's dodge is only one of the three tactics the union discovered violating or circumventing the current Labour Contract Law. Firms would also fire employees and rehire them soon afterward as dispatch workers. The other strategy uses mass layoffs. The cause of these problems is that a small number of enterprises are trying to evade responsibility to optimize profits," Liu said. "We've begun intervening to stop such activities."

On 7 December it was also announced that the Shanghai Labor and Social Security Bureau issued guidance for workers and employers when the new Labor Contract Law comes into effect on January 1 next year.  The bureau issued a pamphlet to explain the new law to business to avoid breaching regulations when signing contracts with employees. [China Daily 7 December 2007]

The next Step: The Contracts themselves

With only three weeks left before the new law comes into force, recently several provinces and municipalities have released new updated standard contracts.

In Guangzhou a sample labour contract that “fulfils the requirements of the new Labour Contract Law has been released in the southern city of Guangzhou. “ According to CCTV; “The new contract law is said to protect the interests of Chinese employees”. No copy has yet been seen outside. CCTV added that, “One highlight is that employers are required to allow their staff to keep a copy of the contract. A violation of that rule will lead to a punishment of the payment of two months' salary to the employee. “The new contract also requires employers to fill in the valid contact information of a legal representative for the firm, giving employees a point of contact with their employer and those workers' salaries during their trial period are no less than 80 percent of the promised monthly salary. [CCTV 4 December 2007]

Jiangsu Labour Department also released a new labour contract for the province that “fulfills the requirements of the new Labor Contract Law” and includes paid time-off. According to the new contract, employers should allow for annual paid vacations for their employees. The two sides can decide on the amount of time-off during contract negotiations. Interestingly it also includes a lot of features from existing legislation on social insurance, medical checks etc that Gu Chao, Official of Department of Labor & Social Security of Jiangsu Province said "This new sample contract we worked out has an important feature. It not only fulfills the requirements of the new labor law. But it also includes many other relevant rules and regulations concerning health check-ups, social insurance, workers' unions and so on to help employers and employees fully acknowledge their rights and obligations."

[See here for the New Contract law and here for the existing 1995 Labour Law]

Dongguan Draft Contract : An example of a seriously flawed contract and regressive moves

In October, the Dongguan City Labour Department released a draft of a new standard labour contract. IHLO has translated the draft here and extracted relevant clauses below. It is believed – as with most other contracts being prepared that the main drafter is the Labour department and it is not clear how much negotiation or input there has been from the ACFTU. Certainly the new draft contract in Dongguan raises some very worrying legal and ethical issues which call into question the significance of the new law to actually change working conditions and improve labour rights in any meaningful way.

Industrial Action = Criminal Behaviour:  Dismissing striking workers

Firstly the new Contract states that

Clause 26: Under the following situations, either party can terminate the contract: (i) Party B (the employee) does not satisfy the employment requirements or Party B refuses to work (3 days in advance and offer any explanation); (ii) Party B is sentenced to imprisonment, sent to re-education through labour, and has serious problems of corruption, theft, gambling, fighting, swindling, strike and slowdown or bad behaviour, or failing to work causing massive economic loss to Party A (the employee) and repeatedly breaching labour discipline, or being dismissed for breaching factory rules and regulations after repeated warnings”

This is a much larger definition of the terms for immediate (and without compensation) termination than the New Contract law gives and indeed than the existing legislation gives.

Article 25 of the current Labour Law states:

The employing unit may revoke the labour contract with a labourer in any of the following circumstances:
to be proved not up to the requirements for recruitment during the probation period;
to seriously violate labour disciplines or the rules and regulations of the employing units;
to cause great losses to the employing unit due to serious dereliction of duty or engagement in malpractice for selfish ends; and
to be investigated for criminal responsibilities in accordance with the law.

The current laws cover go-slows which under current trade union law are allowed:

Article 27  In case of work-stoppage or slow-down strike in an enterprise or institution, the trade union shall, on behalf of the workers and staff members, hold consultation with the enterprise or institution or the parties concerned, present the opinions and demands of the workers and staff members, and put forth proposals for solutions. With respect to the reasonable demands made by the workers and staff members, the enterprise or institution shall try to satisfy them. The trade union shall assist the enterprise or institution in properly dealing with the matter so as to help restore the normal order of production and other work as soon as possible.

The new Contract law states:

Article 39 Where an employee is under any of the following circumstances, the employer may dissolve the employment contract:

1. It is proved that he does not meet the recruitment conditions during the probation period;
2. He seriously violates the rules of the employer;
3. He causes any severe damage to the employer because he seriously neglects his duties or seeks private benefits;
4. He simultaneously establishes an employment relationship with other employers and may seriously affect his completion of the tasks of this entity, or he refuses to make a correction though the employer has pointed it out;
5. The employment contract is invalidated due to the circumstance as mentioned in Item (1), paragraph 1, Article 26 of this Law; and
6. He is subject to criminal liabilities in accordance with the law.

Thus the new contract goes against current legislation and appears to place industrial action in the same category as criminal behaviour. This is not a positive move but a regressive clause which could have very serious repercussions for the growing labour rights awareness in Dongguan. At the same time it fails to define adequately the meaning of “bad behaviour” leaving the employee a great deal of flexibility in interpretation.  The current law also does not specify personal issues like gambling as a cause for dismissal.

As with many places in China, but especially in the Pearl River Delta there has been a yearly increase in the number of strikes and go-slows and other forms of industrial action. Generally this is one of the few means the workers have to ask that employees sit down at the table with them to bargain.  The clause would likely be used widely by employees (and possibly with this intention by the labour bureaus) to allow them to fire with absolute impunity any worker found to have engaged in a strike or other form of industrial action. Currently other similarly vague clauses in existing law can also be used but this appears to make it much more open.

Workers required to give reasons for leaving employment

The new Dongguan Contract also states the circumstances when the employee can terminate the contract (giving 30 days notice). These reasons include marriage and illness.

Article 27:
Party B (employee) may resign when: (1) Party B is going to marriage or take care the family; (2) Party B prefer resign after the set period of medical care for an illness or non-work related injury; (3) any other reasons, according to law, regulation and Party A’s code, allowing Party B resign prior to contract expire.

However the actual New Labour Contract Law does not require employees to give any reason to resign if the workers give 30 days notice.

Instead the new law actually states;

Article 37: An employee may dissolve the employment contract if he notifies in writing the employer 30 days in advance. During the probation period, an employee may dissolve the employment contract if it notifies the employer 3 days in advance.

Thus the new Dongguan contract appears to make the employee submit valid reasons such as marriage or illness in order to terminate a contract. The exact meaning of section 3; " (3) any other reasons, according to law, regulation and Party A’s code, allowing Party B resign prior to contract expire" is unclear but it could be interpreted as giving the employer sufficient grounds to refuse to allow a written notice of 30 days.

Once again this is a retrogressive step and could increase the hold over he employee by the employer as opposed to allowing the employee to have equal rights and protection in developing and choosing their contractual engagements which the new law is designed to do. It remains to be seen as to have this clause will be interpreted however.

Protection from unsafe work

 According to the new Labour Contract Law article 42, an employer cannot terminate a contract in a set of stipulated circumstances which include pregnancy, occupation illness etc. The new Law states clearly that an employee cannot be terminated if they are engaged in “operations exposing him to occupational disease hazards and has not undergone a occupational health check-up before he leaves his post”…..While the Dongguan contract essentially covers most of the list of prohibited situations for termination it fails to include this very crucial circumstance.

Many workers are engaged in work which, due to either the nature of the work or (perhaps more widespread) the failure of the employer to install adequate OSH safeguards and the majority do not obtain health check son departure. This leads to the type of scenario that many workers affected by occupational disease find themselves in. They leave their factory and later find themselves ill and then have little legal or practical means to obtain compensation form their previous employer as they have no current contractual relationship and the employer denies liability. This is the case which workers affected by Silicosis and cadmium poisoning for example find themselves in and one of the main reasons why their struggle for compensation has been such a long campaign. [See for example the case of the Gold peak workers and Gemstone workers]  

The New Contract law states;

Article 42. An employer shall not dissolve the employment contract under Articles 40 and 41 of this Law if an employee:

1. is engaging in operations exposing him to occupational disease hazards and has not undergone an occupational health check-up before he leaves his post, or is suspected of having an occupational disease and is being diagnosed or under medical observation;
2. has been confirmed as having lost or partially lost his capacity to work due to an occupational disease or a work-related injury during his employment with the employer;
3. has contracted an illness or sustained a non-work-related injury, and the prescribed period of medical treatment therefore has not expired;
4. is a female employee in her pregnancy, confinement or nursing period;
5. has been working for the employer continuously for not less than 15 years and is less than 5 years away from his legal retirement age;
(6) finds himself in other circumstances as prescribed in laws or administrative regulations

Whereas the Dongguan contract states;

30. Party A cannot terminate this contract under one of the following situations (except for the dismissals due to serious illegal behaviours):

(i) Party B suffers from occupational illness or occupational injuries and it is within the period of medical treatment;
(ii) Party B suffers from occupational illness or occupational injuries and the labour appraisal committee has confirmed that he/she has lost or partly lost the ability to work and he/she does not ask to terminate this contract;
(iii) Party B suffers from illness or non-work-related injuries within the stipulated period of medical treatment or that he/she still needs to stay in the hospital for medical treatment although the period of medical treatment has been expired;
(iv) female staff member in her pre-labour period, maternity leave and lactation period;
(v) Party B is having public holidays, various leaves and compensation leaves;
(vi) Party B has worked in the employment unit for 15 years and there are fewer than 5 years from his/her retirement;
(vii) other sit
uations according to laws and regulations.




It would be tempting to see the new law as an answer to the prayers for protection and promotion of labour rights but as we can see the writing of the new law is the start of the struggle ahead and not the end. While the new law does contain many good provisions and concrete penalties the issues of implementation, interpretation and enforcement have yet to be resolved. The lack of legislative guidance at this late stage is a serious worry and raises many concerns over how good the actual implementation of the law will be.

One rather optimistic report by the first-ever joint European-Chinese research study on the Chinese labour market by the Shanghai Academy of Social Sciences (SASS) and the Adecco Institute (London)[see here] done in cooperation with the University of Warwick (UK) released on 7 December is correct in stating that companies should not look to the possible negative effects of the new law such as the possibility of increased wage bills and less flexibility in shedding unwanted workers but rather they should see the economic benefits of a more transparent and stable workforce as opposed to the current situation of high staff turnover and resulting lack of unskilled workers; “The new laws provide a strategic roadmap for the next 10-15 years. They will slow the rapid rate of workforce turnover and bring more procedural transparency to labour dispute resolution. They provide better protection for trade secrets and incentives for employers to invest in vocational training for workers. They also permit new forms of flexible work and third-party labour placement.”

However the report appears to jump from this to the as of yet unsubstantiated conclusion that;

"We regard the planned Chinese labour law reforms as a breakthrough and big leap towards International labour market standards. Collective wage agreements, employment rights that are enforceable by law and dismissal protection no longer remain taboos in China. The new labour laws have unmistakable German and British flavours. It is a good example of China's increasing openness to adopt foreign best practices", said Wolfgang Clement, Chairman of the Adecco Institute and former German minister for Economics and Labour.

"Perhaps most importantly, the Chinese government will enforce new labour laws across all provinces in a more effective way than until now. This would be one of the most spectacular, confidence-building reforms in new China", Siderman added.

As of yet it is hard to find an example of any labour related law that has been enforced across all provinces effectively and until we see related investments in enforcement (such as labour inspection, monitoring and steady support by the judiciary in cases of abuse) we cannot see such glowing predications as anything other than hope.

According to a recent online survey by China Youth Daily, 14.5% of the 2,212 respondents said their employers intended to rearrange contracts with long-time workers, and 87.4% disagreed that the new Labour Contract Law would give protection to employees.  A National People’s Congress survey on implementation of the labour law found that fewer than 20% of small-and-medium-sized private companies had signed contracts with their workers, while 60% of the contracts used by those that had them were short term, lasting one year or less, thus revealing the work that needs to be done.[ Asia Online 29 November]

On the flip side however, the recent protests around dismissals and the work of labour rights groups and activists supporting workers continue to show the ever rising spread of legal consciousness among workers. The new law is emerging at the very least as a focus for their protests and a clear bargaining tool for them in their dealings with management. Whether or not they will gain the support of the authorities – or indeed the ACFTU – at the grassroots level remains unclear.

On 8 December, some 50 employees in Shanghai staged a six-hour rooftop protest to complain about their dismissal before the new Labor Contract Law comes into effect. The Workers were employed at Transpo Electronics (Shanghai) Co Ltd, a US-invested company with some 300 employees. The protesters said the company told them in the afternoon of November 30 that they would not need to work next day. The company said it would not sign next year's contracts after their current contracts expire on 31 December. A total of 53 long-serving workers were dismissed, most of whom had been with the company for over five years - some had worked for 11 years. The workers had discussed the situation with a labour rights lawyer who informed them of the new law and its provisions regarding the need to sign an open-term contract after 10 consecutive year’s employment. The workers then complained that Transpo was avoiding signing open-term contracts by dismissing them. In response the Shanghai Labor and Social Security Bureau was reported as saying that it would publicize the new law and supervise companies to avoid similar cases. [Shanghai Daily 10 December]

Support for worker activists and labour groups should continue to ensure that workers are put firmly in the picture when it comes to their rights and the duties of both the employers and the authorities in enforcing the law.  


December 2007



NOTE 1: China’s New Labor Law No Help to Chinese Workers, NOVEMBER 05, 2007 03:11, DongA.com, http://english.donga.com/srv/service.php3?bicode=060000&biid=2007110530318

NOTE 2: Employers sacking workers before the Labour Contract Law is implemented, CLB, public/contents/news?revision%5fid=50073&item%5fid=50072

NOTE 3: See our analysis of the different drafts of the law: The New Draft Contract law of China:
Resistance versus reform but no freedom [http://www.ihlo.org/LRC/W/290607.html


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