Supply Chain Innovation

Assessing the New China Labor Contract law (Part II)

Monday, January 14, 2008

Plugging loopholes
Given that the new labor contract law provides notice periods and accumulated severance rights to workers being dismissed, one of the fears that surfaced was that employers would fire workers just before the law came into effect on January 1, so that they could start them on zero years of service under the new system. There were indeed some high profile cases involving forced resignations of workers but they have generally been resolved in favor of the workers. Zhang Yin, one of the richest women in China, who made her fortune recycling scrap paper, tried to outsource some 2,000 gardening, cleaning and non-technical workers to an agent. The salaries would still have come from Nine Dragons but the contracts would have been issued by the agent. On December 14 workers went on strike in protest because of concerns that their accumulated rights and social security benefits would be threatened. The Dongguan Labour Bureaux mediated and workers signed contracts with Nine Dragons. Ms. Zhang said that the incident represented a misunderstanding and that the 2,000 workers in question had always been casual laborers. She said that the new law was premature as China did not have a sufficiently comprehensive social security system and that the law is too protective of workers. National Ministry of Labour officials have pointed out that forcing workers to resign in order to start them on new contracts would not be regarded as an interruption of workers’ years of service and they may move to close this loophole. Guangdong local labor officials have also clarified that it is still possible to fire workers, provided that employers respect the applicable notice periods and pay severance.

Protection for trade union leaders
The Jan 5-6 edition of the official China Daily featured a fascinating piece. The paper reported that the Shanghai Trade Union has issued a directive to affiliates to protect union chairpersons who are demoted, given a pay cut or transferred. That support could go as far as paying for litigation if the union leader decides to sue the employer in question. The article goes on to quote a labor lawyer who notes, “I have handled very few cases involving trade union cadres suing their employers. But that doesn’t mean everything is fine. Very few trade union officials dare to stand up for employees rights, therefore they are seldom punished”. The paper also quotes Fan Xiayan, chairwoman of the union at a foreign invested automotive components company, who notes, “trade union officials in China still have a long way to go before they have the authority to settle disputes between management and staff, as they do in western countries.”

Auret van Heerden

To be continued…


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