Giving China’s Workers a Chance

Some of China’s biggest companies, including the telecommunications network equipment provider Huawei Technologies, have been encouraging some of their employers to “resign” en masse ahead of a comprehensive new labor law going into effect next year that offers significant protection for workers, including giving tenure to any worker with more than 10 years of unbroken service. The resignation tactic may not work due to pressure from China’s official labor union.

In the case of Shenzhen-based Huawei, some 7,000 employees, among them the president and founder, Ren Zheng Fei, reportedly resigned. The employees were to presumably be rehired almost immediately, but without the seniority that gives them broad protections under the new law.

The effort seems to have backfired, drawing attention to both the new law and to Huawei’s efforts to skirt the restrictions.

Late last week China Daily reported that the government-controlled All China Federation of Trade Unions (ACFTU) was considering an investigation into the Huawei resignations. "We have carried out probes into such cases," an official with the state-controlled ACFTU told the paper. The practice of forcing resignations ahead of the new law is apparently so widespread, China Daily said, that the government may issue regulations to deal with companies using the technique.

"Violators will have to pay a heavy price," Chang Kai, an official with the Legal Affairs Office of the State Council, or Cabinet, said, according to China Daily.

Xinhua said on Saturday that Huawei, under pressure, agreed to suspend the controversial "voluntary resignation" scheme after talks the ACFTU. The union, which closely follows the dictates of Beijing, said it called on China's biggest maker of telecommunications network equipment to protect workers after news of the plan raised fears that the company would lead corporate resistance to the new labor law.

The ACFTU said company officials had met with union organizers in Guangdong and agreed to hold a series of meetings with workers to discuss the new law and how to respond. Union organizations in Guangdong and Shenzhen publicly called on Huawei to solicit workers' opinions and respect their rights. The company had earlier denied trying to evade the law, insisting it was only restructuring its work force. Xinhua reported that Huawei claimed that encouraging resignations was “just routine human resources adjustment.”

Under the terms of the law, which is raising serious concern among companies in China, employers will be required to compensate any employees who are terminated without due cause. Compensation is to be determined on the basis of duration of service and current wages. It also stipulates that employers must inform workers fully about the nature of their jobs and working conditions; and it limits the ability of employers to use temporary labor.

In addition, the law, which was adopted by the Standing Committee of the National People's Congress (NPC), China's top legislature, in June, says that employees who have worked for an employer for 10 consecutive years are entitled to sign a labor contract that has no fixed term, on agreement by both parties. These open-ended contracts would make it harder for employers to dismiss workers.

Other companies are also suspected of trying to dodge the law, including Wal-Mart, the American retail behemoth. In the US, Wal-Mart has famously blocked trade unions from organizing its million-plus workers, even closing a Canadian store that voted to have a union in 2005. In China, however, it has welcomed the ACFTU to organize its stores, presumably because the Communist Party-run union always does what the government tells it to do. So with the ACFTU supporting the new legislation, the company seems to be taking pains to appear compliant.

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.

“We were called into our supervisor’s office about one month ago”, an unnamed Huawei employee who has been working with the electronics company since 1999, told Asia Sentinel about the Huawei resignations. “We were encouraged to voluntarily resign within two weeks. My stock will be kept for six months. If I can get reemployed by the company, then I can get the stock back. Otherwise, I’ll be paid cash.”

Asked about his plans after resigning, the worker said he would apply for the same job although there was no guarantee that he would get it back. He said he would take a vacation. “I’ve been working very hard for eight years after graduation,” he says. “I barely took any vacation during the past eight years. It will be a good chance for me to rest, especially with the compensation I am going to get.”

The 1995 Chinese labor law covers contracts, working hours, wages, safety, child labor, and labor disputes, among other subjects, according to the China Business Review Web site. “The law currently mandates a maximum workweek of 40 hours. Minimum wages are established locally, and wages cannot be deducted or delayed without reason,” China Business Review says. “If employees must work more than 40 hours, overtime pay at fixed rates is mandatory. Workers are guaranteed at least one day off every week. Working conditions are required to be safe and sanitary.

The reality is different, and mandatory unpaid overtime, wage deductions and fees that workers pay just for the privilege of going to work are common. “These payments can prevent workers from leaving jobs where their rights are violated,” says China Business Review. Physical abuse of workers and dangerous working conditions are also common.

Employers used to having their way with the labor force now are concerned about what appears to be renewed determination on the part of the government to enforce the new labor law when it comes into effect. It has been widely reported that multinational companies and others lobbied against provisions of the law, fearing that they may see their vast low-wage, low-rights workforce become more assertive — and protected — under the law.

Firing rules under the new law are expected to be very strict, labor consultant Zuo Xiang Qi told the Beijing Youth Newspaper. He said the law means business in trying to close loopholes that would allow employers to summarily dismiss employees. Zuo added that the only difference between a fixed-term labor contract and an open-ended contract is that the former allows an employer to terminate a contract after the contract expires, but the latter does not allow it without compensation. The open-ended contracts are revolutionary for China’s put-upon factory workers.

When the law was passed last June, Qiu Jie, a labor law expert at People’s University in Beijing, told the New York Times, “This is the biggest change in Chinese labor law in the reform and opening period. It gives legal protection to the vast majority of workers, who had no way to protect their rights under the old system.”