Chinese labor and employment law

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Chinese labor and employment law

  1. 1. 1 CHINESE LABOR AND EMPLOYMENT LAW BY NATHAN JACKSON April 2011 This FAQ is an attempt to answer questions that a foreign layperson may ask aboutChina’s labor and employment laws. China’s labor policy is often a politically charged issue inforeign countries and much misinformation is frequently deployed in political debates. Inaddition to providing an overview China’s labor and employment laws, this FAQ also attemptsto highlight relevant topics that may be unfamiliar to informed laypersons. The focus of thisdocument is on law, but as the FAQ will show, there is often a large gap between law and actualpractice. Where possible, comments are included that provide a practical perspective of China’slabor and employment laws.Why do China’s labor and employment laws matter to me? China’s labor environment matters to you because changes in labor and employment lawsinfluence the prices of goods and services around the globe, the locations in which companiesand individuals choose to invest or move production, and the social stability of China. InNovember 2001, China became a fully admitted member of the World Trade Organization and inrecent years the press has heavily covered China’s growing participation in international trade.China has not only become a major export power, but also an attractive investment target forinternational investors seeking to sell goods and services within China. As China’s share ofworld trade and investment continues to increase, its labor environment will likely attract moreattention from outsiders interested in assessing the country’s economic competitiveness.How large is China’s labor force?
  2. 2. 2 China’s labor force consists of more than 800 million workers, up from 500 million in1980. At least 130 million of these are migrant workers who move from relatively poor ruralareas to urban and industrial centers to work. Many of these migrant workers remit portions oftheir earnings back to family members in their hometown. Until recently, China has typically hadan oversupply of unskilled labor and a shortage of skilled and professional workers. However, inthe past several years, some companies in the major industrial hubs have begun to complainabout labor shortages. As a result, many companies now raise wages 10 percent or more annuallyto retain workers, while others have closed their doors and moved to poorer inland areas orcountries with cheaper labor. Interestingly, salaries for new university graduates have stagnatedbecause of the sharp increase in the number of graduates from China’s quickly expandinguniversity system. While university graduates start their careers with wages comparable to afactory worker, their salaries typically rise much more quickly than those factory workers.How have China’s labor laws changed in recent years? There has been a tremendous change in China’s labor and employment laws in the past35 years. Prior to the early 1980s, nearly all jobs were allocated to citizens through anadministrative bureau. Employees could not choose their employer or terminate theiremployment. Further, regulations set an expectation that the employee would work for the sameemployer for her or his whole working life. Companies in this era could only terminateemployees for gross misconduct. This type of labor market and social safety net was called theIron Rice Bowl because the employer guaranteed job security and benefits to employeesregardless of their productivity or the employer’s profitability. In other words, the benefits couldnot be taken away and were ―iron‖ clad.
  3. 3. 3 In 1983, the government introduced a contract system that attempted to address the lowproductivity of the labor market by replacing the Iron Rice Bowl with short-term labor contracts.At first, state-owned companies resisted this trend and the government succeeded only inminimal reforms. In 1992, the National People’s Congress promulgated a Trade Union Law thatrequired all trade unions to be affiliated with the All-China Federation of Trade Unions(ACFTU). This effectively brought labor unions under greater control of the government. The Labor Law of 1994 liberalized the labor market. The labor law, when combined witheconomic reforms, resulted in more than 40 million lost jobs in government and state-ownedenterprises. As a result of the reforms, the government shuttered inefficient businesses and theformerly economically dominant northeast turned into a rustbelt. Meanwhile, Chineseentrepreneurs and Hong Kong investors transformed the formerly weak southeast province ofGuangdong into the largest center of manufacturing in the world. In 2008, the government introduced a Labor Contract Law that rolled back some of thelaissez-faire approaches to the workforce that the government introduced in the 1990s. This newlaw abolished the system of at-will employment for most full-time employees and requiredemployers to provide employees with written contracts. Since 2008, the government has alsorevisited its policy of tight control over the All-China Federation of Trade Unions (ACFTU).While all unions must still be approved by and affiliated with ACFTU, it appears that thegovernment is allowing the ACFTU greater authority to advocate for the rights of workers than itdid just a few years ago. That said, the government continues to imprison workers who advocatefor the formation of independent trade unions.WAGESDoes China have a minimum wage?
  4. 4. 4 Yes. There are two standards of minimum wage: monthly and hourly. Minimum wagesare set at the provincial and municipal level. The government prohibits employers from reachingan agreement with employees for wages that fall below the local minimum wage standardregardless of whether the employee is still in her or his probation period or internship. Aprobationary period occurs at the beginning of an employment relationship and allows employersto terminate employees without severance pay up to a maximum of six months, but usually justtwo months. The probation period allows the employer to make sure the employee is a good fitwith the employer before being locked into the full term of the employment contract. Provincialand municipal governments frequently adjust statutory minimum wages. For example, manymunicipalities have raised their minimum wages twice in the past year alone.How much is China’s minimum wage? It depends on the locality. For example, Shanghai’s minimum wage for full-timeemployees is RMB 1,120/month, or roughly $165. However, in the poorer inland city ofChongqing, the minimum wage is RMB 870/month, or roughly $130. Of course, purchasingpower differences prevents these figures from being directly comparable with another country’swages. The relative cost of living in China is lower than in many developed countries, but evenwhen wages are adjusted for relative prices they remain much lower than in highly developedcountries.How much do factory workers earn? It depends on the locality, industry, skill level, and a host of other factors. However,several sources keep broad indices of costs for general factory labor across many regions.Although the indices are only rough estimates, they are helpful in gauging wage differentialsacross the country. For example, a skilled manufacturing employee in Beijing can be hired for
  5. 5. 5RMB 3,000/month, or roughly $445. A similar worker in the poorer inland municipality ofChongqing can be hired for RMB 1,900/month, or roughly $280. To illustrate how importantgeographic location is in determining wage rates, the average employee salary in Beijing isnearly three times higher than in the poor inland province of Jiangxi.Do Chinese workers get overtime? They’re supposed to. Under China’s Labor Law, an employer must pay overtimecompensation to any employee who works more than 40 hours per week. As a general rule, anemployer cannot require overtime of more than one hour per day, or three hours per day underspecial circumstances, and no more than 36 hours per month. As in many other countries, whitecollar workers like managers and sales staff are often exempt from the overtime pay rules.The following payment schedule illustrates the overtime pay requirements. Extended Working Hours Minimum Overtime Pay (percent of regular wages)Typical working day 150 percentRest day (min. one per week) (i.e., 200 percentweekend)National holiday 300 percent Many migrant workers desperate to earn quick money agree with the employer to workbeyond the maximum overtime requirements so they can send extra money home to theirfamilies. This type of overtime work is frequently found in industrial hubs and is a contributingcause of recent labor strikes because employees who agree to these arrangements placedownward price pressure on wages and upward pressure on hours. Employers are also able tomaneuver around overtime regulations by applying to the local labor authorities and asking forapproval to use an alternative system of working hours.What are the wage levels for workers who are paid piece-rate?
  6. 6. 6 Piece-rate is a compensation system where the employer pays the employee for each unitproduced or action performed, not on the basis of time. Piece-rate wages are still a feature ofChina’s manufacturers, but over the past decade, the government has developed rules to addressthe exploitation of employees through piece rates. For example, workers were exploited whenemployers paid workers at piece-rate, but then fined them for quality defects, tardiness, or noreason at all. These penalties effectively left workers with wages far below what the employerpromised the workers during the hiring process. The first principle of piece-rate wages is that employers cannot set a work quota so highthat it prevents an employee from completing the work within an eight-hour day or an average40-hour week. Second, the employer must set piece-rates that reflect the amount of worknormally accomplished in a forty-hour week. For example, in the industrial hub of Guangdongprovince, for an employer’s piece-rate to be valid, more than 70 percent of employees must beable to achieve the work quota within the legal working hours.SAFETYHow many workers are injured on the job each year? Despite many safety regulations, China’s workplace safety record is still extremely poor.According to the State Administration of Work Safety, more than 83,000 workers died in workaccidents in 2009, or roughly one out of every 10,000 workers. Of these, more than 2,000 of thedead were coal miners. In 2006, government statistics placed the number of workplace injuries at625,000. And in the manufacturing hub of Guangdong province, more than 40,000 fingers aresevered each year. The majority of injured workers are migrant workers and the most frequentcauses of injuries are carelessness and fatigue. Both of these causes persist because ofsubstandard job training and overly long work hours on repetitious tasks.
  7. 7. 7Does China have a Workers’ Compensation system? Yes. Each province in China has its own Work-Related Injury Insurance Regulations thatrequire employers to pay the medical expenses of injuries, disability, and occupational diseases.The regulations cover all companies, including unregistered companies and those that illegallyavoid paying the premiums. The insurance fund is financed through employer-paid premiumsthat the government determines by gauging the dangerousness of the workplace. For example, anemployer with low risk work like accounting pays 0.5 percent of total payroll expenses into theinsurance fund, while an employer with high risk work like shipbuilding pays 2 percent of totalpayroll into the fund. The law prohibits employers and employees from contractually opting out of the Work-Related Injury Insurance systems. While coverage of employees has continued to increase, manyemployees are unfamiliar with this worker’s compensation program and provincial level taxationdepartments continue to under-enforce it. Similarly, employers continue to underfund theinsurance scheme by understating payroll, hiring employees without contracts, and paying wagesin cash.What kind of safety regulations exist for Chinese workers? China has a large patchwork of safety regulations, but workplace safety is still very badby the standards of highly developed countries. The Labor Law requires employers to informemployees of occupational hazards during the hiring process. The law also requires thatemployers provide workers with safe and hygienic working conditions. The Safe Production lawrequires some large manufacturers to establish full-time safety supervisors and training foremployees. Other important safety regulations include the Occupational Diseases Law and theAdministrative Penalties for the Violation of Production Safety Laws.
  8. 8. 8What are the penalties for safety violations? It varies. First, the onus is largely on employees to report safety violations to theauthorities. Employees are allowed to refuse to perform risky work and they have the right toresign summarily when the employer gives them an order to do unsafe work. In such casesemployers must pay the employee severance in accordance with the Labor Contract Law. Formany workers, especially migrant workers, this job protection is still insufficient to encouragethem to report safety violations. The civil courts impose punishments like warnings, fines, andworkplace closures on employers that violate health and safety regulations.How much compensation do employees receive for workplace injuries? The Work-Related Injury Insurance Regulations contain a disability scale that determinesthe amount to be paid to the injured worker. For example, if a worker loses an eye in a workplaceaccident, the employer must retain the labor contract with the injured worker, even if the workeris unable to perform her or his job. As compensation for the injury, the worker will receive alump sum equal to a portion of the national average wage for the type of work and an ongoingdisability allowance equivalent to a portion of the average monthly wage. In 2011, the government released a new Work-Related Injury Insurance Regulation thateliminates some of the gaps in injury payments between poor and wealthy regions of China.Under the previous regulation it could take an injured employee months or years to finalize asettlement, but under the new regulation the authorities are to reach a decision on payment withinfifteen days of accepting the injured employee’s application for benefits. In practice though, problems continue to persist in the payment of injured workers. Thelaw requires employers to pay employees while they are in the hospital recovering from workinjuries, but in one survey, only 33 percent of injured workers received their salary while in the
  9. 9. 9hospital. To receive benefits, employees must confirm their employment relationship with thecompany at which they were injured. Because employers in dangerous industries often ignore theLabor Contract Law by not providing their employees with contracts, it is challenging for anemployee to prove that she or he is covered under the Work-Related Injury InsuranceRegulations. Further, the new regulation adds a provision that prevents employees fromcollecting benefits if she or he is the primary cause of the accident. While this may seem logical,the most common workplace injuries are caused by distraction and fatigue, both of which aredifficult to investigate because their causes can often be blamed on both the employer andemployee.What kind of laws does China have against child labor? China has several different laws to protect against the labor exploitation of minors. Underthe Child Labor Regulations, employers are not to recruit, employ, or facilitate the employmentof children under the age of sixteen. Exceptions exist for child entertainers, athletes, orvocational training, but in these cases employers must ensure the health of children. These newregulations also remove exceptions that allowed children to engage in labor for the family andloopholes that previously allowed local authorities in poor areas to allow certain forms of childlabor. Employees between the ages of sixteen and eighteen are classified as underageemployees and may not engage in mining, unhealthy or hazardous work, or highly labor-intensive work. Employers of underage workers must arrange to have these workers receiveregular physical examinations. Despite the regulations that prohibit employment of children under the age of sixteen,exploitation of child workers persists in China, though the situation has dramatically improved
  10. 10. 10from even a decade ago. Both employers and child workers desperate to earn a meager livingsometimes ignore the regulations. In 2007, the authorities ended one of the worst documentedcases of child labor abuse after 500 or more children and mentally disabled adults werediscovered working in the brick kilns in Shanxi province. Major lapses like these suggest thatChina’s child labor problems stem from poor enforcement, not a lack of regulation.UNIONSCan Chinese workers unionize? Yes. Establishing a union is easy— there is no need for employee balloting or employercounter-campaigns. To establish a union, 25 workers simply join the union, and the employerwill usually be required to accept the request. However, unions in China differ greatly from theircounterparts in many other countries. First, the primary function of unions is to avoid laborunrest, not to advocate for the interests of workers. Second, while many unions exist in China, allunions must maintain an affiliation with the All-China Federation of Trade Unions (ACFTU). The union discourages rank-and-file employees from airing grievances or striking. Somelabor experts have described Chinese unions as bearing a closer relationship to a European workcouncil than what is commonly called a union. This comparison is apt because in a work councilcountry, a national labor organization reaches agreements with employers at a national levelwhile the work council is just a local component of a national labor organization. In short, thenational labor organization largely shapes the local work council’s efforts. Unions in China maybest be described as intermediaries between workers and management who do most of their workby negotiating behind closed doors.Who runs the unions?
  11. 11. 11 It depends. Under China’s Labor Union Law, labor unions may only be established byworkers voluntarily. However, unions in China are mainly set up by employers, often to preemptorganization by workers. This type of organization is called a company union and they are oftenprohibited in developed countries because they prevent the workers from organizingindependently and choosing their own advocates. In China, union officials are often members ofmanagement and they are directly paid by the company, not by workers. In some instances,employees are able to administer their own union, though they may only negotiate with theemployer under the watch of the local or national union.Do Chinese workers collectively bargain? Yes. In 2006, the ACFTU negotiated collective agreements covering more than 110million workers. However, the unions that conduct collective bargaining are often not in anadversarial relationship with management. Rather, the union acts as an intermediary who seeksto maintain both the profitability of the company and prevent worker unrest. Union officials havebroader considerations than just the interests of workers. Unions must spread their effortsbetween advocating for workers, maintaining a positive economic environment for employers,and preventing industrial instability that could threaten broader economic policy. As a matter of social policy, the government is now encouraging workers to engage incollective bargaining. The Shenzhen Human Resources and Social Security Bureau andShenzhen All-China Federation of Trade Unions recently announced that they will target 120large enterprises for collective bargaining with the hope that once industry-leading companiescollectively bargain, the practice will spread throughout the industries. The government isadopting this approach in the hope that it will address the growing income inequality gap bypressuring companies to use their profits to pay workers higher wages. However, even though
  12. 12. 12collective bargaining has surged in recent years, collective contracts frequently ensure only legalminimum labor standards and do little to improve employee wages or benefits.How are union leaders chosen? While companies frequently set up a union, the local branch of the labor union typicallyappoints the workers’ representatives. Usually this means that the chair of the local trade unionwill be the workers’ chief representative. In instances where the negotiating representative is notassigned by the trade union, the representatives are chosen by democratic vote from theemployees.How do Chinese workers and management settle disputes? The law requires disputing employers and employees to work with each other throughmediation and arbitration committees. At the outbreak of a dispute, workers and management arefirst required to consult with each other. Only after consultation fails can the parties seekmediation. After mediation, the parties enter an arbitration committee. If this still fails to resolvethe dispute, the workers or the employer can bring the dispute before a judge. In 1996, China’s arbitration committees handled almost 48,000 cases. By 2008, and afterpassage of the Labor Contract Law and the Labor Dispute and Mediation Law, the number ofcases reached 693,000. Resolving disputes peacefully to ensure industrial stability is a toppriority of the government and labor law commentators largely give positive reviews to thearbitration committees.BENEFITSHow much holiday and annual leave do Chinese workers receive? Employees with between one and ten years of work experience are to receive a minimumof five days annual leave per year. Employees with between ten and twenty years of work
  13. 13. 13experience receive a minimum of ten days per year. For more than twenty years of workexperience, the employee receives a minimum of fifteen days per year. These laws apply to allemployees, including managers. Chinese workers receive many more days of holiday than in the U.S. Each yearemployees receive eleven days of national holiday, and women receive an extra half-day forWomen’s Day. In addition, employers traditionally rearrange work schedules so that employeescan receive seven-day holidays during Spring Festival and National Day. In return, theemployees work during the following weekend to make up for the additional days of holiday.Each year the week-long break during Spring Festival leads to the largest human migration, asmore than 150 million workers leave their jobs to visit family and friends in their hometowns.During this time nearly all businesses close.Do Chinese workers have a national retirement system? Yes. Employers and employees must contribute to a basic pension insurance fund that isadministered at the provincial or municipal level. Some cities have also set up supplementarypension insurance funds that employees have the option to join. Typically, employers contributeroughly 20 percent of total wages and employees typically contribute roughly 8 percent of wages.It should be noted that most pension amounts are insufficient to support retirees. For this reason,the government offers and encourages workers to enroll in supplemental retirement plans. The general retirement age for men is 60 and for women it is 55. Employees are notallowed to make early withdrawals from their pension accounts, but the accounts aretransferrable when the employee changes employers or moves to a new city. Employercontributions are subject to strong enforcement and employer defaults can be subject to verylarge fines. When an employer defaults on pension payments, the local government is permitted
  14. 14. 14to garnish the payments from the employer’s property. This is typically done through the largelystate-run banking system.Do Chinese workers receive basic medical insurance? Yes. A law passed in late 1998 requires most employers to participate in the nationalbasic medical insurance system. Under the system, employers contribute roughly 6 percent oftotal staff payroll, and employees contribute 2 percent of their individual wages to a pooledinsurance fund and employee personal expense accounts. The employee’s contribution is placedin his or her own personal medical expense account. The employer’s contribution is split intotwo portions: 30 percent of the employer’s contribution is placed in the employee’s personalmedical expense account and the remaining 70 percent of the employer’s contribution goes to thepooled fund. Supplemental medical insurance is also common among white collar workers.Do Chinese workers receive maternity leave? Yes. Female employees are entitled to a minimum of 90 days of maternity leave.Employers are prohibited from discharging or discriminating against women because ofpregnancy or status as mothers. Employers may not subject pregnant women to overtime orhazardous work. China also has a maternity insurance fund that compensates a woman for anylost wages during maternity leave. The insurance fund is financed by employers that contributeroughly one percent of payroll expenses. Men are not covered under the maternity leaveprovisions, although most employers allow men several days off following the birth of a child.Do Chinese workers receive unemployment insurance? Some do. The current unemployment regulations only cover urban residents with aproper hukou, or household registration. This means that for a worker to receive unemploymentinsurance payments, she or he must be working in her or his place of official registration. To
  15. 15. 15receive unemployment insurance, workers must fall within a working age range, be able to work,and register with the government. These criteria filter the number of workers eligible forunemployment insurance down to 120 million out of a total workforce of 800 million people. Like other national insurance schemes, the unemployment insurance system is financedby employers who must pay two percent of payroll. Additionally, employees must contribute onepercent of their wages to the fund. To receive unemployment benefits, the worker must beregistered for benefits, have paid premiums for at least one year, have involuntarily lostemployment, and be actively seeking work.Do Chinese workers have other benefits? Yes. Local governments in urban areas typically operate housing funds. Under theseprograms, the employer and employee contribute an amount each month to a fund dedicated toassisting employees in buying, refurbishing, or renting a home. The accounts are popular withworkers who are attempting to save for housing, as house prices have continued to skyrocket. Ifthe employees do not use the funds in their account for housing, they can only remove the fundsfor retirement, a permanent move overseas, or several other scenarios.CONTRACTSDo Chinese workers have employment contracts? The 2008 Labor Contract Law requires employers to provide full-time employees withwritten contracts that contain the term of employment, job description, place of work, workinghours, rest and leave periods, wages, social insurance, labor protections, and description ofworking conditions. Part-time employees must have at least an oral contract. Before the LaborContract Law of 2008 went into effect, it was estimated that 40 percent of full-time workers didnot have written contracts. The Labor Contract Law has been extremely successful in increasing
  16. 16. 16the number of workers covered by written contracts. The government hopes that writtencontracts will reduce the number of disputes between employers and employees and provideemployees with employer assurances that can be backed by contract law. That said, it is stillcommon for many workers, particularly migrant workers, to work without labor contracts.Can Chinese employers use at-will employment contracts? Not anymore. The at-will employment doctrine allows both the employer and employeeto terminate their employment contract for any reason or no reason at all. Under the LaborContract Law, employers may no longer terminate full-time employees’ contracts at will.Employers may only terminate at-will during the probation period between one to six months atthe beginning of the contract. Likewise, a full-time employee must provide her or his employerwith 30 days notice before resigning from the company. The employer can unilaterally terminatean employment contract, but only in cases where the employee "seriously breaches theEmployers rules and regulations." In other words, a serious breach would require a violationequal to dereliction of duty or graft. Under the Labor Contract Law, an employer cannot terminate an employee forincompetence alone. In an employee is incompetent, the employer must re-assign the employeeor provide further training before terminating the contract. To terminate an employmentrelationship without cause, both parties must reach a severance agreement by negotiation. Aminimum severance in cases of termination for cause is calculated as roughly one month ofsalary for each year of service. An employer may also have to pay severance to an employee atthe end of an employment contract. If an employer does not offer the employee a new contractwith equal or better terms, the employee is entitled to her or his standard severance payment.How does an employer fire an employee in China?
  17. 17. 17 The process can be quite complex depending on unionization or the status of the worker.If the company has a union, the union must be notified before the employer can terminate theemployee’s employment contract. The labor union is entitled to respond, and if the labor uniondisagrees with the termination, the employer must consider the response and provide the unionwith a written notification of how it will respond to the disagreement. Disagreements betweenthe employer and union are settled by negotiation. Employers are also prohibited from firing workers who have been exposed tooccupational disease hazards before being checked by medical staff. Employers may not fireinjured workers during their period of medical care, those who are pregnant, ill, or nursing, andthose who are within five years of retirement.How do employees quit their jobs? Employees can quit by resigning unilaterally, by reaching a mutual agreement with theemployer, or by reaching the end of their labor contract. Under the Labor Contract Law,employees must give 30 days’ notice to the employer before resigning unilaterally. However, theemployee may immediately resign if the employer has abused the employee, failed to pay wagesor social insurance on time, or compelled the employee to perform dangerous tasks.Can employers have employees sign non-compete or confidentiality agreements? A non-compete clause limits the ability of employees to compete with their formeremployers. Chinese courts allow non-compete agreements, but the courts treat non-competeagreements with suspicion and require employers to compensate former employees if they wishto exercise the non-compete contract provisions. The 1994 Labor Law allowed businesses toinclude provisions in contracts that prevent key employees from taking business secrets withthem after they leave the company. By 2006, these provisions could only be applied to directors
  18. 18. 18and senior management. In 2008, the Labor Contract Law expanded the ability of employers touse contract law to protect trade secrets and intellectual property. A non-compete agreementbinds only senior management, senior technicians, and key personnel with confidentialityobligations. Employers may only enforce non-compete agreements for a maximum of two years andduring that time they must continue to compensate a former employee to maintain the agreement.The amount of money to be paid to maintain the non-compete or confidentiality provisions isfixed in a contract. Courts have fined employees for failing to abide by non-compete agreements,but only in small amounts. However, courts have given jail time and fines of nearly $1 million toemployees who breach confidentiality clauses and cause serious damage to their employers.Regardless of the regulations, employers, particularly among technology companies, complainthat employees steal their intellectual property and trade secrets and then take that knowledge tocompetitors or establish their own companies.ENFORCEMENTWho enforces labor and employment laws? Health and safety regulations are enforced by the State Council’s Work SafetyCommission. However, the Commission has many other functions that dilute its ability to be aneffective enforcement authority. As a result, enforcement is often left to local safety boards thatlack training or independence from government officials whose job it is to attract investment.Because the central government rates and promotes provincial and local leaders on their abilityto grow the local economy, there is a conflict of interest in that these same authorities are left tooversee the enforcement of safety laws. Wage and hour violations are also in most casesenforced by local government administrations.
  19. 19. 19Are they frequently enforced? It is difficult to quantify, but commentators agree that the laws are increasingly enforced.First, employees have been bypassing their unions and taking their disputes to court in increasingfrequency. After the Labor Contract Law of 2008 was passed, the number of labor disputes incourt jumped by more than 90 percent over the previous year. In some developed cities, thenumber of labor-related court hearings tripled. Further, the government has gradually allowed theACFTU greater leeway to intervene on behalf of worker interests. That said, the authorities tasked with enforcing labor and employment laws are frequentlyunderstaffed and undertrained to adequately enforce China’s labor laws. Further, China’s courtsare not independent and equal branches of government. Instead they are responsible to theNational People’s Congress, the same body that decides economic policy. Again, this issignificant because there is a conflict of interest in that the National People’s Congress canattempt to maintain economic growth by preventing courts from taking an aggressive stance inenforcing labor laws. China’s legal system does not treat court decisions as precedents that arebinding on lower-level courts. This adds to the struggle of the Supreme People’s Court toimprove enforcement of labor laws at the local level.EQUALITYDoes China have laws against workplace sexual harassment and gender discrimination? Yes to both. The laws against sexual harassment were passed in 2005 and have seenincreased prosecution in courts. Gender is a protected status under the Labor Law. The lawprovides that women cannot be denied employment by reason of gender. Nor can women havetheir employment standards raised above those for men except in the most physically demanding
  20. 20. 20work conditions. The gender provisions do not say anything on the status of transgenderindividuals.Does China have equal pay for equal work laws? Yes. Under the Labor Law, there are three tests used to determine if an employer isproviding employees with equal pay for equal work: 1. Equal pay for employees holding the same position with the same work assignment; 2. Equal pay for employees holding the same position with similar expectations of work volume; or, 3. Equal pay where the same working volume achieves the same performance.Employees may bring a civil claim against their employer if none of these three tests are met. Ifthe employer meets even one test, it has satisfied the requirements of the law.MIGRANT WORKERSWhy do so many workers migrate to cities to find work? Several reasons. Urban companies pay better wages and provide workers with betterworking conditions because there is more competition among employers. Migrant workersbecame a prominent feature of China’s labor market in the 1980s after economic liberalizationled to tremendous growth in some regions while others remained dominated by agriculture andresource extraction. Since that time, the Chinese government has allowed workers greaterfreedom to move throughout the country to find work. As a result of the changes, China hasexperienced history’s quickest rural to urban internal migration. In 1978, only 18 percent of thepopulation lived in urban areas. Currently, 46 percent of China’s population lives in urban areas.
  21. 21. 21Who are the migrant workers? Of China’s more than 130 million migrant workers, seventy percent are between the agesof fifteen and thirty-five. China’s last census showed that in the manufacturing province ofGuangdong, more than 60 percent of factory migrant workers were female. In Shenzhen, thisnumber is 70 percent. The construction trades are dominated by men. Most migrant workerscome from relatively poor rural areas. Sixty-five percent of migrant workers stay within theirprovince to find work, while the rest typically move to industrial hubs near the coast.Why do workers often live in factory dorms? Efficiency. Factories often include dormitories for workers to live in as part of theircompensation package. These factories also typically provide a canteen at which the workers eattheir meals for a small fee, often between 30 to 50 cents per meal. Workers usually share a smalldormitory room with one or more other workers. Because factories are often located far from citycenter, there are few acceptably-priced living quarters nearby. Living in the dorms saves workersmoney and reduces commute time while giving the company extra production flexibility inhaving labor on-site at all times. A secondary benefit for employers is that because workers relyon their employer for housing, the workers may be less inclined to argue with management orseek other jobs.Why don’t migrant workers move their families to where they work? Some do, but most realistically cannot for combination of reasons. First, the travel andliving expenses would be too high for most migrant workers to bring their families with them.Second, China’s hukou or household registration system, prevents migrant workers fromobtaining residential status in the city where they work. In other words, a worker’s residentialstatus is set at the place she or he came from and the worker cannot change the status easily.
  22. 22. 22Without residential status in the cities where they work, migrant workers cannot receive socialbenefits like unemployment insurance payments or schooling for children. Workers who cannotchange their residential status and benefits are more likely to be victims of labor exploitation,discrimination, and abuse.Why doesn’t China allow migrant workers to permanently move themselves and their families tocities? This is a bit complex. First, many migrant workers and their families are able to move tourban areas without changing their registration location. There are no borders to stop themigration and many migrants can find low wage work legally and relatively easily. The Chinesegovernment uses the registration system to slow the already massive migration from rural tourban areas in an effort to preserve social stability. The government’s fear is that sudden influxesof rural families to the cities will lead to greater unemployment, lower wages, and ultimatelyviolent frustration among poor workers. Further, by not allowing workers to change theirregistration easily, the authorities ensure that most migrant workers will send a portion of theirearnings home, hopefully spurring economic development in poor regions.Do migrant workers receive the same treatment as local workers? China’s Employment Protection Law prohibits employers from discriminating againstmigrant workers and states that migrants are entitled to the same labor rights as local workers.However, migrant workers are more likely to experience unpaid wages and poor workingconditions. According to one survey, more than 70 percent of China’s migrant workers wereowed some form of back pay by their employers. Migrant workers often work without contractsdespite the new Labor Contract Law and migrant workers are often unaware of their legal rights
  23. 23. 23despite the efforts of some labor lawyers. As a result, employers disproportionately assignmigrant workers to dangerous jobs with low pay.RECENT LABOR NEWSWhat caused the outburst of labor strikes in China in the summer of 2010? Did the workersreceive any benefit from their strikes? Workers in China do not have the right to organize independently and strike. However, inthe summer of 2010, workers at several factories in Guangdong province organizedindependently and went on strike for better wages and working conditions. This is significantbecause although the workers did not have the right to take such actions, the government sidedwith the employees and allowed their organization and strike to continue. The strikes of thesummer of 2010 were a break with previous labor unrest because until that point, most labordisputes were settled without strikes and were not covered in the media. Ultimately, the strikecontinued without an intervention by the ACFTU and the workers won wage increases of 24-34percent.What was the result of the 2010 labor strikes? Why are they still mentioned in newspapers? Several other events occurred during the summer of 2010 that pressed the government toalter labor policy. First, after the successful independent strike early in the summer, strikesspread to other nearby factories. Second, a string of worker suicides at the contract electronicsmanufacturer Foxconn led to intense international media coverage. As a result of theembarrassment from the international coverage of worker strikes, Foxconn raised wages by 30percent for tens of thousands of its workers. After these events, the government then intervenedby significantly raising minimum wages in many of the major industrial centers of the country.As an example of the scramble to meet worker expectations, the Beijing city government raised
  24. 24. 24its minimum wage twice in a six- month period. In March of 2011, the southern manufacturinghub of Shenzhen announced it will raise its minimum wage by 20 percent. This will beShenzhen’s eighteenth minimum wage rise since 1992.CONCLUSION China’s economy has achieved tremendous growth over the past 30 years and overallworking conditions have improved at a similar rate. Fewer workers are dying on the job eachyear, wages continue to rise, and more and more of the country is able to take part in economicactivity. China has also promulgated a tremendous amount of legislation that is modeled on laborand employment law of many developed countries. In fact, in comparison to the U.S.’s labor andemployment laws, China’s law appear much more progressive. However, promulgating laws ismuch simpler than creating governance structures to enforce them. China’s labor lawenforcement record is spotty and depends greatly on the region, industry, or individual case athand. This gap between law and enforcement is a theme that has dogged China for centuries.There are signs that this situation has improved in recent years, but it remains to be seen howlong it will take to standardize enforcement across the country.
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  26. 26. 26HILLARY K. JOSEPHS, LABOR LAW IN CHINA (2003).INTERNATIONAL LABOUR ORGANIZATION, THE KEY INDICATOR OF THE LABOUR MARKET (KILM),http://kilm.ilo.org/KILMnetBeta/default2.asp.INTERNATIONAL LABOR RIGHTS FORUM, MINIMUM WAGE STANDARDS IN MAJOR CHINESEINDUSTRIAL CITIES (2010) http://www.laborrights.org/sites/default/files/publications-and-resources/Minimum%20Wage%20Standards%20in%20Major%20Chinese%20Industrial%20Cities.pdf.Henry Mao and Alex Lin, Revision of Work-Related Injury Insurance Regulation, CHINA L. ANDPRAC., Feb. 2011.Jamil Anderlini, Beijing City to Raise Minimum Wage 21%, FIN. TIMES, Dec. 28, 2010.Jane Lai, City to Lift Minimum Wage by 15%, SHENZHEN DAILY, Jan. 26, 2011.Jonathan Adams, Chinese Union: Interview with Auret van Heerden of the Fair LaborAssociation, NEWSWEEK, Feb. 14, 2008.Kathrin Hille, Young Chinese Workers on Strike, FIN. TIMES, July 16, 2010.Labor Law of the People’s Republic of China (中华人民共和国劳动合同法) (1995) (China).Law of the People’s Republic of China on Employment Contracts (中华人民共和国劳动合同法)(2008) (China).Law of the People’s Republic of China on Safe Production (中华人民共和国安全生产) (2002)(China).Law of the People’s Republic of China on the Prevention and Treatment of OccupationalDiseases (中华人民共和国职业病防治法) (2002) (China).Mark W. Frazier, State-sector Shrinkage and Workforce Reduction in China, EUROPEAN J. OFPOL. ECON., Vol. 22 (2006).NATIONAL BUREAU OF STATISTICS, CHINA STATISTICAL YEARBOOK 2009 (2010).PETER SHEN, AMERICAN INDUSTRIAL HYGIENE ASSOCIATION, INDUSTRIAL HYGIENE PRACTICE INCHINA – AN OVERVIEW (2007), http://www.aiha.org/aihce07/handouts/p0120shen.pdf.Regulations of the People’s Republic of China Concerning the Handling of EmploymentDisputes in Enterprises (中华人民共和国企业劳动争议处理条例) (1993) (China).Regulations on Work-related Injury Insurance (中华人民共和国国务院令) (2011) (China).
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