China Labor Contract Law: Implementation Concerns

To:Primary Contacts, WRC Affiliate Colleges and Universities
From:Scott Nova
Date:December 20, 2007
Re:China Labor Contract Law: Implementation Concerns

Attachment: WRC letter re China Labor Contract Law Implementation Concerns

I wanted to share with you a letter that the WRC sent earlier this month to all major university licensees sourcing from China. The communication, which is attached, concerns China’s new Labor Contract Law. You will probably recall that we reported to you earlier this year, when the law was still in draft form, regarding the disturbing role played by some U.S. and European businesses in opposing some of its key elements. After three rounds of drafts and substantial public comment and subsequent revisions by the Chinese government, the final version of the law was passed in late June and will go into effect on January 1, 2008.

As we have reported, the primary purpose of the law is to increase the rate at which Chinese workers are provided with employment contracts. Without contracts, workers can easily be denied even the limited rights and benefits provided by Chinese law, including payment of the minimum wage, protection from arbitrary dismissal, and treatment and compensation for workplace injuries. While some elements of the initial draft were weakened or removed in the final version, basic mechanisms for encouraging employers to provide contracts to workers survived, including fines for non-compliance and provisions that automatically impose a permanent contract if one is not provided within a set timeframe. The law also contains other related protections, including provisions limiting the length of probationary periods (during which employees are exempt from certain legal protections); providing protection from dismissal for workers who are pregnant, injured, or nearing retirement age, among other protected categories; providing formal employment status for workers hired through contract labor agencies; restricting employers’ ability to require workers to pay out of their own pockets for mandatory job training; requiring reinstatement or severance pay for workers who are terminated without cause; and mandating particularly strong protections, in the form of permanent (as opposed to fixed-duration) contracts, for workers with more than ten years’ seniority or who have completed at least two fixed-term contracts with the same employer. The law also speaks, marginally, to collective bargaining, requiring consultation with union or other worker representatives when the employer wishes to change a work rule or lay off a substantial number of employees (but not requiring negotiation, as in the original draft). The provision in the original draft protecting worker representatives from dismissal during bargaining has, very unfortunately, been removed. Nonetheless, despite the weakening or removal of some key provisions, the law represents a step towards improving worker protections in China.

Unfortunately, there have been some worrisome developments related to the pending implementation of the law, including acts of violence (of unknown authorship) against labor rights advocates who have worked to educate workers about their rights under the new law; proposed labor contracts that would restrict key worker rights in violation of the intent of the law; and mass terminations of workers with substantial seniority – apparently as a means of avoiding having to provide permanent contracts to these workers after the law goes into effect. The attached letter discusses each of these issues in greater detail and urges licensees to communicate with their Chinese suppliers and the Chinese government to encourage faithful enforcement of the law.

The licensee response to date has been limited. We are following up with key licensees and we will update you.

Please feel free to contact me if you have any questions or thoughts about this matter. I hope everyone has a safe and enjoyable holiday.

Scott Nova
Worker Rights Consortium
5 Thomas Circle NW
Washington DC 20005
ph 202 387 4884
fax 202 387 3292
[email protected]