The level of protection provided by Chinese labour law

Diplomarbeit von Sergio M. Moccia

Abstract:

The Thesis „The level of protection provided by Chinese labour law compared to German labour law as a stimuli for western investment in the People’s Republic of China” describes the Chinese Labour Law and traces back the sources of the Chinese Labour Law regulations. In the first section the German Labour Law and some of the most important clauses are explained. In further sections the Chinese Labour Law itself and its coherent development, the main landmarks and the similarities to the German Labour Law, with its Romanist Tradition, are reflected. In particular the situation of the unions and their influence on management polices are named.

In further sections, this thesis displays the current situation in the Chinese corporate world and its relation towards the Chinese Labour Law. With the elaboration of three chosen cases, this thesis highlights the enforcement level and the core aspects of Chinese Labour Law that are frequently violated within Chinese joint-ventures and their partners from abroad, either from Asian and Western developed nations.

In addition to that, this thesis focuses on the situation in Taiwan and Hong Kong in respect to their Labour Law systems and gives a brief overview about their core aspects and its future perspective and likelihood to keep its sovereignty under the increasing influence of China mainland.

One of the main aspects of this thesis is discussed in the sections dealing with the New Chinese Labour Law of 2007 and its upcoming implementation on the 1st of January 2008. Issues concerning the development and core improvements are evaluated and precisely explained. Furthermore, it will be discussed about the ramifications and main changes that are probably to emerge in the near future. This thesis will also shed some light on the reactions of the work force in China and multinationals in general. The fears and hopes that go hand in hand with implementation of the new draft.

Last but not least, this thesis will give proposals and suggestion to German and Western companies how to deal with labour law related issues that are planning to enter this viable and fast growing market. Moreover, this dissertation will give an overview about the main aspects in terms of Chinese Labour Law regulations that should be considered in order to establish a successful business in the People’s Republic of China.

Table of Contents:

I.	Table of Figures
II.	List of Abbreviation
1.	Introduction	1
2.	The German Labour Law	2
2.1	The Contract of employment	2
2.1.1	Probation	3
2.1.2	Termination of employment	3
2.1.2	Extraordinary dismissal	4
2.2	Trade union and employers' association regulation	5
2.2.1	Trade unions	6
2.2.2	Employers' associations	6
2.3	Collective Bargaining and Agreements	6
3.	The Development of the Chinese Labour Law	8
3.1	The Contract employment system and its position in the Labour Code	8
3.2	Difficulties and scant attempts to alleviate the situation	10
3.2.1	Reward based on status rather than performance	10
3.2.2	Skills did not meet the job requirements	11
3.2.3	Disequilibrium of Labour and Supply	12
3.3	The Way to the Contract Employment System	12
3.3.1	The Ministry Notice	13
3.3.2	The Contract Employment Regulations	14
3.4	The Chinese Labour Law from 1994	16
3.4.1	Legal Bases	16
3.4.2	Foreign employees	17
3.4.3	Representative office	18
3.4.4	The justification of a working relation	18
3.4.5	Duration of the working relation	19
3.4.6	Dismissal by the employer	20
3.4.7	Resignation by the employee	23
3.4.8	Compensation	23
3.4.9	Working Time, recuperation days and vacation	25
3.4.10	Wages	28
3.4.11	Illness and accident	29
3.4.12	Non-competition clause	31
3.4.13	Particular protection for female and minor employees	32
3.5	Labour disputes	32
3.6	Unions and Collective agreement	33
3.6.1	Trade Union Law from 1992	33
3.6.2	Collective contracts of employment	34
3.6.3	The Union Law from 2001 and its practical experience	35
3.6.4	Conclusion	38
3.7	The Local Implementation of the Employment Contract system	39
3.7.1	National Objectives vs. Priorities of Local Government	39
3.7.3	The Contract Employment System and its local implementation	40
3.7.4	Conclusion and current situation	44
4.	Cases	45
4.1	Shanghai Otis Elevator Company Ltd.	46
4.2	Li Kai Di Chang shoe manufacturer	50
4.3	Beijing Olympics	52
4.4	Commentary	56
5.	Labour Law in Taiwan	57
5.1	Historical background	57
5.2	Comparisons to Continental China	58
5.3	Future perspective	59
6.	Labour Law in Hong Kong	60
6.1	Historical Background	60
6.2	Current situation	61
6.3	Future Perspective	61
7.	China's New Labour Contract Law	62
7.1	Development	62
7.2	Controversial points of view and the altered regulations	62
7.3	Résumé and Expectations	66
8.	Chinese Labour Law and its implications on companies	68
8.1	Domestic Employees and the Chinese Labour Law	68
8.2	Foreign Employees in China and the Chinese Labour Law	71
8.3	Ramifications on German and FDI enterprises	72
9.	Conclusion	76
III.	References

Text Sample:

Chapter 3., The Development of the Chinese Labour Law:

This section will focus on the Contract Employment System and its implementation in 1995. It is interesting to see how similar the content of the German Labour Code actually is, compared to Chinese one. Later sections will highlight this matter of fact.

However, the creation of a Labour Law Code in China has been a rocky road that went through more than 40 drafts until it came into effect. One of the major supporters of the reformation of the Chinese Labour Law was the ACFTU, the umbrella organization of all unions in China. This state-directed organization has extremely lobbied the central government and has insisted on initiating the Chinese Labour Law from 1994.

Furthermore, the emergence of the particular term „socialist market economy” (Chinese term: shehui zhuyi shichang jingji) which became part of the official lexicon in 1992, at the 14th congress of the Chinese Communist Party (CCP) led to the adoption of a new approach to economic development that triggered changes in the legal system, including the field of labour and employment law. Perhaps the most significant development was in the realm of labour mobility, both for rural and urban populations. Peasants were permitted to seek employment outside of agriculture, beyond the confines of their villages. Urban residents were no longer assigned to jobs in a system of bureaucratic allocation, and thereafter, prevented, by the legal and economic disincentives, from seeking alternative job opportunities.

4. Cases:

This section will discuss the situation in Chinese foreign invested companies and law violations that took place in those companies. This chapter will name the core violations amended by the employers and show, that the Chinese Labour Law has specific regulations that should encounter these grievances.

4.2 Li Kai Di Chang shoe manufacturer:

Plaintiff: work staff / china labour watch; Defendant: Li Kai Di Chang shoe manufacturer. This case deals with a major shoe manufacturer in the south east of China, in the city of Hongyuan. Around 4000 workers are working in this typical Chinese factory. The employees suffered from different king of exploitation for a long time. This included not only the aggressive and irresponsible behaviour of the supervisory board. The major grievances in the Li Kai Factory Number 5, which produces for New Balance (the third largest athletic and leisure shoe producer in the U.S., most of its operations were off shored to China) were the following:

Low wages, below subsistence level 24 RMB / day = 2, 40 Euro / day. The average income in this factory is representative for the majority of manufacturing sites in the whole of China. It has not improved over the last decade A worker protection committee with members appointed by the executives of the factory thus led to a decision-making process in favour for the enterprise policies. The established Union is never independent and does not go along due to its legal definition.

- Talking back to a supervisor will result in the loss of three days’ wages.

- Everyone must do „their duty to keep the place clean and that every day the room is swept and mopped three times, also during the working shift”.

- Worker’s wishing to leave the gated factory compound has to pass the security guards when they return. The guards have the clear order to go through their belongings without taking the employees’ privacy and dignity into account.

- A score of female employees are under aged and therefore not allowed to work.

- The regular working time of eight hours a day is regularly exceeded and not rewarded.

- Gender, Age, Height, and Province of Origin Discrimination.

- Lack of maintenance and food quality supply.

- Non-remuneration of pensions and other benefit rights.

- This listing encounters markedly the New Balance companies’ slogan „In respect to the way we treat our workers, our motto is this: Open, Fair and Just”.