Labor rights in China: Some frequently asked questions
Some of the most frequently asked questions about workers in China include: What legal rights do workers have? How is the law enforced? Is there a right to strike and to organise? Is there collective bargaining in China? What is the role of the official trade union in labour relations?
We answer these questions here by examining the development of labour law in China since the 1990s as well as discussing how these laws and regulations are enforced by local governments, arbitration committees and civil courts; how workers take collective action to defend their rights and interests; the failure of the All-China Federation of Trade Unions to effectively represent workers; and how civil society labour organizations essentially performed the job of the union prior to a massive crackdown in the mid-2010s.
The development of labour law in China
As China moved from a planned economy to a more market-oriented one during the reform era, the government gradually introduced a broad range of legislation to regulate labour relations and stipulate the rights and obligations of both employers and employees. The aim of much of this legislation was to bring China into line with international standards and facilitate the country’s entry into and participation in global economic entities such as the World Trade Organization.
The first two major pieces of legislation were the 1992 Trade Union Law and 1995 Labour Law, which established the fundamental rights of workers to be paid in full and on time, receive overtime payments and paid leave, and, crucially, to be represented by a trade union.
These basic rights were added to in the 2000s with the introduction of a wide-ranging and comprehensive body of legislation covering work safety, work-related injury insurance, employment contracts, workplace discrimination, labour dispute arbitration and mediation, and the role of enterprise trade unions.
By far the most important, and controversial, new law to be implemented during this period was the 2008 Labour Contract Law. The law specifies that workers are entitled to a detailed written employment contract when they are hired and severance pay (based on length of employment) if they are laid off. Prior to the passage of the Labour Contract Law, domestic and international business communities waged an intense lobbying campaign to water down the bill. After the law was implemented, employers exploited every loophole possible to avoid compliance. One such loophole is to hire workers on an agency basis, essentially considering workers as contractors exempt from the provisions of the law, rather than employees who require an employment contract. In fact, many workers were laid off and then immediately rehired on an agency basis after law passed. The failure of employers to abide by the law is further illustrated by the National Bureau of Statistics survey of migrant workers in 2009 which showed that only 42.8 percent of migrant workers had signed a contract with their employer. By 2016, that proportion had dropped to just 35.1 percent. The Labour Contract Law was amended in 2013 in an attempt to fix the loopholes related to the hiring of agency labour, but employers continue to evade their legal responsibilities and lobby the government to relax certain provisions of the law that, they claim, restrict the hiring and firing of employees.
The 2000s represent the high point of labour legislation in China, with at least eight major laws and national regulations coming into effect. There was relatively little new legislation passed in the following decade, although several existing laws were amended (see chart below). The most notable new law was the 2011 Social Insurance Law, which codified and clarified existing regulations on employer-employee obligations related to pensions, unemployment insurance, health insurance, work-related injury insurance, and maternity insurance. As with the Labour Contract Law, however, employers routinely flouted the Social Insurance Law by ignoring or underpaying pension and other insurance contributions.
As the economy slowed down in the 2010s, several senior government officials openly discussed rolling back labour rights in a bid to create a more pro-business legal environment. Indeed, the last significant piece of new legislation during this period, the 2015 Guangdong Enterprise Collective Contracts Regulations, which was intended to give workers in Guangdong the right to collectively bargain, ended up offering workers little new and was largely ignored by all parties.
Administrative and judicial enforcement
As can be seen from the above discussion of new legislation, enforcement of labour law in China generally has been lax. Local government labour bureaus and labour inspectorates are primarily responsible for enforcing labour laws and ensuring that workers’ rights are protected. However, most of these administrative bodies are under-funded, under-staffed, and lack the ability and the will to enforce the law. This is especially the case in smaller, less economically-developed cities. Local governments have generally been more concerned with boosting the local economy and creating a business-friendly environment, rather than with protecting workers’ rights.
During the reform era in China, it could be argued that both the central and local governments gradually abdicated their power and influence in labour relations to private business owners. The lack of legal enforcement of laws and regulations meant that employers essentially had carte blanche to dictate the pay and working conditions of their employees. As such, it has largely been up to the workers themselves to ensure that labour law is enforced, either by taking collective action (see below) or by taking their complaints to arbitration or the courts.
The principal institution in this process is the labour dispute arbitration committee (LDAC). LDACs handle the majority of routine labour disputes in China, as an employment case must first go through this dispute resolution mechanism before being entertained by the civil courts. It is relatively straightforward and inexpensive for most workers to submit a case to the LDAC, however some employees such as civil servants, military personnel and those over the official retirement age are excluded from the process. Arbitration claims must be filed within one year of the incident from which the dispute arose, a requirement which can hinder claims by victims of occupational diseases such as pneumoconiosis, who often do not present symptoms for several years.
The vast majority of disputes accepted by LDACs are related to remuneration, social insurance payments, and contract termination, with a smaller proportion of work-related injury cases. Most cases can be settled reasonably quickly. Article 42 of the Labour Dispute Mediation and Arbitration Law states that: “The arbitral tribunal shall mediate before making an award. Where an agreement is reached after mediation, a statement of mediation shall be prepared by the arbitral tribunal.” As a result, about half the cases that go to LDACs are resolved through mediation, not arbitration as the name suggests. While mediation can speed up the dispute resolution process, it can also lead to workers voluntarily giving up some of their legal entitlements and settling for a compromise ruling. If mediation fails, then the two parties will go arbitration and the tribunal will make a ruling.
China’s LDACs settled a record 1,068,413 cases in 2019, by the highest number since the Labour Dispute Mediation and Arbitration Law was introduced in 2008 (see chart below). Of these cases, 552,584 were settled by mediation and 430,309 by arbitration ruling. The outright win percentage for workers in the LDACs in 2019 was just 32 percent, with 60 percent of cases resulting in a compromise ruling, according to the China Labour Statistical Yearbook.
Number of cases settled by China’s labour dispute arbitration committees (2001-2019)
An appeal of an arbitration ruling is heard in civil court. The case is handled in accordance with civil litigation procedures. In disputes arising from an employer’s decision to terminate an employee, reduce remuneration, or re-calculate length of service, the burden of proof lies with the employer [see the Supreme People’s Court’s 2001 Labour Dispute Interpretation (最高人民法院关于审理劳动争议案件适用法律若干问题的解释)]. The disadvantage for worker plaintiffs is the financial cost and time of court proceedings. Even in basic labour dispute cases, workers will pay legal fees of at least 5,000 yuan. Employers are known to hold up cases by endlessly appealing decisions to a higher court. Further, even if the plaintiff wins the case, there is no guarantee the judgement will be enforced against the employer. Given the huge backlog of cases they have to deal with, courts often urge parties to resolve disputes through mediation rather than with formal judgements. In 2018, however, the deputy head of Beijing’s No. 1 Intermediate Court, Sun Guoming, went one step further and argued that employers should resolve labour disputes through negotiations with workers and the trade union as equal partners so as to avoid going to arbitration or the courts at all.
If a worker suffers from discrimination during the hiring process on the basis of gender, medical condition, disability, ethnicity, etc., this is generally not regarded by the LDACs as a labour dispute, as the two parties have not yet entered into a formal employment relationship. As such, discrimination cases are treated as civil cases that can be heard directly by the courts without first going through LDACs. In addition, a Supreme Court Ruling on 1 January 2019 allows those already in a formal employment relationship to directly file a civil suit for violation of “equal employment rights.” There have been numerous landmark discrimination cases over the last two decades that not only have helped individual plaintiffs, but also have highlighted in the Chinese media the deeply entrenched problem of equal access to employment (See section on Workplace Discrimination for more details).
Both the courts and LDACs are reluctant to take on collective cases and often break claims down by individual plaintiffs. As such, when a group of workers have a collective grievance or set of grievances against their employer, they often have no option but to take collective action outside the legal system in an attempt to seek redress.
Workers’ collective action, strikes and collective bargaining
The first point to note in any discussion of collective action in China is that although the right to strike was removed from the Constitution of the People’s Republic of China in 1982, there is no legal prohibition on workers taking strike action. In fact, there have been numerous headline-grabbing strikes over the last decade, most notably the 2010 Nanhai Honda Strike in which the workers secured a 35 percent (500 yuan per month) pay increase after defying the local trade union; the 2014 Yue Yuen shoe factory strike in Dongguan in which around 40,000 workers walked off the job for two weeks; the 2015 Lide shoe factory strike in which workers secured millions of yuan in unpaid social insurance contributions; and the nationwide strikes organized by tower crane operators and truck drivers in May and June 2018, respectively.
Many strikes have led to ad hoc or spontaneous collective bargaining, in which workers elected their own representatives and devised strategies to force management to come to the negotiating table. Often local government and trade union officials become involved in an attempt to bring about a compromise agreement. The authorities typically pressure both sides to make concessions and resume production as quickly as possible. However, these quick fixes rarely address the underlying causes of the dispute, and, as a result, it is not unusual for another strike to break out six months or a year later.
It is also not uncommon for police to be dispatched to the scene of a strike, but their primary role in these situations is one of containment, ensuring that the protesters do not leave the workplace or in any other way disrupt public order. According to data from CLB’s Strike Map, arrests are only made in about five percent of cases. If workers are detained by police, they are usually released within a few hours, or a few days at most. On the few occasions that strike leaders have been charged, it is with a public order offence such as “gathering a crowd to disturb social order,” rather than with taking part in a strike per se. A more common form of retribution is for strike leaders to be fired by management either during the strike or a few months afterward, in a process known in China as “settling scores after the harvest is gathered” (秋后算帐).
The vast majority of collective protests (around 80 percent) are related to the non-payment of wages, and most are not technically strikes; rather, they are collective actions, taken after workers have been laid off to demand payment of wage and other arrears. The construction industry, which accounts for more than a third of all worker protests in China, is notorious for systematic wage arrears, while business failures in the manufacturing and the service sectors have considerably added to the problem. It is increasingly common for new start-ups in the service industry to expand rapidly, hire new staff, and then run into financial problems and suddenly close down, leaving workers without a job and owed several months’ salary.
The worker protests in these wage arrears cases are primarily designed to publicise their complaints and grievances on social media and force local governments to intervene. Local officials will put pressure on the employer (if they can be located) to pay at least a portion of the wages owed and then persuade the workers to accept the deal. Local governments and trade unions routinely publicise the amount of money recovered for workers, without explaining how they allowed the wages to go unpaid in the first place.
The role of the trade union
All workers in China have the right to form or join a trade union. However, that right is severely curtailed in that all enterprise unions must be affiliated with the one legally-mandated body, the All-China Federation of Trade Unions (ACFTU). Any attempt to establish an independent trade union will be seen by the Chinese Communist Party as a political threat and dealt with accordingly. The only time in the history of the People’s Republic of China that an independent union was established was the short-lived Beijing Workers’ Autonomous Federation in the spring of 1989. The BWAF was declared an illegal organization and disbanded in the wake of the military crackdown in Beijing on 4 June 1989.
The ACFTU is organized according to a hierarchy of local and regional union federations that basically reflects the structure of the Party and government. This is because the ACFTU is classified as a “mass organization” that serves the interests of the Communist Party and local government rather than its members, the workers. In nearly all cases, local trade union offices have to defer to higher level union offices or to local government and Party organizations for guidance.
The grassroots enterprise unions, which form the foundation of the ACFTU hierarchy, are largely under the control of the enterprise management. Enterprise unions are generally established by local trade union officials in consultation with management, rather than the employees. Enterprise unions function more as social welfare organizations rather than genuine trade unions that represent their members’ interests. Union committee activities are usually restricted to handing out gifts on holidays and organizing social functions. Only very occasionally will enterprise trade union leaders support workers in a dispute against management. Probably the best-known example of an enterprise union chairman actually taking a stand was Huang Xingguo, who in 2014 led Walmart employees in the central city of Changde in a month-long campaign for lay-off compensation after the closure of their store.
The failure of the ACFTU to stand with its members has meant that, after four decades of economic reform, the majority of China’s workers have yet to benefit from the country’s so-called “economic miracle,” while a small group of Party and business leaders has become obscenely wealthy. Moreover, this extreme wealth inequality has worsened over the last five years as China’s fast-paced economy slows down and an ever-increasing number of workers are consigned to low-paid, precarious employment with little or no welfare benefits. Even Premier Li Keqiang admitted in a press conference at the end of the 2020 National People’s Congress that, based on official statistics, 600 million people in China still had an average income of less than 1,000 yuan.
The Party is clearly aware of the problem as well as the impact on its own political legitimacy. Indeed, the Party now seems to have accepted that economic growth in and of itself is no longer the answer and that it needs to focus much more on wealth distribution if it is to retain the trust and support of the working class. The Party has devoted vast resources to eradicating absolute poverty in China’s poorest rural regions, but in order to reduce relative poverty in urban areas and achieve its goal of creating a “moderately prosperous society” in time for its one-hundredth anniversary in 2021, the Party needs the ACFTU to contribute as well.
China’s paramount leader, Xi Jinping, has on numerous occasions since 2013 called on the ACFTU to do a better job in helping low-paid workers achieve their “China dream.” In November 2015, he formally launched a trade union reform initiative, designed to shake up the organization and improve the way union officials carry out their work. Specifically, the reform initiative had two main objectives: 1. “eliminate four impediments” to the ACFTU’s work: regimentation, bureaucratisation, elitism, and frivolousness; and 2. “increase three positive attributes” of the organization: political consciousness, progressiveness, and popular legitimacy. In essence, what this jargon means is that the ACFTU must abandon its old bureaucratic ways and focus on concrete measures that could both help workers and restore its own reputation.
The ACFTU has claimed, in an endless stream of statements and speeches, that it has heard the call from the Party leadership. However, it is clear that China’s workers are still far from satisfied with their current pay and conditions, and trade union officials interviewed by CLB admit that they are still constrained by the union’s bureaucratic structure and struggle to effectively organize workers in those sectors that most urgently need the union’s help.
The role of civil society
In the 2000s and early 2010s, there were dozens of civil society labour groups in China. Many were concentrated in the southern province of Guangdong, and they actively supported workers in their demands for better pay and working conditions. These organizations essentially did the work of a real trade union, helping workers involved in collective disputes with employers to formulate their demands, elect bargaining representatives, develop a bargaining strategy, and maintain solidarity among the workforce. They also helped workers utilize the increasingly powerful tools of social media to put pressure on local trade union officials to support workers’ legitimate demands.
CLB has worked with several of these civil society organizations and documented more than a hundred cases of collective bargaining. Some of the best-known examples are listed below.
- The Shenzhen Citizen Watch Factory strike and collective bargaining in late 2011 ended with workers and management agreeing to a deal in which the company would pay 70 percent of the overtime payments in arrears dating back five years.
- The 2011 Hengbao Jewellery Factory dispute was one of the first factory disputes to focus on unpaid social insurance payments and was characterised by the solidarity shown by the workers when their representatives were arrested.
- The long-running dispute at the Gaoya Jewellery Factory in Panyu in 2013 highlighted the organizing power and leadership of women workers.
- The 2014 Guangzhou University Town sanitation workers dispute was one of several successful campaigns to protect the rights and improve the pay and working conditions of sanitation workers in the Pearl River Delta.
- In the 2015 Lide Shoe Factory case, workers forced the company to pay several million yuan in social insurance contributions in arrears.
However, the Lide case was the last real success for civil society labour organizations in Guangdong. In December 2015, the authorities launched a massive crackdown that led to the closure of many influential labour organizations such as the Panyu Workers Service Centre. However, workers continued to organize, and strikes and protests remained a regular feature of working life in southern China. The situation changed again in 2018, when workers at the Jasic Technology factory in Shenzhen attempted to organize a trade union and were joined in their protests by student and Maoist groups from across the country. This led to an even larger government crackdown in which more than 50 activists were detained. The following year, at least a dozen other activists were detained in a sweeping campaign seemingly designed to eradicate the last vestiges of civil society labour groups in Guangdong. Nearly all of these activists were eventually released but they can no longer provide workers with the valuable help and advice that in the past enabled and emboldened workers to defend their rights.
Still, many labour rights activists and small organizations exist across the country, often working in conjunction with local unions and government officials to ensure not only that the existing laws are enforced fairly and that workers have access to justice, but that necessary legal reforms can occur to better protect workers’ rights. And workers across the country continue to raise their voices, staging thousands of strikes each year in various regions and industries demanding fair treatment and rights guaranteed by law.
Most labour-related legislation was passed in the 1990s and 2000s. Although the legal framework purports to guarantee wide-ranging rights, enforcement is wholly inadequate and seeking redress through official mechanisms leaves many worker plaintiffs unsatisfied. Organizing at the enterprise level and attempting to work within the structures of the official trade union have also met varying levels of success. As employers continually exploit their workers, government officials look the other way, and economic inequality only increases in China, workers are left with little recourse. In light of the crackdown on civil society, it is now more essential than ever that the ACFTU step up to the plate and act as a true representative of the labour sector, defending workers’ rights and promoting their interests in all industries across China.