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The Need for Legal Muscle to enforce China's Collective Labour Contracts
In a wide ranging interview with the Henan Business Daily, Chen Shouren, head of the Luoyang Federation of Trade Unions' legal department, candidly admitted that many companies were reluctant to sign collective wage agreements and that the union and local government could not force management to engage in collective consultations with workers.
Even when management did agree to negotiate, Chen said, workers were still at a serious disadvantage because they did not have access to the company books and had to rely on management's productivity and profitability figures. As such, Chen said, unions were unable to negotiate a reasonable and just wage agreement.
Chen hoped the Ministry of Labour's proposed Wages Law would penalize companies that refused worker demands for collective wage consultations. However, other union officials and labour activists have suggested that this legal provision needs to be backed by the reinstatement of the constitutional right to strike. The legal right of workers to withdraw their labour if management refuses to negotiate, they argue, would be far more effective than the threat of administrative sanction alone.
CLB further notes that while the Chinese government sponsored system of collective consolations (jiti xieshang) is a good first step, what is really needed - as demonstrated by Chen's comments - is a system of genuine collective bargaining (jiti tanpan) in which labour and management negotiate, firmly but fairly, on an equal footing. See CLB's research report Breaking the Impasse: Promoting Worker Involvement in the Collective Bargaining and Contracts Process for details.
CLB has translated the Henan Business Daily article below
Collective Wage Consultations in Luoyang runs into a Roadblock
By Lu Yanyan
Wages are not keeping up with inflation; management and unions cannot reach an agreement.
“I’m about to collapse”, says Chen Shouren, the head of the legal department of the Luoyang Federation of Trade Unions, as he removes his glasses and rubs his eyes. Chen is exhausted because since the beginning of the year he has been working around the clock to implement the Luoyang government’s programme of establishing a collective wage consultation system in the city’s enterprises.
“We have been working hard on behalf of trade unions and enterprises to set up a collective wage consultation system, but some enterprises are unwilling to cooperate because they fear that if they introduce such a system, their hands will be tied,” Chen said.
“Although some enterprises have refused to cooperate, nevertheless, there are already some positive signs,” he added. Chen showed us one survey according to which, six months into the programme, the salaries of workers employed in enterprises that had signed a wage agreement had indeed risen.
The data indicated that since last year, staff and workers’ salaries have risen by an average of 10 percent at the Luoyang YTO Group, by 21 percent at CITIC Heavy Machinery Company Ltd., by 18 percent at Luoyang Jianyuan Tooling Manufacture Co., and by 11 percent at Zhonglu Group Luoyang Copper Industry Co., Ltd.
The Luoyang government decided to implement a collective wage consultation system following a study conducted by the Luoyang Federation of Trade Unions which showed that in 2006 the city’s GDP had grown by 15.6 percent and the local government’s fiscal revenues had grown by 34 percent, but workers’ wages had only risen by 11.9 percent. Moreover, 62.6 percent of workers surveyed had been given two or fewer wage raises in the previous six years; 17 percent had not got a single raise in that period.
On 10 December 2007, Ding Hongjun, chairman of the Luoyang Jianyuan Tooling Manufacture Co. trade union, and a number of his colleagues formally asked the management to introduce a collective wage consultation system. As a result of the subsequent negotiations, management agreed to raise its workers’ wages inline with the company’s increased profits. “Since January of this year, workers’ wages in our company have risen by an average of 240 yuan, or about 18 percent. Workers are taking home 1,600 yuan a month,” Ding said.
Afraid that their “hands will be tied”, some enterprises are unwilling to negotiate.
Luoyang’s efforts have been followed with much interest beyond the city. The Henan Provincial Federation of Trade Unions has decided to extend Luoyang’s experiment throughout the province. And the All-China Federation of Trade Unions has completed a study in Luoyang and is preparing to extend the project across China.
However, the collective wage consultation system in Luoyang has now run into a serious obstacle: Some enterprises, afraid that their “hands will be tied,” are refusing to engage in collective wage consultations. From their perspective, collective wage consultation means signing on to wage provisions contained in collective agreements. They are afraid that if wage commitments are put in black and white, workers could use them as legal evidence in labour disputes brought to labour arbitration committees. Enterprises prefer to adjust wages through verbal agreements.
Some employers have had to be virtually dragged to the negotiating table. Moreover, in some cases, collective agreements have been pro forma contracts that failed to take account of the specifics of the enterprise, key issues have been oversimplified during negotiations and workers’ opinions have not been sought.
A Luoyang YTO Power Machinery Co. employee said that although his monthly wage was now 750 yuan, when new healthcare and pension insurance contributions were taken into account, in real terms, his take-home pay remained basically the same: “They’ve just played with the numbers,” he said.
According to a worker at the YTO Casting and Forging Plant, his employer had a curious system of raising wages early in the month and lowering them two weeks later. He was paid twice a month, first on the ninth day of the month and again a fortnight later. The first payment was a pay raise but the second payment was a wage reduction. “Basically, they raise our wages and then turn around and lower them two weeks later. In the end, our monthly take-home pay is always the same.”
Can trade union leaders stand up to their company’s boss?
Once news of the Luoyang Federation of Trade Unions’ collective wage consultation programme emerged, many bloggers and online commentators quickly called into question the ability of trade union leaders to have a real say in the companies they work for. One commented: “A trade union chairman is also in his company’s employ. When has a union official employed and paid by a boss ever stood up to that boss? Union leaders are free to speak and act as long as their boss approves of what they say and do.”
The netizens’ concerns are not without foundation. According to media reports, in 2007 Tang Xiaodong, a trade union leader in a Sino-Japanese joint-venture company in Beijing, was sacked after he tried defend workers’ rights by helping them negotiate a labour contract. After he lost his job, Tang spent almost three years in court fighting for his rights. Qi Xuerui, an associate research fellow at the Institute of Legal and Social Research of the Henan Academy of Social Sciences pointed out that: “Companies have economic power but trade unions and workers are in a position of weakness. They would dearly like to fight for their rights but they’re too afraid to so.” Qi added that at a time when labour is abundant and there are not enough jobs to go around, many job seekers are willing to work for less and are not about to demand wage raises.
Because trade unions are in a position of weakness, they are denied access to confidential information about their company’s operations and financial status. Chen Shouren explains: “The fact that union officials and senior managers have unequal access to operational information can lead to unfortunate results at the negotiating table. When workers don’t have accurate information about the company’s profitability they end up negotiating in the dark.”
Embarrassing institutional weakness “There is no enforceable law”
Not only are trade unions operating in a position of weakness within their companies, but their effort to implement a collective wage consultation system is hampered by an embarrassing institutional weakness. “In Luoyang, the government is leading the effort to introduce a collective wage consultation system and the unions are supposed to promote it,” says Chen. However, the only bargaining chip available to the union presently is to hint that if enterprises refuse to sign wage consultation agreements the union will not select one of their company employees as a municipal-level-or-above model worker – not exactly a potent threat.
As things stands, the only way the Luoyang Federation of Trade Unions can hope to see this project through to completion is to rely on the power and authority of the government. But administrative law enforcement agencies and labour offices also claim there is nothing they can do when companies refuse to sign wage consultation agreements.
An Opinion published by the Luoyang City government states: “Whenever an enterprise has not introduced collective wage consultations or signed or renewed a collective wage contract, the basic-level trade union shall take the initiative to ask the employing unit [i.e. the management of the enterprise] to introduce collective wage consultations. If the employing unit ignores the basic-level trade union’s request, a higher-level trade union shall, in accordance with the law, demand that it make rectifications within a prescribed period of time. If the employing unit fails to comply, the labour department shall investigate and settle the case in accordance with law.”
But as an official in the Wages Section of the Luoyang Municipal Bureau of Labour and Social Security points out, the Labour Law and the Labour Contract Law currently in force do not contain any provisions to penalize enterprises that refuse to implement a collective wage consultation system. There is therefore no enforceable law in such cases.
Collective wage consultation is a commendable aspiration, but to protect workers’ rights a long-term mechanism to increase their wages will have to be established. This is the only way to achieve lasting results.
“The establishment of a collective wage consultation system will definitely require solid legal support,” says Qi Xuerui, who thinks that the provision in China’s Labour Law which states that enterprises “may” engage in consultations on an equal footing is an optional clause.
In other words, companies can engage in collective wage consultations but they also have the right to refuse to do so. Companies can easily use this as an excuse to avoid collective consultation. The existing Minimum Wage Regulations, Regulations on Collective Contracts and Provisional Regulations on Wage Payments are basically non-binding administrative regulations. Chen thinks that the Achilles’ heel of the effort to establish a collective wage consultation system is the lack of binding legislation. If the proposed Wages Law is passed, says Chen, employers will have to agree to collective consultations even if they do not want to, because if they don’t they will be penalized. The outcome will therefore be completely different.
Moreover, no matter how many resources are mobilized to try to put a collective wage consultation system in place, the fact remains that there are currently no institutional restrictions on employers who opt out of the system. In 1998, the All China Federation of Trade Unions issued a Guiding Opinion on Trade Unions’ Participation in Collective Wage Consultations which contains a rule that is supposed to be applied during collective wage negotiations to establish the appropriate ratio between total wage increases and a company’s profit and tax payment increases and other revenues. But this is trade union guideline without much legal force.
“We can’t have two people go through the courtship process with nothing to show for it at the end,” says Chen, adding that without clear and enforceable rules on the issue of wage adjustment, the two sides will just sit around and talk for half a day with no tangible result.
Source: Dongfang network www.eastday.com 16 June 2008