February 4, 2009 / 1:38 PM / in 9 years

Chinese labor laws buckle as economy darkens

SHENZHEN, China (Reuters) - As China’s economic storm clouds darken and more firms face bankruptcy, factory workers such as Xiang Yongheng have seen their confidence badly shaken in authorities who are supposed to protect their labor rights.

<p>Twenty-five-year-old Xiang Yongheng poses beside his hanging shirt inside a four-metre room with a monthly rent of $12 in Shenzhen's Longgang district, Guangzhou province, southern China January 23, 2009. REUTERS/Bobby Yip</p>

Beaten by thugs last week after demanding three months of unpaid wages from his bosses at the “Yi Fan” food processing factory in Shenzhen’s Longgang district, Xiang appealed to the local labor bureau and police for help, but to no avail.

“They just said we can’t help you. The authorities are trying to suppress my case, I even took evidence to them but they ignored it and just told me to go away,” said the 25-year-old.

The enactment of the labor contract law last year marked a new milestone in the push to safeguard workers’ rights -- particularly the 130 million or so migrant workers powering China’s export engine -- making it tougher for bosses to fire staff, while boosting social security and severance payouts.

While factory owners decried the laws as a crippling cost burden, workers hailed the new legislation -- which unleashed a flood of arbitration and labor dispute cases in migrant-heavy manufacturing hubs such as Guangdong’s Pearl River Delta.

Now though, Xiang and many others are becoming disillusioned by officials who turn a blind eye to routine violations in order to ease the burden on stricken businesses during the downturn.

TURNING A BLIND EYE

“From what I’ve seen, workers’ justice hasn’t changed for the better. Like what’s happening here, we don’t sign contracts, nor are things settled using the labor contract law,” Xiang said.

The growing anecdotal evidence of the strains on China’s labor laws have been increasingly voiced of late, highlighting the difficult task faced by China’s leaders in balancing economic growth and social stability during the downturn.

“The global economic crisis threatens to derail much of the progress made by China’s workers over the last few years,” said labor rights group China Labor Bulletin in a recent editorial.

The Dagongzhe Migrant Workers Rights Center in the southern boomtown of Shenzhen has also voiced concerns at pervasive “tricks” used by employers to circumvent the new laws.

These include reduced overtime pay and using doctored contracts that were either blank, incomplete or written in English to confuse and limit possible legal liabilities.

In a survey of 320 workers by Dagongzhe, 79 percent said they were “dissatisfied” with the situation in factories, while nearly a quarter said factory bosses had hiked both food prices and penalties for minor mistakes on production lines.

About 26 percent of workers never signed any contracts, especially in smaller factories, while 28 percent said they were paid less than the legal minimum wage.

“A lot of factories now are using the financial crisis as a means to protect their own interests,” said Ivy Yu, a coordinator with the Dagongzhe Migrant Workers Rights Center.

In recent weeks, Guangdong’s prosecutor’s office issued a controversial set of guidelines, saying it wouldn’t prosecute key business personnel or technical staff for minor crimes, in a bid to help businesses during the downturn.

The move generated a flurry of public criticism. Meanwhile, other local governments in the Pearl River Delta have also weighed in with their own “guidelines” to help keep firms afloat.

In Huizhou city, labor authorities recently called on businesses to “stringently adhere” to the labor contract law given the specter of greater bankruptcies, while advising layoffs be carried out “as much as possible on a small-scale to avoid legal procedures.”

RULE OF LAW UNDERMINED

But while enforcement of labor laws may have been quietly allowed to slip during the downturn, the stability-obsessed ruling Communist Party hasn’t entirely ignored the plight of workers either given the risk of social unrest.

Provisions on mass layoffs and collective dismissals were recently re-organized under new “guidelines”, so that firms looking to lay off more than 20 people or 10 percent of their workforce now need to get approval from local authorities.

The push seems to have had some success in stanching potentially destabilizing waves of layoffs in some cities.

“In Shanghai, where there’ve been lots of layoffs, the local labor bureau told us that so far nobody has even applied and they don’t want to be the first ... to deal with the mass layoffs,” said Andreas Lauffs, a Chinese labor law expert at global law firm Baker & McKenzie.

“From a macro point of view, the (Communist) party is looking at social harmony as much as possible, and super-afraid of millions of people unemployed on the street and causing social unrest,” Lauffs added.

While Beijing’s desire to tide things through the crisis may be understandable, some legal scholars say the shifting policies and guidelines have ended up tarnishing China’s rule of law.

“It’s always my view that the government should not interfere with the function of the court, nor the function of the enterprises,” said Wang Guiguo, the dean and chair of Chinese and Comparative Law at Hong Kong’s City University.

”I think the government should leave the market alone and let the market function itself. If a company is bound to die, let them die.

“As far as this labor law is concerned, I think on the whole it’s a good law but most probably has been introduced prematurely to China, it’s too early,” Wang said.

For now, however, many factories are opting to simply shut down to avoid paying workers’ claims for unpaid wages and severance pay -- a trend that could worsen during the Lunar New Year when many migrants return home for a long annual holiday.

“They (factory owners) didn’t have the confidence in the legal system to go through official liquidation and layoffs, so they just walked away and gave up their assets,” said Lauffs.

For Xiang, the worker who was severely beaten and cheated out of his wages, the new labor laws have opened his eyes to social injustice, and he has no intention of closing them again.

“This incident has made me very pessimistic,” he said.

“But I’ve decided to fight till the end. My life has come under threat, and I must deal with this to defend the dignity of workers.”

Reporting by James Pomfret; Editing by Megan Goldin

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