China: Fixing Factory Labor Abuse Remains Elusive Goal

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Dec. 19—Lax enforcement of labor laws, tight profit margins, a steady supply of workers and little right to redress are among the reasons factory workers are readily abused in China under sweatshop conditions, practitioners say.

A report from China Labor Watch on the Cuori appliance factory in the eastern city of Ningbo, where students worked summer jobs under terrible conditions and weren't paid all they were promised, is the latest in a long list of such cases. Cuori manufactures sandwich makers, toasters and other items for the likes of Cuisinart, George Foreman and Hamilton Beach and its products are sold by Walmart and Home Depot, among other American retailers. Students at the factory were recruited by labor agents in central China and bused to Ningbo, where they worked 12- to 15-hour days in hot conditions with no air conditioning, were housed in squalid dormitories and are still fighting to regain their security deposits and get the salaries owed them.

Dangerous Conditions, Long Hours

With millions of manufacturing jobs, China has long been the so-called “factory to the world.” While much low-end industry is moving to Vietnam and other countries as China moves up the value chain, China retains massive manufacturing might where worker abuses are common.

Sometimes things can turn deadly. Safety problems have led to explosions and other accidents, including a massive blast at a metal works factory in Kunshan, near Shanghai, that killed 75 people in August 2014.

Much more common are Dickensian conditions of long hours with few breaks, a lack of safety precautions, pay that is improving but remains low, and poor living conditions. Often, as was the case at Cuori, workers are promised one thing but find the reality is different.

U.S. and other Western multinational companies taking advantage of China's low-wage, high-quality manufacturing environment have corporate policies aimed at preventing such abuses, but often their effectiveness falls short.

Corruption Limits Corporate Oversight

One reason such policies fail is that the system is rife with corruption.

“Auditing corruption is pervasive,” Li Qiang, executive director of New York-based China Labor Watch, told Bloomberg BNA in an e-mail. “It's common that factories pay the ‘third-party auditors' bribes to pass the auditing.”

Students and Scholars Against Corporate Misbehavior (SACOM), a Hong Kong nonprofit that advocates for worker rights, complains on its website that corporate codes of conduct for factories “are not effectively implemented.”

“Their ability to protect the workers is drastically compromised by the loopholes built into the existing monitoring model,” SACOM says. “The fact is that only a certain proportion of the supplier factories are audited every year, and the large number, if not all of these audited factories, receive prior notification before the actual date of the audit. Since the management can have time to prepare fake reports, this monitoring program fails to systematically ensure factory compliance with codes of conduct.”

Ethics Policies ‘an Effective Deterrent'

Despite these problems, most agree that the multinational corporations' ethics policies do have positive effects, and some suggest Chinese companies develop such policies themselves.

“It would be good if Chinese retailers and companies would follow suit as this is an effective deterrent,” Andy Yeo, a partner at Mayer Brown in Shanghai, told Bloomberg BNA in an e-mail.

“However, given China's present stage of development, it would be unrealistic to expect that more than only a handful of them would really implement such policy seriously, much less to even have such provisions.”

Enforcement Spotty

The enforcement of labor laws can be as ineffective as auditing compliance.

“The law is usually enforced by the local agencies,” noted Grace Yang, counsel at Harris Bricken in Seattle, who specializes in Chinese employment law.

“If manufacturing is an important industry in that place (and it usually is), there's likely more resistance and the local labor authorities may be less willing to enforce,” Yang told Bloomberg BNA in an e-mail.

Kerry Brown, a professor of Chinese politics and director of the China Studies Centre at the University of Sydney, noted that corruption is widespread.

“Collusion between factory owners and local officials is sometimes a real problem,” he told Bloomberg BNA in a Dec. 15 e-mail. “It is hard to see if the anti-corruption struggle has really impacted. It is so endemic.”

Student Workers Vulnerable

Particularly vulnerable to abuse are university students working summer jobs at factories, as they are protected only by the contracts they sign and not by the general Labor Law, attorneys say.

“The line needs to be more clearly defined as to what employers are required (by law) to provide to part-time employees and what employers are required to provide for full-time employees,” Allan Xu, a partner at Dezan Shira & Associates in Shanghai, told Bloomberg BNA in an e-mail.

“In addition,” he noted, “there is a lack of law at the national level especially with regard to hiring of students, which leads to the current situations where it's hard for students to claim for damages when their rights were infringed by employers from labor law perspective. However, it is possible for the students to claim for the damages from civil law perspective.”

Use of Labor Agents

An area in special need of attention is the use of labor agents, who often recruit students for summer work when they are on school break. Factories contract with the labor agencies, then often turn a blind eye to false promises they make to the temporary workers.

“They usually know what is going on but don't do anything to stop it because they benefit from it,” Yang said. “Strengthening regulations on labor agencies could be a big step forward.”

“Certainly, labor agencies need to be regulated more closely,” Xu said. “In some cases, including this particular case with Cuori, labor agencies do seem to be the main culprit. But Cuori as the actual employer also has the mandatory responsibilities to safeguard the legitimate rights and interests of workers.”

Students who worked at Cuori mostly blame the labor agents who made multiple false promises. China Labor Watch's Li and two students told Bloomberg BNA they are still negotiating with the factory to get all the wages owed them, including massive amounts of overtime.

Abuses May Be on the Rise

“We think that given the factors of rising wages, slowing economy and burgeoning new graduates, such abuses could be on the increase unless steps are taken to rein the perpetrators in,” Yeo told Bloomberg BNA.

“We believe a comprehensive solution is required,” Yeo continued. “First, the colleges should warn their students of the risks of fraudulent or unscrupulous agents and enterprises and the common ruses used and provide contact numbers to report cases.

“Second, the local labor administration departments, especially those in the industrial locations, should give written warning to local enterprises to refrain from such abusive practice or engage agents which do, and point out the penalties for doing so.

“Finally, given that Chinese students are generally social media savvy,” Yeo said, “government authorities can also publish these warnings and remedial measures on such media.”

Enforcement the Issue

In most cases, practitioners expressed satisfaction with the laws themselves.

“As in many other areas, the laws are fine,” said Kerry, who heads the Asia Program at the London-based think tank Chatham House. “It is the implementation of them that is not good. Under [Chinese President] Xi Jinping, there has been a concerted attempt to improve the implementation of laws and give a better deal for workers. But this is very dependent on the locality—some are good, some not so.”

To contact the reporter on this story: Mark Melnicoe in Shanghai at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

China's Labor Law is available in English here.

For more information on Chinese HR law and regulation, see the China primer.

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