China: Students Get Grim Lesson in Factory Work

The global solution for human resource professionals, combines custom research, strategic white papers, country primers, webinars and OnDemand educational programs, and the expert guidance you’ve...

By Mark Melnicoe

Dec. 14—University students who worked summer jobs at one of China's leading small-appliance factories were forced to live in cramped, ill-equipped dorm rooms, made to sweat through 12-hour days in a hot factory and then were stiffed on pay, according to a report by China Labor Watch and confirmed via interviews with students and the agents who hired them.

The 8,000-employee Cuori factory in Ningbo, south of Shanghai on China's east coast, manufactures kitchen appliances, irons, heaters and vacuum cleaners under its own name and for such multinational firms as Cuisinart, Hamilton Beach and George Foreman. Stores in the U.S. carrying items made there include Walmart and Home Depot. All these appliance and retail companies have ethics policies aimed at protecting workers at foreign factories where they source products.

Retailers' Ethical Sourcing Standards ‘Total Failure’

“The cost of Walmart and Home Depot's low prices is exploited laborers working under extremely stressful and exhausting conditions,” Li Qiang, executive director of China Labor Watch, said in the report released Dec. 1. “The enforcement of Walmart and Home Depot's ethical sourcing standards at Cuori is a total failure.”

Contacted by Bloomberg BNA, Walmart spokeswoman Rebecca Lui said in an e-mailed response: “We were contacted by CLW and informed about the allegations. We take allegations like this seriously and are reviewing the report and the statements made by the individuals in the report to determine our next steps.”

Lui said guidelines at Walmart, the world's largest retailer, state “that suppliers compensate all workers with wages, overtime premiums, and benefits that meet or exceed legal standards, as well as standards regarding safe and healthy working conditions.”

Home Depot Says It's Investigating

Home Depot said it was taking steps of its own.

“Although this is a very small vendor for us, we contacted China Labor Watch within an hour of hearing their concerns,” Stephen Holmes, director of corporate communications for Home Depot, told Bloomberg BNA in an e-mail Dec. 8. “We investigated the situation and were assured that the workers' concerns had been resolved.”

Asked what investigative steps the company had undertaken, Holmes said, “We reached out to our auditor there to investigate and we continue to do so until we know this is resolved.”

Litany of Allegations

Among the allegations in the CLW report:

  •   Illegal deductions. Labor agencies used various methods to make students pay hundreds of yuan in deposits.
  •  Signing blank contracts. Labor agencies stated there was a lack of time and forced students to sign blank contracts.
  •  Excessive overtime. Workers and students worked at least 12 hours a day and sometimes put in 15 hours. Workers who refused to work overtime would be recorded as being absent from work.
  •  No overtime pay. Overtime was paid at the same rate as regular work.
  •  Few days off. Despite promises of two days off per week, the student workers could rest only one or two days each month.
  •  Wage arrears. In addition to the illegal deductions, many students said Cuori would hold their wages for one month, and many still have not received their full salaries.
  •  Lack of safety protection. The workshop was very hot and dusty, but workers did not receive any protection, including those who worked with volatile chemicals such as silicone oil and alcohol.
  •  Inspection fraud. Cuori required employees to use alcohol to clean its products when there was an audit or inspection. But most of the time silicone oil, which is cheaper but more harmful to workers, was used.
  •  No safety training. No job or occupational safety training was provided to workers.
  •  Resignations delayed. Management personnel would procrastinate to prevent students from resigning.
  •  Poor living conditions. The dormitories were dirty and had only one electrical outlet, and a student said her bed was on the verge of collapsing.
  •  Dangerous working conditions. The workshop was very hot, and there were no air conditioners. A worker died of heart disease triggered by heat stroke.

Labor Agencies at Center of Scandal

In its report, CLW said it started getting complaints from university students in October. They had been recruited from their colleges in the central provinces of Henan and Hubei in June by labor agencies, which are commonly used in China to help factories find workers. The agents promised the students decent summer jobs in the southern city of Shenzhen, that they would be paid 10 yuan ($1.45) per hour and work a maximum of 10 hours a day with two days off per week and that they would get double pay for any overtime and be provided free meals and accommodation.

More than 100 students from the two provinces signed up only to have the promised employment conditions changed at the 11th hour, CLW said. The day before they left, the labor agencies told them the Shenzhen factory was “full” and that they would be working instead at the Cuori factory in Ningbo.

Previous Promises Suddenly Changed

When they were aboard overnight buses to Ningbo, labor agents informed the students that wages would be 9 yuan per hour and there would be no overtime pay. Instead of free meals, the factory would pay workers an 8-yuan food allowance each day they worked.

The students were already feeling cheated but most agreed to the conditions, seeing little choice if they wanted to work. Once they were on the buses, the labor agents charged the students 250 yuan for the bus ride, then demanded 100-yuan “deposits.” At the factory the next morning, the students were charged another 100-yuan deposit to be allowed in but were assured these deposits would be returned if they finished their work schedules. They also were made to sign blank work contracts and statements that they were giving up the purchase of social insurance, CLW's report said.

Minimum 12-Hour Days, Few Days Off

Once work started, students found themselves working at least 12 hours a day and sometimes as many as 15 hours to meet production quotas. They got two days off per month. Overtime was paid at straight-wage rates and was mandatory.

“Students who asked for leave, even sick leave, would be threatened with wage deductions,” the report said. “Students did not have any breaks other than during meals. They worked continuously, just like machines.”

Many students decided to leave halfway through the summer, but most stayed because they were earning money to pay school fees and to help their parents.

“However, much to their surprise, more labor violations were awaiting them,” the report said.

Wages Deducted

“Through not calculating overtime, over-reporting absence, and various other ways, Cuori and labor agencies illegally deducted an average of 1,000 [yuan] from students' wages in August,” according to the report. “This is almost half of the students' total wages.”

“When students contacted Cuori and the labor agencies, both were slow in addressing the issue and neither wanted to bear the responsibility,” the report continued. “Students needed to call many times before someone answered the phone, and when someone finally spoke with students, he or she was always rude, impatient and arrogant. Until now, two months have passed and students have yet to receive their full payment.”

A Common Refrain in China

The episode marks the latest in a long saga of such conditions at Chinese factories that supply consumer products to the world. The southern province of Guangdong, home to hundreds of thousands of manufacturing jobs, has been the site of numerous incidents in which workers are subject to inhumane conditions, long hours and low pay.

The Taiwanese company Foxconn, which makes iPhones for Apple and supplies technology parts to many other firms, has seen strikes, riots and suicides in its factories over alleged poor working conditions.

“The working conditions at Cuori couldn't be worse,” CLW said in its report. “Cuori didn't treat students as employees, but rather as commodities that would be thrown away after two months.”

Student Describes Horror Dormitory

Many students backed up the claims, including one named Ming who in the CLW report described what it was like when she first entered the worker dormitory.

“We opened the door to the dormitories, and I will remember the state that the room was in for the rest of my life,” Ming said. “The room was in shambles, and it appeared as though no one had lived there before. The bed, air-conditioning and even the fans were broken. There was only one electrical socket, and our phones had run out of batteries, so we couldn't even inform our family that we were safe. The bed was terrible, and when you sat on it, it felt like it was about to collapse.”

Another student, Li Wanli of Luoyang City in Henan Province, said she felt cheated and blamed the labor agency.

“The agency promised that they would pay us but it didn't,” Li, a student at Henan Jiaozuo Teachers College, told Bloomberg BNA in a phone interview. ”I actually think Cuori has already paid the agency but the agency didn't pay us.”

She said she was still waiting for more than 900 yuan ($130) owed her.

Asked what she had learned from the experience, she said, “I didn't know too much about the agency at first. I just followed an agent who was also a student at my college. I shouldn't believe agents so easily.”

Wages Held, Deposits Not Returned

Another student, surnamed Yang, described how he was cheated out of his deposit and meal money.

“At the end of September, I received wages for August which were 1,000 [yuan] less than what I should have received,” Yang said in the CLW report. “When I asked them, they told me that I hadn't finished my work, so they made deductions to my wages. When they showed me records of my work hours, there were wrong. The 8 [yuan]/day ($1.18) meal allowance and the accommodation administrative fee which they spoke about previously was not paid to me. In the end, they did not pick up our phone calls. Until now, they still have not paid us our full wages, and I feel really helpless.”

Repeated attempts by Bloomberg BNA to reach officials at the Cuori factory were unsuccessful, but CLW's Li said in a follow-up e-mail Dec. 8, “We hear that Cuori is contacting students and returning wages.”

But Li also said the amounts were short of what students are legally owed, and he wasn't sure how many had been paid.

Labor Agent Expresses Contrition

One of the labor agents who recruited and hired students largely absolved the factory and instead blamed the Anzhi Agency, his employer that contracted with Cuori.

Yu Xiaochuan said he and another agent named by students, Zhang Hong, are merely employees of the agency. Yu told Bloomberg BNA in a phone call that he was unhappy about this episode and vowed to quit his job and report the incident to the local government labor authorities the following week.

Yu told Bloomberg BNA that the students accepted low salaries but the bosses at Anzhi and Jueqi Tiancheng Trading Co., another labor agency, are “bad-hearted” and insisted on paying even less to the students. Yu claimed he used money from his own pocket to refund deposits that students had paid to the agencies.

“They wanted to keep this money for themselves,” Yu said of the agency leaders, adding that the factory always paid Anzhi and Jueqi.

“I'm just an intermediary,” he claimed.

Labor Laws Don't Protect Students

China has a patchwork of labor laws, depending on province and even city, and labor attorneys said such laws are enforced at the local level.

An official at the Ningbo Human Resources and Social Security Bureau, reached on the phone by Bloomberg BNA, said students don't have an official labor relationship with companies so they are not protected by the labor laws.

“They need to discuss with the company when they sign the contract, and the contract will protect their interests,” the official said.

Andy Yeo, a labor lawyer and partner at the Mayer Brown law firm in Shanghai, confirmed this.

“College students before graduation cannot strictly be qualified as employees under the labor laws, and in practice only have a contract of service (as opposed to employment contract) with the enterprise,” he told Bloomberg BNA in an e-mail. “Therefore they cannot be protected by the labor laws.”

Labor Official Vows Investigation

An official at Ningbo's Social Security Supervision Detachment, who gave his surname as Qi, said he had not heard of the case. When Bloomberg BNA offered to send him a copy of the report, he said he would investigate “to see what happened.”

Grace Yang, counsel at Harris Bricken in Seattle who specializes in Chinese employment law, suggested that might not go far.

“The law is usually enforced by the local agencies,” she told Bloomberg BNA in an e-mail. “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. Nonetheless, the general direction in China is toward more stringent enforcement of the labor laws, and an increase in administrative inspections/checks to deter employer labor law violations.”

Tough Times for Temporary Workers

Yeo described a climate ripe for abuse of students seeking temporary employment.

“Due to the high cost of regular employees, enterprises in labor-intensive industries—especially in electronic components, clothing, daily use wares and the like—tap student and internship labor through such labor agencies,” he said.

“It is also reported that there are about 7.65 million new college graduates in China in 2016 and with the slowing economy, the pressure of employment exacerbates the vulnerability of graduates and undergraduates to the unscrupulous practices of such labor agencies.”

Yang agreed, saying that factories “usually know what is going on but don't do anything to stop it because they benefit from it.”

Asked about any possible actions involving retailers or other companies that use the factory's products, Yeo said, “As a practical matter, retailers or companies that use such enterprises for manufacturing have no legal liability for such abuses.”

Companies Not Liable But Reputations at Stake

But he noted that “many reputable foreign companies there usually have provisions in their contracts with the manufacturers to stipulate that such abuses constitute breach of contract entitling termination. In addition, these retailers or companies will conduct regular audits to ensure compliance. ”

Yang said that while there was likely no legal liability for retailers and appliance makers using the Cuori factory, there could still be pressure.

“These sorts of companies can certainly see their reputations damaged in their home countries, which is why many work so hard to try to prevent labor abuse and why most of them reserve the right to terminate manufacturers/suppliers for labor violations,” she said.

Hamilton Beach: Findings are ’Disturbing’

Hamilton Beach, a major brand of appliances sold around the world, confirmed that it sourced from the Cuori factory and promised to take action after learning of the allegations from Bloomberg BNA.

“Since 2002, we have required our suppliers to adhere to our detailed social accountability policy, which provides greater worker protection than required by local laws and regulations,” spokeswoman Mary Beth Brault said in an e-mail. “We are a member of the Business Social Compliance Initiative (BSCI), which helps companies like us achieve social compliance and improvements with suppliers.”

Brault said that BSCI last audited the Cuori factory in mid-March 2016 and that the factory was rated overall as “acceptable.”

“Only in the area of overtime hours did the factory need improvement,” she said. “The auditor did not find anything like the situation described by the college students to CLW.”

“Nevertheless, we find the allegations to be disturbing,” Brault said. “We are immediately initiating our own investigation and will address these allegations with Cuori's owners. We will require Cuori to remediate any shortcomings with those former workers and implement corrective actions to ensure there is no reoccurrence of such problems.”

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

The China Labor Watch report is available here.

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

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.