China’s Government Mechanisms: Labor Inspections, Labor Legislation and Legal Proceedings

5.2.1 Labor Inspections

Labor inspections in China are still believed to be unable to perform their basic functions. Additionally, they are limited to urban areas only. As it is the case in other developing countries, labor inspections are underfinanced, understaffed, undertrained and underequipped. Information is not collected, managed and shared in a reliable and transparent way. Inspectors often fail to spread knowledge about labor rights.

However, in the need to response to widespread labor issues, the Chinese government has taken some steps and introduced the pilot project called Grid based management in 60 cities in 2009,⁶⁸ which is expected to set a firmer ground for prevention and reporting of labor disputes.

5.2.2 Labor Legislation

Labour legislation in China was reformed only recently: in 2007, the law on employment contracts was revised and effective May 2008, the new law on conciliation and arbitration in labor disputes came into force. Chinese Labour Code appeals to decent working conditions and contains similar provisions that apply in developed countries. Theoretically, it means that the PRC government has no interest in seeing the exploitation of workers. Moreover, the image of China in the world is being harmed due to the existence of this problem. However, central government or provincial governments do not yet possess mechanisms to ensure adequate supervision of compliance with law and independent assessment of impact of corporate activities.

5.2.3 Labor Disputes

Labor disputes are rising in China, both individual and collective (from 19 098 in 1994 to approximately 317 000 in 2006) and an increasing number of disputes are

68 International Labor Organization, 2011.

settled in favor of workers.⁶⁹ When labor violations occur, just like it was the case in Lite-On factories in China, Chinese workers may use three methods to settle the dispute. They are usually effectuated in the following order:

Figure 7: Methods of labor dispute resolution in China.

Source: Author’s scheme based on data from The Foundation for Law, Justice and Society, 2008.

If a suspicion for labor law infringement exists, the parties first attempt a resolution via enterprise mediation. As Blackman points out, people in China are forced to settle disputes by mediation rather than to insist on legal entitlements.⁷⁰ If enterprise mediation fails, parties proceed to arbitrage. If arbitrage fails or any party is not satisfied with the verdict of arbitration committee, the issue is subject to further proceedings at the court. According to the law on conciliation and arbitration in labor disputes, a tripartite mediation committee consisting of representatives of employees, employer and trade unions should be established. However, the tripartite committees in China often lack credibility, because union officials serve in management positions in enterprises. The lack of adequate worker representation is a key problem in labor dispute resolutions, deepened by the fact that the All China Federation of Trade Unions, the only legal trade union in China, acts as a complice to employers and government rather than as a workers’ advocate. In many enterprises, tripartite committees do not exist at all. As a consequence, many disputes proceed directly to the next stage: arbitration. Arbitrations are conducted by arbitration committees

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70 Blackman, C., 1997, p. 39.

• Enterprise
 mediation


if
failure


• Arbitrage
 if
failure


• Court


proceedings


Court
judgment


established by cities, townships and the like. Arbitrations are some kind of compulsory pre-stage before court proceedings. Yet, they are often misused in order to delay these proceedings. In 2005, there were 306 027 of labor disputes resolved via arbitrations and the pie chart below illustrates how the disputes were resolved:

Figure 8: Number of arbitration cases and verdicts by arbitration committees.

Source: Data from The Foundation for Law, Justice and Society, 2008.

Although it may seem that the situation improves in favor of employees, considerable flaws in the law enforcement still exist. Resolution of socio-economic disputes is much less effective than, for example resolution of trade disputes, because the institutions are weak. For instance, most judges in China do not possess a degree in law: only about half of them have graduated from universities, but not necessarily from law faculties. Furthermore, 80% of courts in China are the lowest first instance courts located in rural areas where they are primarily in charge of property disputes.

Consequently, courts in cities are overloaded, proceedings are tardy and the judiciary system is highly inefficient.⁷¹ Lawyers are regarded as employers of the state apparatus and thus expected to serve the Communist Party and its policies, which

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145352

39401 121274

Number
of
arbitration
verdicts
in
2005


In favor of workers In favor of employers Split decisions

hampers the chance for a fair hearing under the law, as it is a common practice in the West.⁷²

The actions of employees mostly concern unpaid wages, illegitimate termination of employment and failure to pay insurance and compensation for work injuries.

However, the enforcement of unpaid wages or insurance remains very problematic, because many businesses operate at very low margins or are insolvent. Furthermore, workers often lack financial resources to pay the costs associated with the court proceedings, such as travel costs, wage compensations for witnesses and foregone wages. In many cases, the costs are higher than potential benefits and bringing the case to the court thus does not pay off.