China's New Labor Law Means Tenure For Everybody
SFO Airport
Tomokazu Sushi Restaurant
7:52 pm PST
Dinner Before My Next Flight
Just came across this podcast interview with CLB's own Steve Dickinson on the always superlative Danwei blog. The post is entitled, "China Businesscast: China's new labor law, everybody gets tenure" and it provides the following executive summary (which is good because my next plane takes off in twenty minutes and I have no time to listen:
The [new China labor] law was a government response to increasing public concern that employers were mistreating employees, especially in failing to pay proper wages. The Shanxi slavery scandal was a example of the sorry state of employee rights in China that brought the issue to the forefront of the public's mind.The law has several components, but the main effects are the requirement that employees have formal term contracts, and that employees can only be terminated with cause. This is the polar opposite of termination at will in the United States.
After two term contracts, the employee must be given an open-ended contract. Combined with termination only with cause, it is comparable to the tenure system in American universities. Critics are calling it a return to the iron rice bowl, when companies were responsible for employees their whole lives.
There has been a tremendous amount of publicity about the law, resulting in widespread general awareness, though the public's understanding is not always accurate. The media coverage seems to be driven by the inherent attractiveness of a story that affects everyone, rather than a government propaganda initiative.
Companies need to beware, as ambitious [Chinese plaintiff] lawyers are actively looking to make money and a career testing the new law.
I am sure it is good stuff.
For more on the new law, check out "China's New Labor Law -- It's A Huge Deal. Huge I Tell You."
Comments (4)
Read through and enter the discussion by using the form at the endDuncan G Casselman - April 8, 2008 2:20 AM
Great Posting Dan.
Am here in Saigon and was crying with our JV partners about the new higher Vietnamese labor costs in our industrial park where alot of miserable mainland China/Taiwan and Korean factories have relocated after fleeing China, driving up local labor costs. In any event, reading your blog has given our team here a ray of hope in competition with mainland factories on a level playing field...Except how does one compete against convict labor which is being used in China with a wink and nod? While I am seeing some sourcing contracts from Western companies asking if Convict labor is used in the manufacture of products, its only a check off box and I know of several factories in China which send their labor intensive work to "special work zones"...Remembering back to a Western european class about German efficeny during WWII, the motto "Work makes you Free" comes to mind. Or least cheap products. So much for graduating with a social studies major at a top 10 college in Iowa.
Brendon Carr - April 8, 2008 7:11 AM
In many respects the new PRC Labor Contracts Act is a clone of the disastrous Labor Standards Act that is a millstone around the necks of Korean employers. Why did the Korean companies go to China? To get away from the "iron rice bowl" established by the LSA's "just cause" requirement.
Francesca Brundisini - April 21, 2008 2:54 PM
Hi Dan,
I have read all your posts about the new Labor Law in China, and they have really helped me out with my research. I'm searching for news and infos about this new law in order to present a little seminar in my university class. We are dealing with this subject for the first time, and we (students) have to introduce it. If it's not improper, I would ask you where to find more informations on this topic.
Thank you very much.
FB
Lora Lee - April 23, 2008 6:29 PM
The new law is not helpful for small business, which are trying to be fair with the employee to start with.
I used to work for my father and he has a factory in China with just under 300 employees. He treated his employee well, I saw it with my own eyes and many of them have been there for over ten years.
With the new law, five of his employees were tempted and now sue for overtime over the last few years. And as a businessman, my father has no problem of the change of law and start to pay overtime from now on. But to pay overtime for work that has been done before the new law is a bit O.T.T. Not to mention when you have a small company and you know that if the five persons won, you might as well close the factory as surly the rest of them will follow.
I know that people working in factory are not earning much, but not all employers mistreated their employee and now all employers get punished. Also, it is those companies that treated people well will have employee stay and they are the one being punished.
Most of us work overtime, how many people can leave the office at 5/6 everyday??? I don't think we can start suing our employer for overtime in U.K., USA, Canada or Australia.
This new law, surely reminded those fleet the Communist crazy period in China.
It is like Mao has returned, but only this time, merchant and land owner are taken to court to have their possession striped rather than in their own court yard.