Release of investigative report on labour rights in Hong Kong enterprises in China 2014-2015
A press conference was hosted by the Hong Kong Confederation of Trade Unions (HKCTU) on August 11, 2015 regarding “Investigative Report on Labour Rights in Hong Kong Enterprises in China 2014-2015”, below is a summary of the report.
To read the full report, please click here
Missing social security funds initiating a new wave of labour movement: Violent suppression intensified
A vast number of Hong Kong enterprises have set up factories or established businesses in China. Many of them are suppliers for international brands such as Marks & Spencers, Disney, UNIQLO, etc. Yet, the labour conditions in these enterprises have long been neglected, without an efficient monitoring mechanism. To tackle this, the HKCTU has continued to run its “Monitoring Database of Labour Rights in Hong Kong Enterprises”, which was developed in 2013 (see appendix). Through media, social networks, labour organizations in China and interviews with Chinese workers, it collected information on labour rights violations from large-scale labour disputes in Hong Kong enterprises, between May 2014 and April 2015. It aims to expose the common labour rights violations of Hong Kong enterprises in China, to monitor brands and Hong Kong enterprises, and to push the Hong Kong Government to protect labour rights in China.
Nearly 70%, a significant growth of collective labour disputes: Between May 2014 and April 2015, the HKCTU collected 25 cases of documented collective labour actions in Hong Kong enterprises in China. Nearly 90% covered strikes and the rest were large-scale protests. Compared with the previous years, there is a nearly 70% growth of documented collective labour actions. This is related to the Hong Kong management’s refusal to engage in collective bargaining and its unprofessional manner in handling labour conflicts. Workers have no choice but to strike to force employers to negotiate.
Missing social security premiums is the cause of over 55% of the collective labour disputes: Compared with last year (<15%), disputes caused by missing payment of social security have increased significantly. Missing or under-payment of severance pay at relocations, and missing wages are the two other reasons for collective labour actions, accounting for 44% and 40% respectively.
Affecting an estimated 150,000 workers: It is estimated that these 25 cases of collective labour action, affected about 150,000 workers. Since 28 May 2010, the Publicity Department of the Communist Party of China has banned Chinese media from reporting or discussing strikes. Therefore, it is believed that the actual number of strikes is a lot higher than those documented.
Nearly 85% of labour disputes triggered by violations of Labour Contract Law: As shown in these cases, the Hong Kong enterprises often violate multiple labour laws simultaneously. For example, an enterprise might refuse to pay both severance compensation and social security premiums at the same time. The Chinese authorities tend to side with the employers. They avoid responsibility by claiming that workers’ missing pension insurance is outside their administrative jurisdiction. This opens the door for the Hong Kong employers to avoid paying pension insurance for workers indefinitely; For those areas which are not clearly stipulated in the Labour Contract Law, the court gives judgement guidelines to judges, that open another door for the Hong Kong employers to avoid severance compensation.
Focuses of the research report:
Large-scale listed companies, such as Chow Tak Fook, Stella International Holdings Ltd., Pegasus International Holdings Ltd. and Arts Optical International Holdings Ltd. merely launch corporate social responsibility (CSR) for the purpose of window-dressing: Over 30% of cases involved major listed companies in Hong Kong or their suppliers. For example at Arts Optical, its wholly-owned subsidiary Argent Optical Manufactory Ltd. offers its senior employees with over 10 years of experience, lower basic wages than new employees. Another one-fifth of Hong Kong enterprises are recidivists, as strikes have repeatedly taken place due to their labour rights violations. These companies take CSR as a cover-up, to hide their violations of labour rights.
Workers' right to know is denied: Hong Kong enterprises have been systematically and intentionally adopting various measures to avoid paying financial compensation (severance) as required by Labour Contract Law. They intend to cut the costs of restructuring, relocation or closures, under the Guangdong policy of industry-upgrading. Many workers only learn about these when machinery is removed or the factory closes down. Local governments tend to side with the enterprises, which creates more barriers for workers to claim their severance pay.
Management actively invites the police to intervene; workers in nearly 80% of the strikes have been surrounded, physical assaulted, suppressed or even detained: For example, the owner of Artigas, a supplier factory of UNIQLO, personally led a troop of policemen to storm the factory, detaining 31 workers’ representatives and injuring many. One detainee had a serious head injury and had to be hospitalized. The workers’ right to strike has been severely violated. However, some strikes lasted from one to four months, which indicates that even under violent suppression, workers have strong will and determination to fight for their rights.
Dismissal to retaliate against workers’ representatives, a violation of Trade Union Law: Many Hong Kong enterprises adopt dismissal as a means to retaliate against workers’ representatives. An example is Grosby Footwear (Shenzhen) Ltd., a supplier of Marks & Spencers and Clarks. During a strike, Grosby dismissed a total of 109 workers in seven rounds, including a vocal vice-chairperson of the trade union. The policy also led to a tragedy. A female worker, who had served in Grosby for 12 years, committed suicide in the factory upon learning she had been dismissed. Enterprises’ retaliation would make strikes disorganized, as no workers dare to stand up and represent the collective interest. This would extend the strike and harm both employees and employers, badly damaging the reputation of the latter.
Hong Kong entrepreneurs make use of their political privileges to weaken legislation on collective consultation, which leads to the growth of strikes: Hong Kong entrepreneurs have repeatedly worked with their counterparts from Taiwan, making use of their connections with politicians and the business sector, to influence the law-making process, to remove pro-worker articles from new collective consultation legislation. Hong Kong entrepreneurs have long colluded with the Chinese authorities and strikers can face criminal charges anytime. One example is, Wu Guijun, a workers’ representative from a Hong Kong-owned factory who was detained for a year and seven days for joining a strike. The weakened collective consultation regulations cannot hold the Hong Kong entrepreneurs accountable and when a dispute takes place, the Hong Kong employer refuses to negotiate collectively. As a result, labour conflicts are intensifying. When labour relations deteriorate and a strike breaks out, the enterprise eventually suffers from the damage of its reputation, economic loss due to production halts and even some other higher costs.
Recommendations to Securities and Futures Commission & Stock Exchange: Public interest is involved in the labour disputes of listed companies, therefore, they should be more closely monitored. The HKCTU recommends following the examples of certain countries, to include labour conditions as one of the criteria in regulating the listed companies:
Recommendations to Securities and Futures Commission (SFC)
When a compliant is received, or there is evidence that a subsidary of a Hong Kong listed company has violated Chinese labour laws, an immediate notice should be sent to the licensed corporation of the listed company, demanding it to take prompt and effective correctional measures, and to deliver a detailed investigative report, covering the correctional measures, within a certain timeframe.
The listed company is required to document the violations at prominent positions in its annual report and issue letters to its investors, to disclose such a risk to its investors;
SFC should upload its annual report and disclose a list of law-breaking listed companies to make it publicly accessible.
If the above-mentioned violation continues or severe violations are found, SFC should conduct site visits or establish an independent investigation committee, to further investigate or make inquiries. Disciplinary measures, such as public condemnation, revocation or suspension of license or fines, should be exercised when appropriate.
Recommendations to Stock Exchange:
It should require all listed companies to seek verification of any alleged violations of labour laws in mainland China, the results will be used as one of the conditions of listing approval.
To promote these policies, the Listing Rules should immediately be modified accordingly.
The Stock Exchange should immediately learn from the company whether policies have been implemented to protect mainland workers, and their responses to the specific allegations of violations of labour laws. The listing process should be suspended until a satisfactory reply has been presented.
Recommendations to the Hong Kong Government:
Taking OECD’s "OECD Guidelines for Multinational Enterprises" as a reference, to develop its own guidelines on labour rights, so that Hong Kong enterprises can understand how to protect workers’ rights in Mainland China. Hong Kong government should also set up complaint channels, to strengthen the supervision on the implementation of the above labour rights protection;
Reflecting upon the laws on supervising the listed companies and the company regulations, punishing the listed companies and Hong Kong enterprises that violate labour laws in mainland China
That it take a neutral stance and stop favoring the business sector. In distributing / collecting news and information related Chinese labour laws it should fully consult all stakeholders, including the Legislative Council, trade unions and other labor organizations.
Recommendations to major business associations: sending warning letters to Hong Kong enterprises which have failed in taking up their corporate social responsibility and have violated the labour regulations in mainland China, demanding them to take prompt and effective correctional measures; blacklisting Hong Kong enterprises which have repeatedly broken labour laws in the mainland, and blocking them from being members of the business association.
Transnational corporations (TNC):
TNC should strictly follow the "OECD Guidelines for Multinational Enterprises" and their own codes of conduct, to ensure their suppliers are giving legal and reasonable wages;
China’s Trade Union Law and Regulations on Enterprise Collective Consultations and Collective Contracts both state that an enterprise must conduct collective consultation with its employees. The “ILO Convention” and “OECD Guidelines for Multinational Enterprises” clearly support workers’ freedom of association and rights to collective bargaining. TNC should not allow suppliers to replace collective consultation with telephone hotlines or face-to-face individual meetings with workers;
When a labour rights violation is reported at a supplier factory, TNC should not only take in the report from the supplier, but it should also conduct an independent investigation to discover the facts of the case. When a collective consultation takes place, TNC might send a representative to attend, to promote and ensure that the supplier responds to workers’ reasonable and lawful demands;
TNC should prohibit its supplier from making use of police brutality, assault, arbitrary detention or criminal charges against workers in peaceful strikes;
TNC should strictly urge suppliers to pay workers their severance payments and missing social security insurance premiums. If a supplier cannot afford these payments, the TNC, should be responsible. It should prohibit suppliers from excusing themselves from paying severance and social security insurance payments, by quoting the local administrative jurisdiction’s lack of competence, or claiming that it has not broken the law as the local government has arbitrarily set up guidelines claiming no clear definition to implement the legislation.