Factory “Shammed” Bankruptcy, 300 Electronics Factory Workers Went on Strike in Shenzhen

Last month (August 2017), more than 300 workers from the Shenzhen mobile phone motherboard manufacturer, Jielai Technology Co., Ltd. went on strike to recover back wages from the month of June, but the company suddenly announced bankruptcy in 29 August. Hence, the worker escalated their actions. In addition to recover outstanding wages, they also demanded for statutory severance payment, and guarded the factory to prevent transfer of assets by the company.

The Jielai workers criticized the bankruptcy is of "malicious" intent because the employer has already set up factories in Yunnan, Chongqing and Zhengzhou and more than half of the production lines in Shenzhen have moved to these plants ever since. Moreover, Jielai were not lacking in orders from their major customer, "Waterworth", an up and coming mobile phone company founded in 2009. Therefore, the workers believed that the employer “shammed” the bankruptcy to hide the real intention in plant relocation in order to evade paying the workers severance payments.

On 4 September, the court seized the assets of the employer and forced the employer to negotiate with the workers. A settlement was eventually reached with the employer promised to pay all the wages in arrears and 60% of the statutory severance payments.

In order to reduce labor costs, many manufacturers in the Pearl River Delta Region are transferring productions to further inland in recent years. But some unscrupulous employers have tried to avoid payments of severance for workers in the past, which is similar to that of the Hong Kong's catering industry some ten years ago. After dissolving one restaurant, some restaurant owners continued to operate other restaurants under separate company registrations, leaving severance payment for workers eventually paid off by the "Protection of Wages on Insolvency Fund" (the Fund). In 2012, a restaurant owner was sentenced to three years' of imprisonment after found guilty in fraud of the Fund. Therefore, if local governments in China do not face up to this problem by severely punishing employers that “sham” bankruptcies, it is likely that similar incidents will continue to occur.