Written by Fuk Ying Tse.

The enforcement of the Labour Contract Law of China and its amendments in 2008 and 2013 respectively are regarded as attempts by the state to regulate employment relationships. By introducing the concept of a labour contract, in which working conditions and terms are clearly defined on paper, both workers and employers are able to negotiate their contract terms on equal grounds. In general, a labour contract is vitally important in specifying “who does what, when, how and what for” in the workplace. It offers workers protection at work and an exit mechanism without being exploited.

While working for a Hong Kong-based labour organisation during the past two years, I examined how the Labour Contract Law has been implemented among factory workers in the manufacturing sector. Annual investigations, mostly around our major project site in Shenzhen, have been conducted since 2008. The latest one, covering eight cities in the Pearl and Yangtze River Deltas, was conducted in early 2014 with the assistance of local labour organisations and university students.

In the past decade when we worked in southern China and provided workers with free legal consultation services, we found that countless labour disputes, ranging from occupational injuries, wage-in-arrears and other sorts of workplace mismanagement, resulted from the lack of regulation of what “work” should be like and confined to – or in other words, the terms workers are promised in exchange of their labour power in the production process; how employers should be held responsible in cases of disputes; and also how workers can negotiate on favourable terms and guarantee themselves a safe, equal and just workplace instead of simply following what is offered to them according to interests of the employers.

We do recognise the rationale of the Labour Contract Law, but its enforcement is always unsatisfactory. Workers tend to get into poorly defined employment relationships and sign rough contracts. Of course more labour contracts are signed year by year, but probably only in big coastal cities. Contracts are often roughly drafted, and the ambiguities make it easier for employers to manipulate working patterns and remuneration for workers. Many workers are also not informed of the potential risks and hazards of their work.

Rough contracts or having no contracts at all hinders workers from getting legally abided compensation in case labour disputes such as occupational injury, outstanding social security payments and illegal layoffs. By refusing to recognise that the employment relationship actually exists during a certain period of time, employers are often not held responsible for the losses incurred by workers. Workers often have to make extra effort to provide proof of employment, which consumes a tremendous amount of time and difficulty. Local authorities and judiciaries also tend to make decisions in favour of employers, depending on the industrial development in the region and vested interests of the local government.

A labour contract also does not necessarily guarantee job security. In theory, workers should be compensated according to seniority if the employer refuses to renew a contract with them, or wants to terminate a contract. The terms and conditions of a renewed contract should always be better than the old one. Once signing 3 contracts with the same employer consecutively, workers can request a contract for an indefinite period of time, meaning that they are regarded as permanent workers of the enterprise.

However, very few workers gain permanent contracts. The effect of short contracts on workers’ welfare can be seen in the week-long strike by street cleaners in Guangzhou University Town in late August 2014. When their contracts change, their seniority has to be counted all over again even if they always worked in the same position.

We also see strategies used by employers to evade from compensating workers for terminating a labour contract unilaterally (aka laying off). Since compensation to workers does not apply to resignation, employers cut working hours deliberately, inducing workers to resign. When factories relocate, workers are often made to resign since they did not want to relocate to a new city.

For dispatched workers, the story is even more complicated. The use of dispatched workers was actually boosted by the Labour Contract Law in 2008, which granted labour dispatch an official status. In the Law dispatch workers are only allowed for temporary, auxiliary and substitutive positions, but from our survey, quite a number of workers revealed an indiscriminate use of labour dispatch in their enterprise.

Labour dispatch is problematic in certain ways. First, the employment relationship becomes ambiguous. In principle workers sign a contract with a dispatch agency, but it is the enterprise which fulfils all functions of an employer – giving production orders, paying wages, paying for social security, providing training and occupational safety measures etc. Yet when disputes arise, the enterprise and dispatch agency tend to blame each other, leaving workers in difficult circumstances. Some dispatch agencies are really small units or even affiliates of the enterprise de facto, so no one might eventually take up responsibilities. Second, dispatched workers often have lower pay and welfare provisions than formal workers, which is supposedly not allowed by the Labour Contract Law.

The 2013 amendment of the Law attempts to impose tighter control of labour dispatch by introducing a ceiling to the proportion of dispatched workers that an enterprise can employ, stricter registration requirement for dispatch agencies etc. The effect is yet to be examined, since it is just barely a year after the amendment of the Law and provision on labour dispatch came into effect, and a two-year transition is allowed for enterprises. Nevertheless, what we can see is that when labour dispatch no longer works, enterprises opt for other forms of flexible employment, such as temporary work and outsourcing, which are out of the existing legal framework and even more difficult to regulate.

We consider the ineffective implementation of the Labour Contract Law largely the fault of the state, for putting very little effort into law enforcement and very low punishments for employers who break the law. After years of struggle in the coastal area, the situation has improved, unlike inland areas where industries and labour power have increasingly relocated. It might be due to the lack of exposure and vision of local governments and judiciaries in handling such disputes, and worse, a closer connection between capitalists and local governments.

Since most interviewed workers who have prior knowledge of the Labour Contract Law learn about that from personal networks, it shows that the role of the state in promoting the Law among workers is very limited. We believe that labour departments and trade unions at different levels should play more proactive roles in increasing the awareness of workers to understand their own rights.

Harsher penalties for employers violating the Law should definitely be imposed. Nevertheless, we believe that workers should always be the agent of change against exploitation and for better working conditions. Therefore, besides educating workers on the Law, rooms for workers to organise and negotiate with their employers on equal grounds should also be opened, especially in the form of establishing collective contracts with their employer on an independent basis, so as to realise the rationale of the Labour Contract Law and scrutinise its practice right in the workplace.

Fuk Ying Tse is a PhD student at Warwick Business school. Image credit: CC by Shreyans Bhansali/Flickr.