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Unionisation poses rising challenge for Chinese employers

Published on Friday, 21 Jun 2013
Kathleen Healy

The Situation

The recent Hong Kong dock workers' strike, which was settled on the 40th day of industrial action, was a timely reminder to employers in China that employees, if they join forces, can cause a significant amount of disruption, loss of earnings and adverse publicity.

In recent years, there has been an increase in industrial unrest in China, with employees seeing the advantages of joining forces to campaign or complain about workplace issues.

Although there is no legal right to strike in China, the PRC Trade Union Law does give guidance on the role trade unions are required to play in disputes. The trade union is expected to mediate between an employer and its employees to help restore operations and production. It is not, however, expected to lead strikes. Contrast this with the position in countries where unions are a common feature of the employment landscape, where the trade union's role would be to call for, organise and implement strike action.

Nevertheless, trade unions in China have started to play a more active role in labour disputes and large-scale incidents. The number of strikes has increased significantly in the past few years, with workers primarily demanding pay rises, payment of wage arrears, compensation for factory relocations and better conditions. Employees have successfully put pressure on the collective-bargaining process by using different types of industrial action, such as by closing down factories through striking, blocking factory gates, or staging street demonstrations. These can have a material impact on an employer's ability to run operations and put extra pressure on them to resolve matters quickly.

The Legal Position

From the individual employee's perspective in China, participating in, and especially organising, industrial action potentially exposes them to the risk of dismissal by their employer on grounds that they have seriously breached the employer's internal policies - for example, by taking unauthorised absence from work. In the case of those who organise a strike, breaches could include inciting others to strike, or for serious dereliction of duty resulting in major damage to the employers' interests.

But there is no guarantee a court will uphold a decision to dismiss an employee in such circumstances, particularly where there is a workplace dispute between the parties. Given also that dismissing strikers may serve only to entrench the position of other workers, employers prefer to try and resolve a dispute by negotiation.

Adopting a more open and conciliatory approach to the role of unions also chimes better with the current unionisation campaign by the All China Federation of Trade Unions. This body aims to set up unions in 90 per cent of enterprises, 95 per cent of foreign-invested enterprises and all Fortune 500 companies by the end of 2013, and enter into collective-bargaining agreements with them.

The Consequences

With all this in mind, the unionisation of workforces seems unavoidable. Some employers, therefore, rather than resisting the establishment of unions, are choosing to work with staff so that the labour group works harmoniously with the employer.

There are also signs of a rise in the acceptance of collective bargaining on pay. In most cases, if the collective-bargaining process becomes more effective, unions will no longer need to call industrial action to resolve employee disputes.

On a final note, unions are developing global strategies to deal with companies. The UNI Global Union website confirms that unions are looking to "globalise", leveraging muscle that may already exist in some countries to fight for workers' rights in "lower cost" countries. In certain sectors, there is a rise in the formation of Global Union Federations - international representatives of unions in specific sectors or occupational groups, often resulting in international framework agreements that set out principles for core labour standards globally.

For China, where unions may be able to take advantage of a global union agenda, this can only mean that pressure to give them a seat at the table is likely to rise. Those who resist may risk industrial unrest.

Kathleen Healy is a partner in Freshfields’ expanding Employment, Pensions and Benefits practice in Asia. Based in Hong Kong, she specialises in advising on Asia-Pacific employment and HR projects, and on the multijurisdictional employment aspects of internal investigations.

The information contained in this article should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. If advice concerning individual problems or other expert assistance is required, the service of a competent professional adviser should be sought.

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