New China Labor Law Improves Workers' Rights

BEIJING -- China enacted law Friday meant to improve workers' rights, capping a round of unprecedented legislation by the communist government that included input from foreign companies and the Chinese public.

The measure, the biggest change in Chinese labor law in more than a decade, was preceded by intense debates, warnings about potential damage to business, and charges from activists that U.S. and other foreign companies were trying to suppress workers' rights.

Approval came two weeks after the discovery by police of children and adults working as slaves at brick kilns in the country's central provinces, highlighting abuses that have accompanied China's economic boom.

Story Continues Below

The law is meant to set standards for layoffs, severance, use of temporary workers and other conditions in China's rapidly evolving labor market. A provision added at the last minute in response to the slavery scandal would punish officials for negligence or misconduct.

"The law is meant to protect workers and their rights," legislator Xin Chunying said at a news conference.

The proposed law was introduced in December 2005. The following April, the government took the rare step of publishing the first draft and asking for public comment. It got more than 190,000 responses from the public and from companies.

Foreign business groups expressed alarm at some portions of an early draft, including a provision requiring approval from China's state-sanctioned unions for layoffs. They argued that overly restrictive rules could raise costs and hurt business.

A report issued Friday by the legislature on the approved law made no mention of such union approval. It said a company that plans to lay off more than 20 workers has to inform its union and listen to its opinion. But the law retains provisions limiting probation periods and entitles more workers to severance pay — a step that companies say could raise wage costs.

A text of the law has not been released.

Xin, deputy chairwoman of the law committee of the legislature's Standing Committee, tried to assure foreign investors they will not be hurt by the new rules.

"If there is some bias in the application of the law, it would be in favor of foreign investors because local governments have great tolerance for foreign investors in order to attract and retain investment," Xin said. "Even if they (companies) violate labor law, they (officials) are still hesitant to resist them."

A key issue will be enforcement, which is uneven and depends on the cooperation of local authorities who have been accused of colluding with abusive employers.

The American Chamber of Commerce in China said it had not seen the final law and could not comment. But its chairman, James Zimmerman, thanked the government for seeking comment.

"Our members appreciate the Chinese government's openness in seeking comment from a broad range of stakeholders, including the foreign business community," Zimmerman said in a written statement.

Labor activists criticized foreign investors who challenged earlier versions of the law, accusing them of trying to get Beijing to reduce protections for workers.

Most labor complaints are directed at Chinese employers or smaller companies run by foreign entrepreneurs. Major Western companies generally offer the best pay and working conditions. But state media are quick to publicize accusations of misconduct against well-known American and other Western employers.

The communist government is trying to update its legal and political structures to keep pace with a rapidly changing society and market-oriented economic reforms.

In the slavery scandal, authorities say nearly 1,000 children and adults were abducted and forced to work in brick kilns. Operators beat and starved workers, often with local government protection.

The new labor law "is expected to improve protection of employees' legal rights following the exposure of forced labor scandals in brick kilns in central and north China," the official Xinhua News Agency said.

Editor's note:
4 Foreign Currency Plays to Beat the Falling Dollar.
Will the Liquidity Crisis Sink Your Stocks? 12 Ways to Profit.
Buffett, Soros, Templeton, Rogers: Learn Their Money-Making Secrets