CLB's analysis of Guangdong's Regulations on the Democratic Management of Enterprises

In the first half of 2010, industrial conflict in China became increasingly intense, with protests spilling out of the factory into the public domain. A wave of protests spread nationwide following the suicide leaps of a dozen workers of Foxconn in Shenzhen, and strikes at Honda Auto Parts Manufacturing Co. Ltd (Nanhai, Guangdong). Against this backdrop, the Standing Committee of Guangdong Province People’s Congress on 21st July convened to discuss the revised draft of its Regulations on the Democratic Management of Enterprises. According to media reports, the original draft was submitted to the Province’s standing committee in 2008, but deliberations were put on hold to enable measures to be thrashed out for dealing with global financial crisis, which broke in that year. In June 2010, the Guangdong Provincial Party Committee demanded faster progress in the preparation of the draft Regulations, as the rising tide of labour conflicts made it more urgent to construct harmonious labour relations. Therefore, the Provincial People’s Congress duly put the draft into this year’s legislative program. Two new chapters were added to the draft Regulations: the fifth chapter − “collective wage consultations” and the sixth chapter − “dispute coordination and management”. In July, after sending the draft to the Provincial People’s Congress for deliberation, currently the drafters are seeking opinions from four sources: the government, workers, state-owned enterprises and non-state-owned enterprises. It is planned that the draft will be revised again this August, and in September it will go back to the People’s Congress Standing Committee for revision, and should be passed in late September.

From viewing the draft Regulations that are open for opinion, two areas stand out as being particularly important: the fifth chapter on “collective wage consultations” and the sixth chapter on “dispute coordination and management”. Once this local-level legislation has been passed, we think it could trigger a major overhaul of the collective consultation system that has prevailed in China over the last two decades, with collective bargaining becoming one of the principal adjustment mechanisms in labour relations under the market economy. Based on provisions of the Regulations and chapters five and six, China Labour Bulletin draws the following conclusions:

(1) The Regulations provide a framework for initiating collective wage consultation. Article 40 of the Regulations stipulates that when workers recognize the need for collective wage consultations with the enterprise, a request should be sent to the union. When one-fifth or more of the enterprise workers have asked the union for collective wage consultations, the union should organize the democratic election of worker representatives to engage in such negotiations, and inform the enterprise of the request for collective consultations on wages. Article 41 states that for enterprises that have not yet set up a union, when one-fifth of workers ask for collective consultations on wages, asking the local trade union to supervise and guide the democratic election of worker representatives is allowed. In the articles concerning collective consultation in the Trade Union Law (1992), the Labour Law (1994) and the Labour Contract Law (2007), enterprise unions have been given the role of asking for collective consultation − not the workers. If this framework for initiating collective consultation becomes law, it will be highly significant in two ways. First, it will provide workers with a formalised channel for protecting their interests, enabling them to use collective bargaining to voice their demands, without having to first force management to the table through strikes and other forms of collective protests. Second, it will give collective bargaining – a labour right that has always nominally belonged to workers – back to workers. It will allow workers, under the supervision of the unions, to elect their own representatives in negotiations. The preconditions for workers themselves to take the main role in collective bargaining will have been met.

(2) The Regulations have restored collective bargaining to its rightful place—within the enterprise. In recent years, due to the “hollowing out” or outright absence of unions within the enterprise, the ACFTU has consistently pursued collective consultation at the industry or regional level. However, the draft Regulations have underscored the importance of collective wage consultation in the enterprise, and article 37 of the draft Regulations states that enterprises should set up a collective wage consultation system in accordance with the law, and through collective consultation on wages, set up a rationale wage adjustment mechanism. Also, the draft Regulations have provided some guarantee mechanisms, such as allowing workers to freely engage local union cadres and lawyers from outside the company to serve as advisers in the collective-bargaining process. They also bar employers from all discriminatory behaviour against worker-appointed collective-bargaining representatives and from illegally dismissing or revising the employment contracts of workers who serve as representatives in negotiations. Such provisions really have helped to allay the “sense of impotence” or “fear ” cited by enterprise grassroots union cadres and worker representatives as reasons for shunning negotiation. After establishment of a collective-bargaining framework at the enterprise level, collective agreements can be crafted to satisfy the specific demands of workers in different enterprises and sectors, and with differing job descriptions.

In this regard, Ou Guangyuan, chairman of the standing committee of Guangdong’s People’s Congress, points out that “the main object of this legislation is to resolve the problem of inhumane conditions and excessively low wages at enterprises. The enterprise is a cell in the body of society. For the stable development of that society, it is essential to ensure that enterprises establish democratic management, normal mechanisms for wage increases and harmonious industrial relations.”

(3) Due to the precedent of collective bargaining triggered by strike action at Honda, the draft Regulations in Article 40 now include provisions that bar workers seeking wage rises from resorting to work stoppages, go-slows and other extreme methods before they have lawfully demanded collective consultation or while consultations are on-going. During this time, they must ensure the normal order in production operations while protecting their rights. Since the provisions mandate initiation of collective bargaining if at least 20 per cent of workers demand it, there is clearly no longer any need for the current model in which workers usually initiate collective bargaining by striking first. However, the draft Regulations also recognize the reasonableness of workers using strikes or other forms of collective action. For example, Article 51 indicates that if an enterprise management fails to respond to a workforce demand for collective bargaining, or fails to arrange such negotiations, that employer may not terminate workers’ employment contracts on grounds of stoppages or go-slows. Such provisions, we believe, could be interpreted as meaning that the law has recognised the reasonableness of workers’ resorting to striking and other forms of collective action. One drafter of the Regulations, Guangdong Federation of Trade Unions Member and Inspector Kong Xianghong pointed out, Article 51’s aim isn’t to prevent workers from work-stoppages, but rather workers must have first put forth reasonable and appropriate demands, which will help to put labour conflicts of interest onto a path where they can be solved under the rule of law.

(4) The Regulations clearly state the government’s role as one of “neutral coordinator”. In cases where either the enterprise or the worker representatives cannot continue the consultation process due to internal disagreement, or agreement cannot be reached, the draft Regulations in Article 61 allow either side to apply for intervention and mediation by the human resource and social security authorities of the government. Provisions like this identify the government’s role within labour relations as one of facilitation and arbitration. Therefore, the tools for balancing interests within industrial relations have been put back in the hands of labour and management. Conditions have therefore been satisfied for the formation and development of labour as a collective force. The still greater significance of this clarification of role lies in the recognition by the Guangdong legislature that industrial disputes are “contradictions” inherent in labour relations in the market economy, and as such, they come under “contradictions” of economic interest, capable of resolution by collective bargaining. For the government, this recognition has laid the foundations for a non-politicised model of dispute settlement in worker’s collective rights campaigns.

The launch of deliberations on the draft Regulations at the Standing Committee of Guangdong Province People’s Congress shows how a local legislature is nudging rights protests by workers in China towards resolution through standardised, institutionalised collective bargaining. It also shows that completion of the transition to a market-based model for labour relations in China has created a pressing need for such collective bargaining to serve as a core adjustment mechanism, for alleviation of the increasingly conflictual industrial conflicts. The ACFTU has spent nearly two decades promoting the collective contract system. But it has failed to bridge the enormous gap that persists between the very distinctive collective bargaining system China has evolved and the reality of industrial relations on the shopfloor.

In earlier reports CLB has published, we point out that the biggest problem in the existing system of collective consultation is inadequate worker participation. Here, the draft Regulations constitute a major breakthrough. Through provisions ranging from creation of a framework for initiation of collective consultation to election of worker representatives, they show that Guangdong’s lawmakers are preparing to hand back to the workers one of the core collective labour rights, that of collective bargaining. We believe that once workers themselves are involved in collective bargaining, this mechanism will be able to satisfy their demands, attract their interest, and garner their support. Collective contracts, once signed, will also have real effect. Therefore, we expect these Regulations currently being deliberated by Guangdong’s legislature to play a deep and far-reaching role in bringing greater harmony to industrial relations, benefiting all three main parties involved—labour, management and the government.
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