The company vanishes: workers chase shadows in search for wage arrears

31 October 2013

Wage arrears have been one of the most common causes of labour disputes in China for well over a decade. And despite new laws criminalizing the malicious non-payment of wages, there is little evidence that the situation for workers is improving.  It is still relatively easy for company bosses to use stalling tactics or simply disappear in a bid to avoid paying the wages they owe employees.

In July 2013, China Labour Bulletin Director Han Dongfang talked to Zeng Biping, a technician at a small energy-saving equipment factory located in Dongguan, southern China’s manufacturing hub, which employed about 20 workers.  Zeng, a relatively well-paid, skilled worker, and two colleagues were owed a total of 180,000 yuan in back pay but after nearly two years of legal battles, all of which the workers won, the company was still only willing to offer about a third of what it owed.

Zeng Biping told Han that the problems with the non-payment or delayed payment of wages at the company started back in 2011:

They would pay for one or two months, then there would be nothing for a few months. Some workers even went without pay for up to six months straight. I personally am owed four months’ wages. We did not understand why they didn’t pay. Eventually, we went to the Labour Bureau to complain about the situation, but were told that mediation would not work in this case. We were urged to go to arbitration.

Delaying tactics

In late 2011, Zeng and his two colleagues did just that. It should have been an open-and-shut case but the arbitration committee took six months to reach a decision. The Lunar New Year holiday disrupted proceedings and they had to wait until late February 2012 for the case to resume. Two months later, the panel found in Zeng’s favour, and the company was told to pay out 160,000 yuan in total. After the award, the three workers went back to the Labour Bureau to demand enforcement.

But at this point, the company produced a double whammy. It appealed the arbitration ruling to the civil courts and in addition counter-sued the workers, claiming they had not attended work or carried out their duties as instructed. Zeng reasoned that the company did not have the cash to comply with the arbitration award and as such had decided to litigate as part of a strategy of procrastination.

The appeal judge however upheld the arbitration award and added another 20,000 or 30,000 yuan to the total bill to include an element of compensation for the termination of employment contracts. The company appealed again, and the second ruling also went against them. With both rulings basically upholding the decision of the arbitration committee and legal victory under their belts, it simply remained for the three colleagues to try again to obtain enforcement. Here, things went more seriously awry. The company tried a new ploy. It disappeared, leaving no details of its location or any record of assets.

The court told us they could not get hold of the company. There were no assets and no way of enforcing the decision. Then the court wound things up and stopped working on the case. So in December 2012 we went to the police to report a case of malicious wage arrears, and early in 2013, around the Lunar New Year, the police managed to track down the company in its latest guise.

They said they would respond to our demands. But not all of us were around at the time. Later, when we were all together again, we went to the police, and called company representatives over to discuss things, to see if they would give us a one-time payment or some other settlement. But they went back on their word. They said that they could only pay a small amount. They said, ‘you three are trying to get 180,000 yuan. If you accept 10,000 or 20,000 yuan per head we will pay up and that will be an end of it. But if you insist on 180,000 yuan, that is not on.’

Criminal charges

Zeng and his colleagues did not agree to this deal and all they got was a written pledge from the company at the police station, to “respond” to the arrears issue, though no figure specifying the amount owed was ever written down.

Given that this was a clear case of malicious non-payment of wages, as stipulated in the 2011 amended Criminal Law, Han asked Zeng why the police had not filed criminal charges against the company. Zeng explained that when they went to Dongguan Public Security they were told the matter had been complicated greatly by the company’s repeated changes of identity. As long as they could not be sure of the identity of the company, the police were reluctant to get involved.

During this entire process Dongguan Fuguang changed its legal identity three times. It also stopped production on the grounds that “they could not find premises.” The management then claimed they had in fact been swindled by a previous management and were involved in their own litigation. In light of these circumstances, the court backtracked from its 180,000 yuan ruling, and urged the three former employees to accept 30 percent for the time being; adding that they could try to get the rest at a later stage, using the “squeezing the toothpaste tube” method.

At this point, Zeng and his colleagues realized they had no option but to make some concessions.

If we get 80 percent of what is owed, we will be happy with that, but if the court says that enforcement is impossible, we are going to have to think about other ways of recovering the money.

The three workers came from different parts of China, making it difficult for them to develop a coordinated plan of action: Zeng was from Hunan and his two colleagues were from Sichuan and Guangdong. The Sichuan guy, Zeng said, ran out of money and had to go back to his home, while the other one is working in the construction industry. Both are pursuing the litigation while working. Zeng is now unemployed.

In retrospect

Looing back, Zeng said, the main problem was that initially they did not understand how the arbitration and legal process worked and how to really push their case forward. Asked by Han what they would have done differently if they had the chance, Zeng said:

We would still have gone through arbitration but it would have also been worth kicking up a fuss with the local government, because if you don’t do that, nobody cares. I called up a newspaper, the Dongguan Daily, aiming to use the media to get more publicity for our cause but if I’m honest we did not do enough. Petitioning came to nothing. I know that some things are illegal, like blockading the road for example, but sometimes you cannot avoid doing it, otherwise it is hopeless. If we had done that perhaps we would have got our money within two or three months. Now, it has dragged on for over one year. It is nearly two years.

Throughout this process, Zeng found lawyers to be of little use.

We used a legal aid lawyer in the first trial but later we felt that his advice had been inadequate. For the appeal, we did not bother with a lawyer. We felt that if we had spent our own money on a lawyer, we would have cleaned ourselves out.

What was particularly galling for Zeng was the subsequent discovery that the company was actually receiving 500,000 yuan in government subsidies designed to promote the energy efficient industries. “Had we known this, we could have asked them to freeze the company’s assets pending a ruling,” he said.

Zeng said it felt like the dice in their case had been loaded against them from the outset:

I have all the documentation, my own and that of my colleagues, I have looked through all of it, and my impression is that the arbitration committee basically sided with the company. They did not want us to create a fuss.

Moreover, the inability of the courts to enforce the judgments in their favour gave Zeng the impression that the legal system was basically worthless.

Han suggested that the establishment of a small claims court dealing specifically with wage arrears cases might provide a solution. Because such a court would not be bogged down with other civil cases, it could process complaints quickly and ensure payments are made while the employer still had accounts receivable coming in.

This interview with Zeng Biping was first broadcast on Radio Free Asia's 劳工通讯 in six episodes in July 2013.

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