Steel workers laid-off and rehired as temporary employees for lower pay

03 March 2009

One key characteristic of labour relations in China today is the imbalance of power at the enterprise level that allows employers to ignore or manipulate the law for their own benefit. This has been abundantly apparent since the introduction of the Labour Contract Law on 1 January 2008, with unscrupulous employers using all manner of tricks and devices to avoid giving workers their legal entitlement.

The powerful Lingyuan Iron & Steel Group in Liaoning province has been bending the law and government directives ever since it started laying off workers as part of the state-owned enterprise restructuring process in 1998. Workers were laid-off with the promise of new jobs at a later date but in reality they were farmed out to a labour supply company and rehired only as temporary supply workers. The Labour Contract Law contained provisions designed to combat this abuse but Lingyuan tried to dodge the law once again by reclassifying the workers as “contractors.”

In September 2008, CLB director Han Dongfang talked to laid-off Lingyuan employee, Liu Xiangdong, about the company’s long history of coercion and manipulation, and the workers’ frustrated attempts to seek redress through the petitioning and judicial systems.

“To get laid-off is glorious”

Lingyuan started laying off employees in 1998 under the slogan “to get laid-off is glorious,” adapted from the phrase attributed to China’s then paramount leader Deng Xiaoping: “to get rich is glorious.” In this case, the company claimed the “glory” would come from the “sacrifice” the laid-off workers made to the greater good of the company.  According to Liu, company managers were seeking to develop their own “political capital” by laying-off as many workers as possible during the restructuring process. The more employees they laid-off, the better they were doing their jobs, Liu explained.

In order to convince workers to accept layoffs, Liu said management promised they would eventually get their jobs back, likening the situation to a “boat in the middle of a voyage. The boat can’t carry all of these people, so you get off first and, after the boat is fixed up and running with the wind at its back, we’ll pull you back aboard.” Liu was one of those laid off in 1998. Successive waves of layoffs followed in 1999, 2000, and 2001. “Of course, it was not voluntary,” Liu said. There was no letter or agreement signed, it was just “you will be laid off or else.”

Among those laid-off, about 385 workers were transferred to a “re-employment service centre” controlled by Lingyuan. They kept their jobs but were paid by the service centre. “The company coerced us, saying your labour contracts will be revoked, but you’ll still work at your jobs and receive your wages; it is just that the relationship will change a bit,” said Liu. In 2002, the service centre was disbanded and replaced by the Gangda Labour Services Company – also owned by Lingyuan. Lingyuan Steel revoked the employees’ labour contracts and forced them to sign contracts with Gangda. Since 2002, this group of workers has been working in Lingyuan Steel’s various plants as “dispatched workers” from Gangda.

“We work at Lingyuan Steel,” said Liu, “but we are paid by another organization.” As dispatched workers, Liu and his coworkers each receive about 10,000 yuan a year less than they did as direct employees of Lingyuan, though they continue to receive social security and medical insurance benefits. Liu works on a production line, “monitoring a conveyor belt,” he said, and has been doing the same job for over 15 years. His 380 or so co-workers in the same circumstances are spread out across a number of company plants in various positions, and some of them have over 20 years of experience on the job. These jobs are an important part of the company’s production process, and “not at all suited to this kind of dispatch work,” said Liu.

When the workers formerly gave up their labour relationship and signed with Gangda in 2002, they were compensated with around 1,000 yuan for each year of service. Liu was given compensation of 1,080 yuan for each of his eight years from 1991 to 1998 (the years at the labour service company between 1998 and 2002 were not counted). However, Liu said, management gave themselves much bigger payouts. Moreover, many former SOE managers went on to get rich by running the private enterprises, including Gangda, spun off from Lingyuan during the restructuring.

Protests and petitions in vain

Worker protests at the layoffs began in 2002 with over 1,000 workers staging a mass protest in the square outside the company’s main office. The protest lasted for about a week but managers refused to meet the protestors. Instead, managers used “divide and rule” tactics to break the will of the workers. They dispatched workers who had “benefited” from the layoffs to convince other workers to sign agreements. Only six workers held out and refused to sign. They were not sacked and retain their positions today, Liu said.

Liu and several other workers went to Beijing in 2002 to file a complaint about the layoff process with the Petitions Office, the Ministry of Labour and Social Security, and the All-China Federation of Trade Unions (ACFTU). The union “doesn’t represent workers at all…and they have no power. I can tell them about a problem, but they don’t resolve it at all,” said Liu. They told Liu and his coworkers that “there are many cases like yours, and what you got is not too bad. In some places they only get two or three hundred yuan.” The ACFTU officials said they would report the situation to the Liaoning provincial union. But, Liu said that he and his coworkers did not pursue the local and provincial unions because “the company is very powerful, and they don’t even notice the union.” Gangda nominally has a labour union, whose chairman suggested that the workers use legal means to protect their rights, but, said Liu, “they won’t help.”

Workers have continued their protests, with several petitioning trips to Beijing and most recently a strike involving about 90 workers on 1 March 2008. Some workers were “bought” with the promise of pay rises and promotions, said Liu, and returned to work; for the other positions, they “hired temporary workers from the outside and brought them in.”

The manipulation continues

Meanwhile, Lingyuan has increased the number of “dispatched” workers it has hired from Gangda. Liu estimates there are now about 2,000 workers hired from Gangda doing “not very good jobs…ones that company workers don’t want to do.” These jobs pay less and are exempted from raises that the company has recently given other workers, Liu explained. In order to dodge provisions of the Labour Contract Law that restrict the use temporary supply labour, many positions have now been reclassified as “assistant” or “contract” positions.

The primary goal of Liu and his coworkers is to “clarify” their employee-employer relationship, which they think should be with Lingyuan Steel, and to enforce compliance with the new Labour Contract Law and its implementing regulations.

In May of 2008, the workers applied for arbitration with the city of Lingyuan, but the local authorities refused to accept the case on the grounds that since it was related to the restructuring of a state-owned enterprise, it was out of their jurisdiction. When they appealed this decision to the local court, the court also refused the case. An appeal to the next level up also “went nowhere,” said Liu; “Here in the interior, these local enterprises are very closely connected with the labour authorities and the government authorities. They absolutely would not take the case.”

Though they had not hired an attorney for these actions, Liu said that he and his coworkers had sought outside assistance. A reporter had visited them and published their story on And some students from Tsinghua University had taken up their case but, Liu said, because of the “national spirit of unity” after the Sichuan earthquake and the preparations for the Olympics, the matter had been set aside. Nevertheless, Liu remained hopeful and welcomed any offers of legal help.

Han Dongfang’s interview with Liu Xiangdong was with originally broadcast in nine episodes in September 2008. To read the full Chinese transcript or listen to the audio file of the broadcast please go the workers’ voices section of our Chinese language website and follow the links

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