Tobacco plant workers fighting for equal pay stuck in legal limbo

29 December 2009

Workers are always the first to suffer when poorly managed state-owned enterprises (SOEs) seek to restructure and cut costs in order to stay afloat in an increasingly competitive market economy. At a state-owned tobacco plant in Henan, for example, nearly a quarter of the workforce (86 out of 380) had their wages slashed and their employment contracts “spun off” to an outside employment agency as part of the enterprise’s restructuring program initiated in 2003.

In April 2009, China Labour Bulletin Director Han Dongfang talked to tobacco workers’ representative Zhang Liucheng about the enterprise’s attempts to squeeze its employees, and the workers’ attempts to fight back via the media, the petitioning system, labour dispute arbitration committees and the courts. This last option was closed off to them however because of earlier Supreme Court decisions excluding SOE disputes from the jurisdiction of the civil courts. See page 12 of CLB’s research report No Way Out: Worker Activism in China’s State-Owned Enterprise Reforms.

Most of the workers at the tobacco plant in Lushi county, near the border with Shaanxi, had been with the company for at least a dozen years when management sought to cut their wages and limit their existing open-ended contracts. Zhang himself joined in 1991, becoming a formal employee in 1993, and working as both a technical operative in tobacco leaf grading and in the accounts department. In 2003, two groups of 40 and 46 workers respectively were ordered first to sign fixed-term contracts for three or five years, and then, at their expiry, rejoin the company as employees of a labour dispatch agency in the prefecture capital Sanmenxia. When Zhang’s five year contract expired in 2008, he and the other employees were told to sign documents that were effectively agency contracts. “They were not signed directly with the tobacco company. The workers don’t even know who runs the Sanmenxia agency,” he explained.

Wages slashed

Although precise employment terms and conditions have differed among the affected workers, one net result has always been the same - a drastic cut in wages. Zhang himself had his wages halved, although he did retain his pension and healthcare benefits. “At that time, official pay was 1,000 yuan a month,” he said, “and I found myself on 500 yuan.”

Many workers refused to sign the new contracts, demanding restoration of their open-ended contracts and equal pay for equal work. The company would not budge however and so the workers petitioned the municipal government and later marched on the provincial authorities in Zhengzhou. The Zhengzhou delegation however was intercepted and escorted back to the tobacco plant, ostensibly to negotiate with management. But no settlement was reached. Three more petitions followed, between 2003 at 2008, and all were disrupted by management threats and pressure.

In May 2005, after failing to achieve anything with petitions, the workers, with the help of a law firm in Sanmenxia, filed for arbitration. The workers demanded the restoration of open contracts, equal pay for equal work, and compensation for the loss of income due to the contract changes. The labour dispute arbitration committee (LDAC) upheld all three demands, but the enterprise refused to comply and filed an appeal with the Lushi district court. The court, following Supreme Court directives from 2000 and 2003, refused to accept the case on the grounds that it related to SOE restructuring.

Courts unable to help

Despite the failure to enforce the LDAC ruling, some short-term contract workers did see a slight reduction in wage differentials with their open contract colleagues. However, when the company moved to foist outside labour agency contracts on part of its workforce, the frustrated workers initiated a second round of arbitration, accusing the tobacco company of illegal evasion of the Labour Contract Law. Once again the LDAC ruled in their favour, and once again the ruling had no teeth. “LDAC officials claimed that the ruling would be effective and that we would get legal protection,” Zhang said. “If things did not work out, they said that we could go to court. But nobody could sort this out for us, and we knew that the court would again argue that it does not fall within their jurisdiction, and refuse to handle the case.” Eventually the LDAC too bowed to pressure and dropped the case. In light of all these setbacks, Zhang and his colleagues abandoned their quest for legal redress.

As for the trade unions, Zhang and his colleagues were mystified to find the vice-chairman of the company union sitting alongside and representing management in the arbitration sessions. According to Zhang, he did not even address them. The county and municipal union federations were more forthcoming, however, and offered “strong support,” although in reality they could do little. “In the end we were referred to the chairman of the provincial union federation Li Zhibin, who was also vice chairman of the Standing Committee of the Provincial People’s Congress. Li launched an investigation and the county level union federation delivered a research report,” Zhang said. But, still, no concrete action was taken.

The workers made a direct approach to the county Party secretary who refused to help on the grounds that the tobacco company was managed at the prefecture level and as such he had no influence. They also contacted the media, and the Workers Daily ran the story. It drew some attention but led to nothing.

Workers dispirited

Throughout these proceedings, the company has pressured the workers and threatened them not to create trouble. “Most workers are being pressured by the company and do not dare to speak out,” Zhang said, adding that he too was threatened but; “I never changed my stance. I do not fear the management. If they fire me, I will just go. I’m not afraid.”

At the time of the interview only about 30 of the original 86 workers were continuing their struggle. Zhang was still on an agency contract, with a monthly wage of just 800 yuan, compared with the 1,400-1,500 yuan earned by others doing the same job.

Han urged Zhang to keep fighting: “You cannot just stop trying to safeguard your rights and interests. If you do that, the employer will be able to violate your rights and interests more or less at will in the future. Do you no longer have faith in the legal process and the courts?”

“We have confidence,” Zhang said. “But under the current system, nobody is acting fairly.”


Han Dongfang’s interview with Zhang Liucheng was broadcast in four episodes in April 2009. To read the full Chinese transcript or listen to the audio file of the broadcast please go to the workers’ voices section of our Chinese language website and follow the links.


On 28 October 2000, the Supreme Court’s deputy chief justice Li Guoguang stated:

When enterprises make workers redundant, all issues relating to unpaid wages are specific phenomena arising from the process of enterprise and employment system reform. They are not issues arising from the performance of labour contracts. Therefore, such disputes should be resolved by the competent authorities in line with overall policy provisions for enterprise reform. These cases are not labour conflicts and so should not be heard in the civil courts.

And on 26 March 2003, Huang Songyou, also a deputy chief justice of the SPC, stated at a session of the All-China Civil Law Working Conference:

No collective disputes triggered by wage arrears at SOEs due to state industrial policy or corporate restructuring can be accepted [by the courts] for the present… Persuasion must be used, conflicts must be defused, and settlements reached in coordination
with the branches of government concerned.

These rulings meant, in effect, that tens of millions of laid-off workers were arbitrarily stripped of their constitutional right to seek legal redress through the courts

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