Minimum Wages; Big Differences (Republish)

On my blog, I see a lot of searches for minimum wage standards in China, and I have been waiting for a compiled chart, detailing the wage standards. Given the size of China and the huge variance of economic development, minimum wage standards vary considerably. I need to wait no more as China Herald just posted a piece, in which Fons Tuinstra stated that a team from the Renmin University of China had prepared and made available minimum wage standards of all the provinces and regions. And this work resulted from China’s joining the Global Wage Indicator.

With respect to minimum wage variance, the standards range pretty wildly. For example,

Beijing———– 730.00 Yuan/month; 8.7 Yuan/hour

Shanghai——– 840.00 Yuan/month; 7.5 Yuan/hour

Shaanxi——— 540.00 Yuan/month for Xi’an CBD, and wage standards decrease gradually for less developed areas. In my home town (Chenggu County), the minimum wage is 460.00 Yuan/month.

This is just a sampling of the significant differences in minimum wage standards in China. So, to those who want to know the “minimum wage standard in China,” I will remind them that there is no uniform minimum wage. Luckily, they can go here to view all of the minimum wage standards, broken down to provinces, cities/districts, and counties (in some instances).

Wahaha v. Danone: My Arbitration is Better Than Yours (II)

Remember that Danone joined Wahaha’s chief Zong Qinghou personally as a defendant in the Stockholm arbitration (in May 2007)?

Remember that Wahaha filed for arbitration in Hangzhou Arbitration Commission in June 2007?

Have you been wandering how exactly Zong Qinghou can file a parallel arbitration in China while the original joint venture contract between Wahaha and Danone designated Stockholm as the venue for mandatory arbitration?

Apparently, Zong Qinghou, through the Chinese media, is shedding some light on his lawyer’s strategies behind this legal maneuver. His legal team points out a possibly lethal defense to Danone’s Stockholm arbitration against Zong personally.

As most American lawyers know, the first line of defense is through procedural challenge: jurisdiction or venue. And that is exactly what Zong’s lawyers are doing. They claim that the alleged breach of non-compete and non-disclosure agreements by Mr. Zong falls within the purview of the Chinese labor law, not commercial law since Mr. Zong was in a employment relationship with the Wahaha-Donone joint venture.

They further claim that the Chinese Labor law controls when labor disputes between parties within the boundaries of the P.R.China. See Article 2:

This Law applies to all enterprises and individual economic organizations (hereinafter referred to as employing units) within the boundary of the People's Republic of China and laborers who form a labor relationship therewith.

Upon establishing the proper law to be applied in the dispute between Danone and Zong personally, Zong’s lawyers employed their sharp weapon—arbitration arising under a labor dispute should be inside China pursuant to Article 79:

Where a labor dispute takes place, the parties involved may apply to the labor dispute mediation committee of their unit for mediation; if the mediation fails and one of the parties requests for arbitration, that party may apply to the labor dispute arbitration committee for arbitration. Either party may also directly apply to the labor dispute arbitration committee for arbitration. If one of the parties is not satisfied with the adjudication of arbitration, the party may bring the case to a people's court.

How about that?! Stockholm arbitration suddenly sounds irrelevant with respect to claims against Zong personally.

So what is Danone’s response to that? They countered, according to the report (Chinese only), that the non-compete and non-disclosure agreements were supported by nifty consideration and they should be enforceable. (note: this really makes no sense. Maybe the reporter did not understand Danone’s argument. Let’s assume that Danone did not respond.)

What are its possible responses?
--get around the employment relationship argument
--argue that Zong’s role in the joint venture was multi-faceted and being an employee was a minor part (weak)
--argue that even if the labor law applies, the parties’ original intent was to arbitrate all disputes in Stockholm

Anything else, folks?

Hepatitis B Carriers: Will Chinese Law Protect Your Job & Dignity?

Hepatitis B is the nemesis of more than 100 million people in China. Having this disease often means you face blatant discrimination in your job, career, and education. Due to the large number of people affected by the disease and the “disgrace” associated with it, more and more people have begun to speak out against discrimination of Hepatitis B carriers in China. Thus, on May 18, 2007, the Ministry of Labor & Social Security and the Ministry of Public Health jointly issued an administrative document. Bearing the title, Opinions on the Employment Rights of Hepatitis B Carriers, this document represents the first step taken by the Chinese government in protecting the rights of more than 100 million of its own people. (Applaud!)

This opinion provides that:

Employer shall not refuse to employ or cease to employ a worker for being Hepatitis B positive except for fields of employment as provided in the laws, administrative regulations, and mandates issues by the Ministry of Public Health.

国家法律、行政法规和卫生部规定禁止从事的易使乙肝扩散的工作外，用人单位不得以劳动者携带乙肝表面抗原为由，拒绝招用或辞退乙肝表面抗原携带者。

It also gives the employees a right to privacy and employers even though it recognizes that employers have the right to conduct physical exams.

Overall, this opinion is a feeble measure in light of the magnitude of the problem. For those 100 million plus Chinese folks, it is not just the torture of the disease itself that wears them down; what is worse is the stigma associated with Hepatitis. And the worse of all, their livelihood is in jeopardy just because they have the disease. Stronger and more comprehensive legislation must be introduced to protect the rights of more about 1/10 of the Chinese population.

Currently, a new law, Employment Enhancement Act (Draft) (《就业促进法》（草案)）(Chinese only), which is under debate and consideration in the National People’s Congress, does contain prospective measures aimed at employment discrimination in Article Five:

Employees shall not be discriminated on the basis of nationality, race, sex, religion, age, and physical disability.

草案第五条第二款规定：“劳动者就业，不因民族、种族、性别、宗教信仰、年龄、身体残疾等因素而受歧视。”

Prominently missing from protection under this proposed law is discrimination of people with Hepatitis B.

These 100 million strong people deserve equal treatment, a right to employment, a right to a decent livelihood, and most importantly social dignity which often flows from employment, education, and a decent livelihood.

Besides ending with a plea for protection for these folks, I also want to recount one of my personal encounters with a Hepatitis B carrier. It is one that I shall never forget.

She [to protect her identity, I will not reveal her identity] was my best friend’s girlfriend. Young, pretty, diligent, and smart. After years of study, and after passing the grueling Chinese college entrance exams, she made it into her dream college in the wondrous city of Wuhan, Hubei Province.

One day, I got an emergency phone call from my best friend, who was in a state of shock and panic. He pleaded for help for her girl friend, who just arrived in Wuhan for official enrollment. When she got to Wuhan, the school notified her that she had to go through a physical exam. That notice was like lightening out of the blue, or in Chinese, a bucket of cold water over her head that chilled her burning desires to embark on a path to a bright future for a country girl. The notice had put her hopes, dreams, and the possibility of a decent life in jeopardy because she is a Hepatitis B carrier. If the physical revealed her little secret, her acceptance to the college would be revoked.

In China, when your best friend calls for help, you do whatever you can to help. As simple as that. I had to find a solution for my best friend’s girlfriend. [Before I proceed further, I plead 5th Amendment protection. ] Someone came up with the brilliant idea of finding someone that looks like my best friend’s girlfriend, and let the look-alike go for the Hepatitis B part of the physical…

Yes, you guessed it. A replacement was found and my best friend’s girlfriend kept her little secret and a chance to a better future.

Years have passed since the date of that physical exam. I have always struggled with that incident. Something seemed wrong and out of place. She should not have to hide a medical condition probably caused by an incompetent doctor or nurse. She should not be robbed of a chance to a better life if she had not committed fraud.

So, will the Chinese law protect people like her in their employment and safeguard their sense of dignity?

It should. But I don’t know.

China’s New Labor Contract Law (II)

After the promulgation of the Labor Contract Law of the P. R. China, the legal community interested in Chinese law is abuzz with excitement and curiosity. For those who have not been able to view the full text in English, get it here. If you can read it in Chinese, get it here. Further, I suggest that you read the Labor Contract Law in conjunction with the Labor Law of P. R. China, and for that in Chinese view it here. (English version, here.) If you are a labor and employment lawyer in need of a thorough understanding of Chinese labor law, you might also want to read the Ministry of Labor’s Several Opinions on the Implementation of the Labor Law of the P. R. China (Chinese only). For regulations on minimum wage in China, you may want to read the order issued by Ministry of Labor and Social Security in 2003. (Read it here.)

Sweeping the New Labor Contract Law is on paper, but I agree with the sentiment expressed by Dan Harris of China Law Blog where he stated “Enforcement is Key.” As the law aims to extend protection to multitudes of workers from China’s vast countryside, enforcement of this law would be more problematic since so many of those from the countryside sleep on their rights for many reasons. They might simply not know what their rights are; or, they might not care to have their rights protected for the sake of getting or keeping a job.

For another comment I wrote on China's Labor Law, please read:

What Foreign Companies Need to Know About Chinese Labor Law

China’s New Labor Contract Law (I)

On June 29, 2007, the Standing Committee of the National People’s Congress passed the new Labor Contract Law of the P. R. China (“Labor Contract Law”). After four committee rounds of reading, consultations, and 190,000 or more public pieces of comments, the new law will go into effect on January 1, 2008, and it is expected to be a milestone for protecting workers’ rights across China.

Through a series of blog posts, I intend to introduce a snapshot view of the key clauses set forth in the Labor Contract Law. I hope that readers will have a better understanding of what the new law requires and expects of parties to an employment relationship, and that the enactment of another piece of legislation is but one small step forward in China’s long struggle to build a country under the rule of law.

Statutory Scope of the Labor Contract Law

This law applies to all corporations, privately-owned entities, Private, non-enterprise units and organizations who establish labor employment relationship with workers. Likewise, government agencies, institutions and social groups must comply with the labor contract law in their labor employment relationship with employees.

The net cast by the legislators is wide enough to afford broad protection to employees, workers, especially migrant workers from the countryside. Prior to the enactment of this law, most migrant workers enjoyed little to no legal protection, and they fell through the crack of the Lab law. In recent years, there have been widespread practices of abuses, mutilations, and downright savage treatment of those migrant workers. The slave worker scandal that broke out last month in Shanxi and Henan Province involved hundreds of migrant workers being abducted or forced into slave labor with little to no pay. The savagery gripped the world and shocked conscience of the country. At the same time, it revealed the extent of labor abuses despite the existing labor laws and regulations. In a sense, this law could not have arrived at a better time.

How to Protect Your Trade Secrets in China?

There are four major regimes of intellectual property: trademark, patent, copyright, and trade secret. Trade secrets are the oldest and probably not most recognized form. Your trade secret is likely one of the most important things that gives you an edge in your success and survival amongst fierce competition. If you take your business into China, that still rings true. Thus, an understanding of the law of trade secrets in the P. R. China is essential in order for your to protect your trade secrets.

Unlike the United States, China does not have an unified body of law addressing the protection of trade secrets; in stead, trade secret protection laws are scattered in a few pieces of legislation, and the complexity of which warrants dedicated attention.

Definition of Trade Secret

Trade secret is defined as, pursuant to Several Regulations on Prohibiting Actions of Infringing Trade Secrets (《关于禁止侵犯商业秘密行为的若干规定》)

any formula, pattern, device, machine, process, technique, compilation of information, or program (referred to collectively as proprietaryinformation)

Regulations/Laws on Trade Secret

An article I ran into succinctly and accurately lays out the relevant laws on trade secret, I will try to shorten the pithy parts of it.

1. Article 10 of the Anti-Unfair Competition Law states that a competitor is prohibited from using the following measures to infringe upon another's trade secrets:a) To acquire the owner’s trade secret by theft, intimidation, or other improper approaches;b) To disclose, use, or allow others to use the owner's trade secrets that have been obtained through the above methods;c) To disclose, use or allow others use the trade secrets which breach the agreement or requirements of the owner.

It is considered a trade secret infringement for any third party to acquire, use or disclose another's trade secrets under the condition that he acknowledges the existence of illegal behavior as set forth in the above clauses.
Article 25 of the Anti-Unfair Competition Law further stipulates the penalties for violations under Article 10.

2. Article 22 of Labor Law of the P. R. China allows an employer to include a clause in an employment contract clause that affords protection for the employer's trade secrets. And a typical such clause appears in the form of a confidentiality agreement, which prohibits an employee from disclosing the employer’s trade secrets at the end of his/her employment.

3. Article 118 of the General Principle of Civil Law, Article 43 of the PRC Contract Law, and Article 219 of the Criminal Law.

Protective Measures

The same article quoted above suggests excellent ways to protect your trade secrets. It states:

it is important to keep the trade secrets conforming to the special features that are prescribed by the law, that is, unknown to the public, with business value and kept in secret. In the event of a breach, this allows for a legal basis for prosecution. For example, if a company leaves the trade secrets in unlocked file cabinets in unrestricted areas of the company, or leaves the documents disclosing trade secrets in garbage cans without shredding the documents, then they have more difficulty establishing that the trade secret was to remain unknown to the public or has high commercial value. It is sometimes surprising how many companies are susceptible to such a simple mistake. It is quite easy and inexpensive to establish such internal protective measures and with a documented policy on how such materials are to be handled, there becomes a point of reference for a court to base prosecution on.

Then, it provides practical steps to safeguard your trade secrets:

A. Maintain documentation that you are the legitimate owner of the trade secrets that you seek to protect.

B. Establish an internal trade secrets protection system:
Have a written trade secret plan and follow the plan
Train your employees on the protection of trade secrets
Sign and enforce confidentiality agreements

What Foreign Companies Need to Know About Chinese Labor Law

Fast Food Giants in Chinese Hot Water

Kentucky Fried Chicken and McDonalds both grabbed news headlines in China in the last few weeks. This time, they were not noted for their famed fried chicken or burgers; they were in trouble with the Chinese authorities for alleged violations of local minimum wages regulation in the Southern province of Guangdong.

Forbes has an excellent article, reporting the allegations of violations:
A newspaper in the city of Guangzhou had charged that McDonald’s and two chains owned by Yum! , KFC and Pizza Hut, were paying their workers, mainly students, wages as much as 40% below the local minimum for part-timers of 7.5 yuan (97 cents) an hour.

According to provincial labor authorities in charge of investigating the alleged violations, the foreign companies did not violate local minimum wage regulations. But, the companies were cleared only because that the minimum wage protection does not extend to college students, who make up a large portion of the two companies stores in Guangdong province.

Negative Impact

Any PR specialist would probably conclude that the events unfolded in China constitute a PR disaster for the two fast food giants in the local market. And the local market, unfortunately for the companies, is one of the world’s fastest and most important markets for them. Even though they have been cleared for the minimum wage issue, they have not for alleged working hour violations. As the corporate executives in America wait for the other shoe to drop, the damage might have already been done to the companies involved. To the Chinese consumers, the companies look just like what Karl Marx described in his treatise on the cruelties of capitalists, greedy, blood thirsty creatures that suck every ounce of value out of their workers…

To mitigate the negative impact of the bad press, both McDonalds’s and Yum! agreed to more unions in China. The New York Times reported on April 10, 2007 that McDonald’s, following the footsteps of Wal-Mart, gave into governmental pressure and agreed the formation of unions in its 750 outlets in China.

In light of the recent events, foreign companies are likely to remain under scrutiny of both local government authorities and consumers. China Business Blog states that:

The All China Federation of Trade Unions (ACFTU) is planning to get 80 percent of foreign companies to sign up by the end of 2008, and anyone running an MNC in China might want to plan for the day when they knock on the door - and to make sure, well in advance, that the Union rep (or the undercover reporter that precedes him) will not find any low-hanging fruit in which to stew the company at China’s most efficient court – the Court of Public Opinion.

Lessons for McDonald’s, Yum! and Everyone Going to China

1. Know the Chinese Labor Law

Like many other laws and regulations, the Chinese regulations over labor issues are very complicated. The most fundamental piece of legislation is the Labor Law of the People’s Republic of China (“Labor Law”). Chapter Five of the Labor Law sets the standards for wages, and it states as follows:

Art. 48 China hereby institutes a minimum wage protection system. Minimum wage standard is to be determined by the government authorities in provinces, autonomous regions, and municipalities. And such governments shall register minimum wage standard with the State Council.
Employers shall not pay wages lower than local minimum wage standard.

Art.49 When ascertaining and adjusting minimum wage standard, local governments consider comprehensively the following factors:
(1) Employee’s situation and minimum living standard;
(2) Average wage level;
(3) Production rate;
(4) Employment situation;
(5) Economic development differences between regions.

In addition to the Labor Law, the Ministry of Labor Social Security issued the Regulation on Minimum Wage (“Wage Regulation”) in January 2004, which came into effect on March 1, 2004. Wage Regulation states:
Art. Five Minimum wages standard shall apply in two forms, monthly minimum wage and hourly minimum wage. Monthly minimum wage standard applies to full time employees; hourly minimum wage standard applies to part time employees.
Art. Six When ascertaining and adjusting minimum wage standard, local governments consider local minimum living expenses, city and township consumer price index, worker social security deduction and housing deduction, worker average wages, economic development level, and employment situation.

2. Due Diligence

As shown above in the Labor Law and Wage Regulation, local government (on the provincial and similar level) is left with the discretion to set the minimum wage standard. Therefore, minimum wages can differ significantly from province to province. Variations of minimum wage standards could be a source for trouble for foreign companies. Needless to say, both McDonalds’ and Yum had their first rate in-house counsel, large international law firm counsel, as well as local Chinese counsel examine labor regulations in different regions of China. However, somehow, somewhere details still failed them.

In addition to seeking legal counsel, foreign companies need to take additional due diligence measure to avoid brushes with the Chinese authorities, and more importantly bad PR in the Chinese press.

a. Communication with Local Department of Labor and Social Security
Wages Regulation stipulates in Article Four that people’s government above the county level bears the administrative responsibility of enforcing the minimum wage compliance. Therefore, it should serve a foreign company to have a local agent to seek clarification from relevant enforcing government bodies regarding minimum wage standard in specific regions.

b. Union organizations are given a rule in the enforcement of the minimum wage standards in China too. Specifically, union bodies have the legal right to report violation and request enforcement actions from relevant administrative government labor agencies. So, communication and corporation with such union organizations in labor matters such as minimum wages, working hours would also benefit foreign companies.

3. Doing More Than the Minimum

As a direct result of the alleged violations of McDonalds’ and Yum, foreign companies are likely to remain under the microscope for a long time. Providing local employees more than what is the minimum could be a proactive action against possible allegations of wrong doing. Compliance with the law is one matter; provisions beyond minimum local governmental requirement is quite another in that it proactively dispels suspicions of violation simply because working for a foreign company means higher wages (This is actually the overall general impression among professionals in China.). Meanwhile, higher wages and better pay packages will tend to attract top notch Chinese talents.