BEIJING -- China is putting the final touches on its most significant
overhaul of workplace regulation in a decade, in an unusual process that has
sparked debate on the trade-off between economic growth and worker
China's proposed Labor Contract Law is tentatively scheduled for final
passage in June -- a year and a half after it was presented to the nation's
legislature -- by the standing committee of the National People's Congress.
The draft law was first presented in December 2005, and the standing
committee met in April to discuss it and other pending bills. If passed in June,
the measure is expected to take effect next year. The delay in passing a labor
law has been because of a surprising development in China: The government
solicited public comments on the draft, and it received nearly 200,000 of them.
The debate has been heated at times. Business groups that commented on the
draft law became a lightning rod for criticism by international labor groups,
which accused them of trying to water down much-needed protection for Chinese
But the process shows how China's government is increasingly seeking to
involve interest groups and the public at large in the formation of laws. The
cautious steps toward greater transparency reflect both the state's desire to
retain popular support of its rule and its need to tap a wider base of expertise
to ensure laws are suited to the ever-more-complex economy and society.
The making of laws in China is still largely driven by the political elite.
However, observers say the government has appeared genuinely responsive to
concerns raised by the proposed labor law.
Alexander May, a labor lawyer with Shuang Cheng Attorneys-at-Law in Beijing,
says that while the process generated heated debate among law professors, unions
and companies, the relative openness was widely welcomed. "I absolutely think
the comments had a large effect," he says.
China wants the new law to bring more order to the workplace. Many workers
lack written contracts and often don't receive salaries on time. The government
is also concerned that many workers are being unfairly trapped in short-term
contracts, with little chance of advancement.
Business lobbies are worried that stricter contract requirements could raise
costs and give them less flexibility to hire and fire. They are also concerned
about the major role that China's officially sanctioned trade union, is playing
in the legislative process.
Work on the new law began around 2004, at a time of growing official concern
about worker unrest and widening income inequality. The labor ministry, aided by
China's official trade-union body, drew up the first draft.
Months after the first draft was submitted, China's leaders decided to seek
public comment on the draft -- a rare, if not unprecedented, step. A
public-comment period of one month generated a huge reaction -- 191,849
responses. Most of the comments came from individual workers and Chinese trade
groups, but there were some from foreign companies as well. Among the foreign
voices was Serge Janssens de Varebeke, then-president of the European Union
Chamber of Commerce in China. The "strict regulations" could raise production
costs and "force foreign companies to reconsider new investments or continuing
their activities in China," he warned in a letter to the National People's
Congress last year.
Global Labor Strategies, an activist group based in the US, accused business
groups, including the American Chamber of Commerce in China, of trying to "gut"
April 26, the United Steelworkers, a US union, began a campaign urging some
members of the American Chamber of Commerce in China to distance themselves from
what the union called attempts to undermine the proposed law. Officials of the
chamber deny it has sought to water down labor overhauls. Along with other
business and labor groups in China, the chamber only offered constructive
comments and sought clarification on some points in the original draft, a
One point of contention regarding Chinese labor issues: While the law doesn't
differentiate between foreign and domestic companies, foreign ones are often
held to a higher standard in practice. Last month, for example, media in
Guangdong in southern China accused McDonald's Corp. and Yum Brands Inc., which
owns the KFC and Pizza Hut chains, of underpaying their workers, even though
authorities cleared them of wrongdoing.
After months of deliberation on the original draft of the new labor law,
lawmakers published a new version in late December, with substantial changes.
One of the most significant appears to weaken the role of Chinese trade
unions. A provision in the original draft would have required employers to
submit changes in workplace rules to unions or other employee representatives
for approval. Business groups strongly objected.
In the revised draft, that language has been changed so that employers are
required only to consult unions or other employee groups. The requirement
remains ambiguous, and some employers worry that it still gives unions an
unusual amount of power over personnel decisions.
The second draft also made numerous changes to language governing
more-technical issues such as probation periods, noncompete agreements, layoffs
and collective bargaining.
The American Chamber of Commerce in China says it is mostly satisfied with
how the draft law was revised: The second draft addressed three-quarters of the
issues it raised in original comments in April 2006. There are still worries the
current draft could raise costs for employers by raising requirements for
The EU Chamber of Commerce declined to comment.
"It's still a system of selective transparency," says James Zimmerman, a
lawyer who is chairman of the American Chamber of Commerce in China. He says
foreign companies never got a chance to comment on some other important recent
regulations, including measures governing mergers and