Law and Fair Work in China

Sean Cooney, Sarah Biddulph, Ying Zhu

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135101725
• Edition: 1
• Topic: Social Sciences
• Subtopic: Ethnic Studies
• Index: Social Sciences

China's economic reforms have brought the country both major international clout and widespread domestic prosperity. At the same time, the reforms have led to significant social upheaval, particularly manifest in labour relations. Each year, several thousand disputes break out over working conditions, many of them violent, and the Chinese state has responded with both legal and political strategies.

This book investigates how Chinese governments have used law, and other forms of regulation, to govern working conditions and combat labour disputes. Starting from the early years of the Republican period, the book traces the evolution of the law of work in modern China right up to the reforms of the present day. It considers the structure of Chinese work law, drawing on both Chinese and Western scholarship to provide new insights into its unique features and assess where the law is innovative and where it is stagnant and unresponsive. The authors explore the various legal and extra-legal techniques successive Chinese governments have adopted to enforce work law and the responses of firms, workers and organizations to these practices.

1 Introduction

The immense transformation of China's economy over the last 30 years has generated complex social, political and institutional challenges that would test even the most robust system of government, let alone one emerging from many years of chaos. These challenges include severe water and air pollution, threats to public health from communicable diseases, disputes over appropriate land use, and concerns about food safety.

One challenge which has generated particular controversy – both domestically and internationally – has been to provide a workable system of basic labour standards. Where once Chinese industrial workers were employed overwhelmingly in entities operated on socialist lines, they are now engaged in a wide range of market-oriented enterprises and work forms, no less diverse than those in advanced economies. As work has been marketized, worker protests have proliferated (Lee 2007), often erupting in violence. These protests are frequently the result of abuses such as the underpayment of wages and excessive working hours. They are dealt with in a variety of ways, ranging from suppression to placation. China's leaders have realized, however, that such ad hoc measures do not substitute for systemic responses to the problem. Thus, over the last decade, they have been very active in creating new norms and enforcement methods directed at resolving labour problems in an orderly way.

The stakes are high. Escalating labour violence could undermine rapid growth, shake the Chinese Communist Party's hold over the country and lead to a repeat of the events of 1989. On the other hand, a sophisticated response to the negative consequences of economic transformation may assist the country to continue its trajectory toward widespread prosperity and a ‘harmonious society’. Little wonder then that initiatives in labour regulation are frequent, hotly debated and closely scrutinized by the Chinese authorities.

This study investigates how Chinese governments have used law, and related forms of regulation, to govern working conditions. We examine three themes closely. First, we explore the evolution of the modern law of work in China from its beginnings in the Republican period (1912–1949) to the most recent reforms. We consider what has prompted legal change and what circumstances and ideas have shaped it. Second, we consider the structure of Chinese work law. We look at the scope of the law – who is included and who is excluded – and how work law creates different classes of workers. We also examine the nature of labour standards and identify areas where legal rules have become more sophisticated and innovative, and areas where law has become stagnant and unresponsive. Third, we explore how Chinese governments have sought to enforce the law, whether through formal legal and labour relations institutions or through supra-legal and extra-legal means.

China is large enough, and powerful enough, to devise its own approach to dealing with social problems and this is certainly the case with regard to work law. It is portrayed in Western media variously as a villain in the global struggle for decent work or as an outstanding example of economic success, creating millions of jobs that have radically lowered the incidence of poverty. These broad-brush depictions typically fail to reflect the complex, dynamic and sometimes contradictory processes of creating and implementing work law in the country. This book aims to provide a nuanced account of these processes. Further, while we aim to identify the distinctive features of China's work regulation, we will also note the ways in which it resembles other systems. Notwithstanding the authoritarian nature of its government, China has much in common with other major nations in relation both to the problems it confronts, and the way it deals with them.

In order to examine our three themes, we draw on textual material, field research and the contributions of Chinese and international scholars. We trace the history of fair work law over the last 100 years, giving particular emphasis to the development of the current legal framework, and especially the major reforms introduced in 1994 (the Labour Law) and in 2007–2008 (the Labour Contract Law and related legislation). The current framework has been developed in a period of very great change in the labour market and policies governing it, but not fundamentally in the nature of the regime. This in part accounts for the presence of both continuity and innovation in China's regulatory approach.

The scope and originality of inquiry is encapsulated in the expression ‘fair work law’ used in our title. We will therefore explain what we mean by ‘law’ and ‘fair work’.

‘Law’

This study takes a broad view of what constitutes law; such an approach is particularly important in China where the distinction between legal and policy norms has often been difficult to draw. We examine not only the formal legal system regulating work but how it interacts with other forms of regulation. By ‘regulation’ we mean, as Julia Black has put it, ‘the intentional activity of attempting to control, order or influence the behaviour of others’ (Black 2001; Parker et al. 2004: 1–5). So, while we will certainly examine key statutes adopted by the Chinese legislative organs, such as the Labour Law and the Labour Contract Law, this will by no means exhaust our inquiry. We will consider a broad array of regulatory actors and regulatory measures.

Considering first the role of actors, there are many entities which have issued rules addressing labour issues. These entities include central governmental ministries, as well as provincial and local government legislative organs. They also include firms and unions. Other actors, while generally not empowered to make rules, have been active in interpreting and applying them. This latter group includes, in particular, those concerned with implementation and dispute resolution, such as labour inspectors, mediation committees, arbitrators and judges.

The regulatory measures produced by these actors include those which are legal in orientation, such as statutes setting workplace standards, local government rules on pay and time, and the orders of administrative agencies. However, they also extend to strategies deployed by the state which arguably conflict with – as well as shape – the legal order; for example, mass enforcement campaigns (运动式治理) and ‘grand mediation’ (大调解).

It is important to stress that Chinese labour regulation is in many ways dispersed and fragmentary. While it is possible to identify a formal hierarchy of legal institutions and legal norms in China by reference to the People's Republic of China (PRC) Constitution and the Legislation Law, many actors compete and collaborate within the ‘regulatory space’ (Scott 2001) pertaining to Chinese work relations and the extent of their influence is not merely determined by the formal hierarchy. Thus, it is often not clear in practical terms which measures are of greater applicability. We will encounter this issue of conflicting measures on many occasions in this study.

In analysing work law in China, we have drawn upon the literature of regulation theory. This literature is useful in several ways. First, it assists us in providing a fuller descriptive account of PRC work law. Regulation theory draws attention to sources of norms and compliance processes that are often overlooked by traditional legal analysis.

Second, the regulation literature provides considerable methodological assistance in observing how law operates in practice. The recent rapid development of China's legal framework, coupled with the transformation of China from a planned to a market economy, has resulted in a significant divergence between the letter of the law and its implementation. A study of fair work law in China would be incomplete without an empirical analysis of enforcement practice and some explanation of why enforcement at times diverges so greatly from the text of the law.

Many leading scholars of regulation are empirically oriented; they seek to understand how laws and rules operate in practice. They adopt socio-legal research methods, such as quantitative analysis of empirical data, qualitative interviewing and direct observation of actors (see, e.g. Hawkins 1987; Parker 2002; Haines 1997; Parker and Nielsen 2011). In this book, as explained below, we also draw on empirical research – both our own qualitative interviews as well as a number of other empirical studies – in order to see how regulatory initiatives have been implemented on the ground.

Third, the literature helps us to assess key features of Chinese labour regulation. Much regulatory scholarship is concerned not simply with how regulatory processes work, but how they might be evaluated (see, e.g. Ayres and Braithwaite 1992; Gunningham and Grabosky 1998; Bercusson and Estlund 2008; Lobel 2003: 2146; Estlund 2010). We likewise point to limitations and benefits associated with certain types of regulation deployed in Chinese labour law. However, this is not a normative study, and we do not, except in the broadest of terms, propose ways in which Chinese work law should be reformed.

Despite the usefulness and richness of the literature on regulation, there are some limitations in drawing on it to analyse the phenomena we are focusing on in this study. One concerns the relative lack of regulatory analysis about the implementation of fair work standards (as distinct from their social and economic effects).¹ For example, there have been surprisingly few detailed empirical studies specifically focusing on the enforcement of pay and time rules (contrast the very extensive literature on occupational health and safety: see, e.g. Gunningham and Johnstone 1999). Fortunately for our project, such studies have recently started to appear (see, e.g. Weil 2008; Pires 2008).

Moreover, until recently, there have been few studies attempting to adapt regulatory theory to the Chinese context. This has meant that the analysis of the distinctive characteristics of Chinese regulatory approaches has been underdeveloped. Again, this has begun to change over the last decade, as we discuss below.

A second limitation is that there are several features of regulation in China without exact analogues in the advanced economies where regulatory scholarship has been developed.² For example, Chinese administration is characterized by its tiao-kuai (条块) structure, according to which local officials (including labour inspectors, arbitrators and judges) are responsible ‘vertically’ to the relevant central government ministry and ‘horizontally’ to the local people's congress and local people's government (van Rooij 2002a). This arrangement creates a number of implementation tensions which are explored throughout this book.

Despite the challenges in applying the regulatory approaches used in the advanced economies, insightful studies have shown that the regulation literature still provides guidance on how to describe, observe and evaluate Chinese law. For example, in a groundbreaking socio-legal study on the enforcement of Chinese environmental law in Yunnan, Benjamin van Rooij has mapped the complex motivations of actors, including local governments and local businesses, and their interactions with legal norms (van Rooij 2006b). We have benefited from this work in conceptualizing this study, although we have opted for a broad historical account rather than the detailed case-study approach van Rooij employs.

Other scholars, both Chinese and international, are now conducting empirical work on labour relations. Several studies have documented the widespread non-compliance with Chinese work law (see, e.g. Chan 2001; Sargenson 1999; Lee 2007). Others have cast light on labour relations within Chinese firms, providing an understanding of the interaction between external and intra-firm regulation (see, e.g. Cooke 2005; Zhu et al. 2010; Taylor et al. 2003; Chen and Hou 2008: 347–82). Building on this work, researchers from legal, human resources and political science backgrounds have begun to uncover the reasons why Chinese regulatory agencies fail to secure observance of the law (see, e.g. Gallagher 2007; Thireau and Hua 2005; Cooney 2007; Halegua 2008; Ho 2003, 2009).

Nonetheless, there has not as yet been a study which links questions of enforcement of Chinese fair work law to a detailed examination of its structure. In our view, it is important to take the precise content of Chinese work regulation seriously, rather than assuming that, where labour abuses occur, this is simply a case of the law being ignored. One of the major points we make in this study is that the structure of work law itself permits the abuse of some workers, just as it contributes to the protection of others. It allocates powers to, and restricts, the functioning of labour institutions, makes promises of rights and then derogates from them, and sets up boundaries around categories of workers who are variously included or excluded from its scope. All systems of work law do this to a greater or lesser extent; our goal is to examine the way this occurs in China.

Moreover, not only does the law's structure affect its enforcement, but the converse is also true. Our research shows that enforcement strategies, including extra-legal ones (such as campaigns), have had an important impact on rule-making, stimulating regulatory innovation and expediting legislative drafting that filled gaps and sought to better protect workers. Thus there is a recursive relationship between formulating the law and implementing it.

The recursive relationship suggests that a study of Chinese work regulation should be diachronic, that is, it should examine change over time (compare the comments of Howson 2010; see also Gallagher and Dong 2011). Certainly, the nature of contemporary Chinese work law needs to be understood in relation to its development during the period of economic reform since 1978. However, our investigations show that 1978 was not a blank slate; the law's evolution has a much longer history – with several periods of both remarkable policy openness and sweeping destruction. Norms and practices from the Republican and Maoist eras still resonate today.

‘Fair work’: wage protection and working time

The second term we will clarify here is ‘fair work’. We do not use this expression because we propose to evaluate Chinese work law³ against a postulated ideal, but rather to indicate the kind of work law we are concerned with – that is, ‘fair work law’ or the provision of basic labour standards. Thus the term is used in a definitional sense, one which will be familiar to many readers in jurisdictions such as the United States and Australia where the terms ‘fair labour standards’ and ‘fair work’ are used to refer to the legislation that provides for fundamental worker entitlements. Fair work standards concern many issues in the workplace; our principal concern is with pay and working time, two conditions which have historically been central to improving the lives of working people. We focus on these two conditions, not only because they enable us, in a book of this length, to provide a detailed analysis, rather than a broad-brush account, of how the Chinese legal system has regulated for worker protection, but also because the two conditions are central to much of the contemporary conflict in Chinese work relations. Widespread breaches of pay and working time rules have been a leading cause of labour unrest and social instability in China, and have therefore been the main target of regulatory reform.

Standards on pay and working time have long been core elements of the law of work. They constitute a major part of the traditional focus of the International Labour Organization (ILO).⁴ They have also constituted a long-standing part of the labour and employment laws and normative instruments of all major economies. This is true also of China. To be sure, Chinese work law, like the rest of China's legal system, has been subject to a great deal of disruption in the twentieth century as a result of revolution, invasion and periods of ideological extremism. Nonetheless, China has not been autarkic in the design of its labour standards and we will see evidence of the long-standing influence of international norms.

Wage protection

Pay regulation is commonly understood as being concerned chiefly with setting wage rates for employees, whether through stipulation by the state (for example, in minimum wage legislation), by collective negotiation or individual contracting. While this study does consider processes for determining wages, we also consider another, historically very important, aspect of pay regulation, namely wage protection. As this term is repeatedly referred to in this study, but may be relatively unfamiliar to readers, we explain it in some detail here. Wage protection refers to measures designed to ensure that workers obtain the pay to which they are entitled. This entitlement may be derived from a law stipulating pay rates, but it may also arise from a contractual agreement.

Wage protection measures date from at least the fifteenth century in Europe and were developed in response to employer ‘truck systems’.⁵ These were forms of work in which employers limited the freedom of workers to use their remuneration. Contemporary wage protection laws usually require employers to pay workers regularly, in legal tender, and without arbitrary deductions.⁶ They prohibit bonded labour; for example, outlawing requirements that employees, or prospective employees, deposit a sum of money or other form of surety prior to commencing their engagement. They may also require employers to provide appropriate wage slips and to retain pay records so that payments may be verified.⁷

An important practical reason for examining the development and implementation of wage protection in China is that, as we have explained, unpaid wages (including both base pay and overtime pay) are a major, if not the primary, cause of labour disputes in China. This is not least because many of the abuses that wage protection laws target have been widespread. Our focus on wage protection requires that we examine how the state and other actors ensure that once a pay rate has been determined between an employer and an employee, it is observed. That question does not arise simply in relation to state-imposed pay rates, since most wage protection laws (including China...