Opinion: How to deal with trade unions
December 19, 2012 | BY
clpstaff &clp articles &Many foreign-invested companies have delayed establishing trade unions, but as the government pushes harder on this issue, unionisation and collective bargaining will become unavoidable
Employee unionisation is high on the human resources agenda for multinational companies in China. Increasing pressure is coming from the Chinese government through the All China Federation of Trade Unions (ACFTU) and all levels of government-supported trade unions, to establish trade unions and enter into collective bargaining agreements.
Under the PRC Labour Union Law (中华人民共和国工会法), employees have the right to form an enterprise trade union if their employer has 25 or more employees. The formation of the union is guided, supported and controlled by the government-supported upper-level trade union. This gives the government an ability to exercise indirect control over any enterprise trade union.
The employer's role in the union formation process is to provide support and cooperation to its employees. It must not obstruct the upper-level trade unions from setting up a union within the company and may face regulatory pressure from the local authorities if it attempts to do so. For many multinationals, this can be a frustrating situation, particularly when their employees show little interest in establishing a union.
|Increasing pressure
Trade unions have historically maintained a low profile and employees in foreign-invested enterprises established by multinational companies have had little motivation to form a union. Nevertheless, the ACFTU and the upper-level trade unions frequently push companies to establish unions. Any foreign-invested enterprise with 25 or more employees can expect a visit by the upper-level trade union, which is likely to lobby for the establishment of a union, regardless of the level of interest shown by the company's workforce.
This pressure shows little sign of slowing as the approach by the ACFTU and the labour authorities since 2010 has become increasingly aggressive. The ACFTU has expressed its aim to establish unions in 90% of enterprises and 95% of foreign-invested enterprises by the end of 2013, as well as to enter into collective bargaining agreements with 80% of all enterprises that have trade unions and with all the PRC-based subsidiaries of the top 500 companies. The ACFTU and all levels of government-supported trade unions have spared no effort in pushing enterprises to set up trade unions, and support such unions to conduct collective bargaining on behalf of employees.
If the pressure from the ACFTU and upper-level unions is successful, what benefit is there for employees? The role of an enterprise trade union includes involvement in discussions about major operational decisions and employment-related rules and to provide support to employees in cases of unilateral or collective dismissals. In addition, they will conduct collective bargaining with employers on behalf of the workforce.
It remains to be seen whether the unions will in fact secure any substantial improvement in employment terms and conditions through collective bargaining. The experience to date is that most collective agreements between foreign-invested enterprises and unions have simply maintained the minimum conditions imposed by the PRC Employment Law (中华人民共和国劳动法), which the majority of foreign-invested enterprises comply with anyway.
|Collective dismissal
Nevertheless, employers will be wary of the potential power of trade unions. It is widely expected that unions will play an increasingly important role during collective dismissals. The relevant union must be informed and consulted before the implementation of any collective dismissal plan – failure to do so could mean the local labour authority will not approve the plan. Although the union's consent is not a legal requirement, in practice a positive response from the union is likely to be needed in order to secure the approval of the local labour authority. Maintaining a good relationship with its enterprise trade union will therefore be critical to the smooth operation of any foreign-invested enterprise.
|Action by employers
So what are employers doing in the face of this push to establish trade unions and enter into collective agreements? Many companies have tried to buy themselves time, cooperating with any requests but in practice making fairly slow progress towards union establishment and collective bargaining. However, this is a temporary measure and it is likely that more concrete measures will be expected. The local governments in several cities have issued regulations stating that a trade union preparation fee, amounting to 2% of total payroll, will be payable by a company to the upper-level trade union if it delays establishing a union. This approach, combined with the potential threat of the labour authorities applying pressure in other ways, means that the issue will remain high on the HR agenda for some time to come.
Kathleen Healy and Claire Pan, Freshfields Bruckhaus Deringer, Hong Kong
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