Brief Description of Employees’ and Employers’ Associations
In China, trade union is the main association of employees, and the All-China Federation of Trade Unions is a national-level organization that reports directly to the Chinese Communist Party. Regarding the employers’ association, the China Enterprise Confederation is the sole representative from China within the International Organization of Employers.
In China, all trade unions are under the leadership of the All-China Federation of Trade Unions (“ACFTU”). ACFTU is a national-level organisation that reports directly to the Chinese Communist Party and has branches at the provincial, city and district levels.
Technically speaking, an enterprise does not have to take positive action to establish a trade union. However, if its employees request for the establishment of a trade union, the enterprise cannot obstruct the process. In practice, local ACFTU branches have been observed increasingly pressuring enterprises to set up trade unions from the top town.
In the case of Wal-Mart, the ACFTU publicly condemned Wal-Mart for refusing to establish trade unions and threatened to file a lawsuit against Wal-Mart. In 2006, almost 30 Wal-Mart employees requested to have a trade union instated, which led to the formal establishment of a trade union at Wal-Mart.
The China Enterprise Confederation (originally known as the “China Enterprise Management Association”) and China Enterprise Directors Association (the “CEC/ECDA”) are non-profit national organisations that are registered with and approved by the Ministry of Civil Affairs of the PRC.
The government department responsible for overseeing the CEC/ECDA is the State-owned Assets Supervision and Administration Commission of the State Council. The CEC/ECDA have legal person status and are created to promote reforms within enterprises, improve management within enterprises, act as a liaison between enterprises and governments and protect the legitimate rights and interests of enterprises and entrepreneurs.
CEC is the sole representative from China within the International Organisation of Employers. Currently, most provinces, autonomous regions and municipalities, which are directly under the central government, various national industry departments, industrial cities and tens of thousands of large and medium-sized business have established their own enterprise management associations. The number of enterprises with such management associations has reached hundreds of thousands. These various associations comprise an interconnected national system of management associations.
Rights and Importance of Trade Unions
Trade unions are responsible for safeguarding the legal rights and interests of employees. They can suggest, negotiate, or form collective contracts with employers.
The fundamental rights and responsibility of trade unions is to safeguard the legal rights and interests of employees. Specifically, trade unions should i) harmonise employment relationships and safeguard the rights and interests of employees by conducting equal negotiations for employees and forming collective contracts; ii) organise and coordinate employee participation in democratic decision making, democratic management and democratic supervision according to relevant law and via the employee representative congress or other channels; and iii) maintain close contact with employees, listen to their views and demands and forward the same to the management of employers, exhibit concern for their daily lives, help them resolve difficulties and serve them wholeheartedly.
An enterprise may form collective contracts with its trade union (or its elected employee representatives if the enterprise has no trade union). If a union or an elected employee representative submits a written request to engage in collective bargaining, the employer generally cannot refuse without just cause.
Collective contracts are binding on the employer and all of its employees. Accordingly, individual employment contracts cannot include standards that are lower than those set forth in the collective contracts. However, it is possible to have terms in individual employment contracts that are more favourable to the employees than what the collective contracts provide. If an employer violates the collective contract and infringes upon the employee’s interests, the trade union may insist that the employer should bear the burden of liability. If there is a dispute arising from performance of the collective contract and it cannot be resolved through negotiation, the trade union may file for arbitration and litigation in accordance with the law.
Types of Representation
The employee congress and employee representatives’ congress are the basic forms in China for enterprises’ democratic management, and trade unions are the operating organ of them.
Employee Congress / Employee Representative Congress
The trade union is the operating organ of the employee congress and employee representative congress (the “EC/ERC”) and is responsible for carrying out their routine activities. The EC/ERC are the basic forms in China for enterprises to exercise democratic management, and for employees to exert their rights to participate in democratic management.
In China, state-owned enterprises usually establish a trade union and EC/ERC, and private businesses are also encouraged by the government to a establish trade union and EC/ERC. In practice, private businesses, if they would like to have a trade union, usually establish a trade union and organise the EC/ERC only when necessary. In Shanghai, where an enterprise’s total number of employees is fewer than 100, the enterprise usually needs to organise an EC instead of an ERC. Local governments in various regions of China (such as Shanghai and Gansu province) may have different provisions on how to convene and hold the EC/ERC .
When an enterprise creates or revises internal policies or makes other decisions on major matters that directly affect employees’ interests such as issues related to remuneration, working hours, rest periods and off days, work safety and health, insurance and welfare, staff training, labour discipline and work quota management, etc. it should discuss such matters with the ERC or all its staff. Employees should be given the opportunity to make proposals and provide their opinions in this process, and the employer should hold fair negotiations with the trade union or employee representatives before finalising any decision. During the implementation of any internal policies or major decisions, the trade union or the employees have the right to raise their concerns with their employer on any inappropriate issues. Such issues will be corrected and addressed through negotiation, but the employers retain the right to make the final decision. Employers should announce or notify their employees of any decisions on internal policies and major matters that directly implicate the interests of employees.
Employee representatives shall be elected through the democratic process for the ERC. The number of employee representatives is determined based on the percentage of total employees, but there should be at least 30, pursuant to the Regulations of Shanghai Municipality on Employee Representatives Congresses.
According to the Regulations of Shanghai Municipality on Employee Representatives Congresses, the voting process of employee representatives shall be held when at least two thirds of the total employees in the electorate (determined by different branches, departments, etc.) are present and the candidate shall at least receive a majority of the votes in the electorate, in order to be the representative. It is also required that employees’ representatives shall be composed mainly of grassroots employees and the number of middle and senior management personnel, usually, shall not be greater than 20% of the total representatives. In addition, the ratio of female representatives shall generally match the ratio of female employees in the company.
General Assembly of Union Membership / Union Member Representative Congress
The general assembly of union membership or the union member representative congress (the “GAUM/UMRC”) is the power and authority of a trade union, which is held once or twice a year. The representatives of the UMRC are democratically elected among union members. Trade unions with members fewer than 100 should convene a GAUM.
The functions and powers of the GAUM/UMRC include reviewing and approving work reports and financial reports from trade union committees (the “TUC”) and work reports from finance scrutiny committees (the “FSC”). They are also responsible for electing the members of the TUC and FSC and removing the elected representatives or TUC members.
Trade Union Committee (“TUC”)
TUCs are the permanent body of and answerable to the GAUM/UMRC. Elected by either the GAUM or the UMRC, the TUC should report its work to and subject itself to the supervision of GAUM/UMRC. A trade union with more than 25 members should establish a TUC. A trade union with fewer than 25 union members may establish a TUC by itself, jointly establish a TUC with other trade unions, or elect one person as a union organiser to coordinate union members in the performance of union activities. If a trade union has a large number of female members, a female trade union committee can also be established in addition to the normal TUC. If a trade union has few female members, the TUC can reserve spots for female members to ensure that they are represented.
Finance Scrutiny Committee (“FSC”)
Trade unions should set up a system of scrutinising and monitoring their budgets, financial accounts and funds according to independent accounting principles. Unions of all levels should establish FSCs. FSC members are elected by the GAUM/UMRC. The election results should be submitted to the high-level union for approval. The FSC will be responsible for reviewing the expenses and income of the unions. The results of these reviews should be periodically reported to the GAUM/UMRC for monitoring purposes. The GAUM/UMRC has the right to present their views about the use of union funds and, if necessary, implement changes or amendments.
Unions receive their funding from a variety of sources including i) union fees paid by union members; ii) fees allocated to unions by enterprises, public institutions and government authorities, which have established trade unions (they are typically required to set aside 2% of the total employee wages per month to the union); iii) a certain percentage of profits from the union’s enterprise or public institutions; iv) subsidies from the government; and v) other income. Union funds are typically used to serve employees or for union activities.
Trade Union President, Deputy President and Committee Member
The trade union president or deputy president is elected either by the GAUM/UMRC directly or by the TUC. Dismissal of the president or deputy president requires convening the GAUM/UMRC for discussion. The dismissal must be supported by a majority of the GAUM/UMRC members to pass.
Enterprise trade unions with more than 200 employees can appoint a full-time trade union president. The labour contract terms of full-time trade union presidents, deputy presidents or committee members are automatically extended on the date they take office. The length of the extension is equal to the term of office. If a non-full-time trade union president, deputy president or committee member’s residual employment term is shorter than their office term, the employment term will be automatically extended to the expiry date of the office term. These extensions do not apply where the president, deputy president or committee member commits an act of serious misconduct or reaches the statutory retirement age.
When the term of office of trade union presidents and deputy presidents has not expired, they shall not be arbitrarily transferred to other positions. When it is necessary to transfer due to work needs, the consent of the TUC and the higher-level trade union should be obtained.
Tasks and Obligations of Representatives
Generally speaking, representatives shall listen to employees’ opinions and suggestions, and express employees’ wishes and requests.
According to the Regulations of Shanghai Municipality on Employee Representatives Congresses, employee representatives shall: i) learn and propagate among employees relevant laws, regulations and policies, improve their own qualities, reinforce the ability of participating in democratic management, and performing duties properly; ii) communicate with employees in the electorates, listen to employees’ opinions and suggestions, and express employees’ wishes and requests; iii) implement ERC resolutions and properly complete all work assigned by the ERC; iv) promptly circulate information about the performance of their duties and their participation in ERC activities, and accept the assessment and supervision by employees; and v) observe the employer’s rules and keep the employer’s trade secrets confidential.
Employees’ Representation in Management
The companies having the board of supervisors shall include an appropriate number of employees’ representatives in them. Companies with more than three hundred employees, excluding those that have legally formed a supervisory board with employee representatives, must include employee representatives in their board of directors. Additionally, state-owned enterprises are also required to have employee representatives in their board of directors.
According to the PRC Company Law, the board of supervisors shall include shareholders’ representatives and an appropriate number of employees’ representatives; the ratio of employees’ representatives shall not be less than one-third, and such ratio shall be stipulated by the articles of association of the company. Employees’ representatives sitting on the board of supervisors shall be appointed by company employees via an ERC or EC or other forms of democratic election.
For limited liability companies and companies limited by shares with more than three hundred employees, they shall either legally establish a supervisory board with employee representatives or include employee representatives among the members of their board of directors. Employees’ representatives who sit on the board of directors shall be appointed by company employees via an ERC or EC or other forms of democratic election.
Lastly, limited liability companies invested and incorporated by two or more state-owned enterprises or by two or more state-invested entities, shall have employee representatives in their board of directors. For entities solely owned by the state, there shall be an employees’ representative appointed as board director. Other limited liability companies or companies limited by shares may opt to have employee representatives in their board of directors.
Other Types of Employee Representative Bodies
Grassroots Chinese Communist Party federations may also help employees to resolve employment disputes.
Apart from the abovementioned employee representative bodies, grassroots Chinese Communist Party (“CCP”) federations could also help employees to organise, receive information concerning the employees’ appeals and provide assistance to resolve disputes between employers and employees, in order to establish and maintain harmonious employment relationships. According to the CCP Constitution, any employer with more than three CCP members shall establish a grassroots CCP organisation. In addition, PRC Company Law provides that employers shall provide the necessary conditions to facilitate the CCP activities.
