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“Western Fast Food” chains violate minimum wage laws

Discussion about workers’ rights and Labor Law in China has again come to focus on large multi-national companies. In February this year, a few journalists from Guangzhou’s New Express on their own initiative went to investigate working conditions at McDonald’s, KFC and Pizza Hut. Several of them posed as students and worked at several facilities. They found that all three fast-food outlets were seriously underpaying their part-time employees. Under Chinese law, part-time employees are entitled to much higher hourly wages than full-time employees because they do not receive the benefits, insurance and stability that come with a full-time position.

Their expose investigative report was published on March 28, and the media jumped on this issue, and the scandal was widely broadcast stirring up great public interest. Some people expressed disgust at the foreign bosses; some were cynical that the union had done nothing, some were sympathetic to the companies. What looked like an open-and-shut case turned out to be a complicated one. Are these companies paying lower than the legal minimum wage to its employers who are mostly university students working part-time, who often-times work many hours?

What ensued was a technical debate over whether these university students are actually covered by the Labor Law. The companies argued that these students were not employees because they were hired under the “work-study program”. As will be discussed in the translated interview with lawyer Liang Zhi, “Western Fast Food” companies claimed that the minimum wage laws do not apply to students working part-time, based on an ambiguous section in 1990s regulation which states that students working part-time cannot be classified as “employed”. Liang Zhi explains the historical context of this law, and points out that students should still be protected by all laws and regulations. From this, we can see that Chinese law still has many loopholes, making it difficult to effectively protect the rights of all workers. The China’s laws have not kept up with the rapid change in the nature of the country’s economy.

To give some indication of the various responses to this issue, we have translated four articles:

  1. One of the earliest reports from Guangzhou’s New Express, which outlines the seven areas in which the three “Western Fast Food” companies violate China’s laws and regulations
  2. An interview with Liang Zhi, one of the four main lawyers with the Chinese Lawyer’s Association
  3. A statement from the Chinese Ministry of Labor and Social Security, issued about a month after the story broke
  4. An article outlining the All-China Federation of Trade Unions’ (ACFTU) stance on the issue

The Guangdong Provincial Labor Bureau and the Guangdong Provincial General Trade Union declared they would carry out a joint investigation. While waiting for the results the ACFTU in Beijing took a very adamant position stating that the law was being violated. Meanwhile the provincial trade union negotiated with the companies to allow it to set up union branches in their fast-food facilities while still insisting that the student were covered by the law regulation part-time workers. The investigation was carried out in 21 cities and took some time to be released.

When the result was released on April 10, different actors took different positions over the issue. Lawyer Liang Zhi argues that these companies are clearly violating the law. The Ministry announced that the students did not come under the Labor Law. It merely pledged that they should work towards perfecting the law and improve enforcement. On the other hand, the ACFTU continued to insist that the students should be protected as if they were regular part-time workers.

The issue then petered out. The New Express seems to have dropped the issue. The Guangdong trade union successfully negotiated with McDonald’s to establish trade union branches in its Guangzhou restaurants in the next half-year. (The ACFTU has already set up union branches at McDonalds in other provinces, including Shanghai, Jiangsu and Anhui.) Now that the union has branches in the fast food outlets it is not sure how the back wage issue is being resolved or whether the employees are getting higher wages. It is just hoped that the trade union’s concern did not stop at having set up trade union branches. It is hoped that the Guangdong union did not just grab the opportunity to promote its image as “protector of workers’ rights”.

We learn a few things from this case. First, the power of the media in this case is note-worthy. This issue was brought to light purely due to journalists’ self-initiated investigative reporting. Wide media coverage in March and April created a lot of public attention and pressure on the “Western Fast Food” companies’ reputation in China. Secondly, legal opinions from labor lawyers also have a place in labor issue debates. Thirdly, we also saw a variety of different opinions expressed by different sections of government (here the ACFTU is classed as government).

The actors whose voices are still missing from public debate are the university students working in these companies. They have not taken the opportunity to step forth to say their piece, less still to fight for their rights. On the second day after the expose report came out, KFC retracted all existing contracts with its employees and made everyone sign new once back dated to January. Everyone complied obediently. The US 60 cents an hour wage was too valuable for them to lose.

By ruling that the students are not technically “employees” the Labor Ministry has saved the three fast-food companies some millions of dollars since together they hire some 151,000 people in China. The back wages and penalties would have added up to an enormous amount. Guangdong simply couldn’t create a precedent like this.

PDF version of introduction
CLNT_McD_KFC_intro.pdf [83.15KB]

Here are the translated articles

1) “Renowned lawyer claims three fast food giants are breaching the labor law in seven ways
CLNT_McD_KFC_original_report .pdf [94.63KB]

2) “Part time student employees are workers too!
CLNT_McD_KFC_lawyer_comments .pdf [92.76KB]

3) “Ministry of Labor and Social Security declares position on the fast food part-time employee issue
CLNT_McD_KFC_ministry_statement.pdf [72.79KB]

4) “The union’s perspective on securing workers’ rights through struggle against Western fast food companies
CLNT_McD_KFC_union_editorial .pdf [84.63KB]

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