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Chinese students go undercover to investigate Coca Cola

Student beaten by manager when he asked for his wages

CLNT Editorial: 16 September 2009

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CLNT Coca Cola editorial

In this issue of CLNT, instead of providing a translated article as usual, we bring you the latest news from an unusual and groundbreaking campaign by mainland Chinese student activists, in support of workers at Coca Cola bottling plants. In August 2008, students from several mainland Chinese universities established a Student Coca-Cola Campaign Team (blog in Chinese: http://followcoca.blog.163.com/). Their purpose was to contribute to improving the working conditions of dispatch workers at Coca Cola bottling plants in China. Their method was to take jobs as ordinary workers, and to collect data based on their direct experience, with the goal of publicizing any labor abuses they encountered. In mid-2009, the student campaign team followed up with a second round of undercover factory investigations. Unfortunately, a student was beaten up by two managers of the labor dispatch company that hired him, when he resigned his job and asked for payment of outstanding wages for himself and two fellow workers. Now Hong Kong-based NGO Students and Scholars Against Misbehavior (SACOM) has launched an international campaign in support of the students, demanding that Coca Cola improve working conditions for dispatch workers in its bottling plants, and pay the medical expenses incurred by the injured student.

The students did not choose to focus on Coca-Cola because it was a “foreign company” or because it was the worst exploiter of dispatched labor. However, like students who have campaigned against corporate abuses in other countries, they knew that the unique Coke brand gave Coca-Cola visibility and made it potentially vulnerable to public pressure. Also, as large employers, Coca-Cola and its subsidiaries have an important influence on industrial relations standards in China.

Dispatch labor at Coca Cola bottling plants
A well-publicized incident in April 2008 exposed that one Coke bottler in southwestern China was evading the recently implemented national legislation intended to reform the labor contract system in China. According to Radio Free Asia, instead of providing permanent work contracts to its long-term employees in distribution and warehousing, the Guizhou COFCO plant (1) informed these employees that they were being transferred to the labor dispatch firm (labor sub-contractor) Rongcheng, cutting their incomes in half (http://www.clb.org.hk/en/node/100306). But actually, the Rongcheng labour dispatch company is controlled by Guizhou COFCO Company itself. The company is using a trick known as “reverse dispatch”, by establishing their own labor dispatch unit and using it to supply its own factory with contract workers. Unfortunately, reverse dispatch is becoming increasingly widespread across many industrial sectors in China

The students analyze the labor dispatch system in this excerpt from their follow-up report in May 2009 (2):

“The system of labor dispatch emerged and developed rapidly in China during the 1990s. According to some incomplete statistics in 2004, there are no less than 26,000 labor dispatch companies with more than 25 million dispatched workers.

Why has labor dispatch been so widely used since 1990s?

Prior to the 1990s, many enterprises employed a large number of temporary workers. But gradually these temporary workers became de facto long-term workers who will work for their enterprises for many years. However, their salary and other benefits are lower than full-time workers doing the same jobs. Temporary workers soon became popular with big domestic and multinational companies.

Since the promulgation of Labor Law in 1995 which pushed for a labor contract system, the government has prohibited the temporary worker system. But in a market economy where enterprises seek the maximisation of their profit, they must find a new way to use low-cost labor. This is when the labor dispatch system came to the central stage.

While there are limits to the labor dispatch system required by the Labor Contract Law, effective 1 January 2008, such as that it has to be:
1) temporary: their work cannot exceed six months; for dispatched workers working longer than six months at a company, they should be made full-time workers;
2) supplementary: the dispatched workers should be employed in ancillary positions supportive of core-business workers or
3) to replace workers on leave.
As is evident in our research and other credible work, this is not enforced in practice. This has resulted in dispatched workers doing the same work as full-time workers but enjoying lower salary and benefits.

The Coca-Cola bottling companies which we have investigated have all used dispatched workers in core positions (positions directly related to the production) for long periods of time (some of them up to 10 consecutive years) in violation of the labor law.

The findings of our investigating at Coca-Cola bottling companies are not isolated cases but are rather a widespread phenomenon. On 13 January 2009, an article published in Workers’ Daily points out the problems with dispatch labor:

1) It is difficult to achieve ‘equal pay for equal work’. The dispatched workers earn less than full-time workers doing the same work and also receive fewer benefits than full-time workers.

2) It is difficult to express their interests. Because labor dispatch companies are disconnected with the management and service of dispatched workers while the companies that the dispatched workers actually work for also have no established labor relationship with the dispatched workers, the dispatched workers are being put in place where neither of the companies cares about them. The dispatched workers point out that in making decisions concerning the interests of dispatched workers, both companies (i.e. the labor dispatch company and the company that use dispatched labor) do not consult them. The agreement between the two companies is signed without consulting the dispatched workers.

3) It is difficult to join the union. The labor dispatch companies argue that because the daily management of the dispatched workers takes place in the companies they work for, they should join their unions and most labor dispatch companies do not have unions anyway. The companies that actually use the dispatched workers also argue that because they are not formal employees of the company, they should not join their unions, either.

Under the system of labor dispatch, the enterprises actually employing the dispatched workers in their company could easily dismiss them without having to take any responsibly (because they do not have any formal labor relationship with the dispatched workers). This system helps reduce labor costs, makes management easier and avoids the burden associated with labor contracts. On the other hand, the labor dispatch companies can make huge profits. But the job security of the dispatched workers has been seriously threatened, as well as their rights and interests.”

Chinese student activists investigate Coca Cola
In July and August 2008 several students took summer jobs as contract workers at five different Coke bottling plants across two provinces: in Shanghai and Hangzhou cities in Zhejiang province, and Dongguan, Huizhou, and Guangzhou Cities in Guangdong province. They conducted extensive interviews with long standing workers at these and four supplier plants, and continued their research on weekends and holidays after they returned to classes. They released their first formal report at a well-publicized media conference in Beijing in December 2008, entitled “Coca-Cola: The world’s most valuable brand is evading its legal and social responsibilities” (available in English at
http://sacom.hk/wp-content/uploads/2009/09/report_eng_dec2008.doc). (3) It revealed a detailed pattern of abuse of contract workers, including excessive overtime hours without receiving the statutory compensation, the absence of proper training or adequate safety provisions, and even poor and inadequate food in company cafeterias.

One of the spokespersons of the Coke Concerned Student Group is Yang Zhengjun, a graduate student at Beijing’s Central University of Nationalities. Yang’s parents, like millions of other rural dwellers, had to leave Yang with his grandparents in their rural village near Chongqing to seek work as migrant laborers working at factories in coastal Zhejiang province. This they paid for Yang’s education. Yang decided to pursue graduate studies in political economy to help ordinary people struggling to make a living far from their homes like his parents. “We just want to do something useful for society and perhaps bring about some small improvements,” said Yang. He added that conditions experienced by contract workers at Coke bottlers are typical of the working conditions experienced at other companies in China. But as a company with a top brand and quite profitable in China, he expected Coca-Cola to pay more than average attention to its social responsibilities. (4)

Coca-Cola immediately denied any violation of Chinese labor law or any abuse of contract labor. The company claimed that it had “immediately” contacted and scrutinized its bottling factories, and was assured by them that the students’ accusations were untrue. Moreover, the company claimed, dispatched contract workers made up only 43% of the company’s workforce, and not up to 90% as alleged by the students.

Some of the worst abuses were detailed at the bottling plant in Hangzhou operated by Hangzhou BC Foods. Its majority owner is Swire Beverages, a joint venture of Swire Pacific (87.5%) and the Coca-Cola Company (12.5%). Swire Beverages operates eight bottling plants in Mainland China, as well as others in Hong Kong, Taiwan, and the Western USA. The Coca-Cola Company considers Swire Beverages as one of its key global “anchor bottlers.”

The students reported that alongside some hundred long-term permanent employees at Hangzhou, the plant employed some 1,000 contract workers during the busy summer season, and some 600 contract workers during less busy seasons. Contract workers were employed alongside regular employees on the production line and as forklift drivers, as well as cleaners, carriers, and delivery drivers. The relatively few permanent workers received good pay and benefits, as well as adequate training and safety provisions. The numerous contract workers were required to work excessive hours without adequate rest during the busy season, were cheated of overtime pay, were not provided with adequate training or safety provisions, or even basic employment injury insurance. Before they were even hired, some workers were required to sign Contract Termination Agreements with major labor dispatch firm, Zhiqiang Management, before they were dispatched to work at the Hangzhou bottling plant. (5)

A few weeks after the students released their report, they received workers’ reports that some changes were being made affecting contract workers at Coke plants. For example, following a small protest action over poor and inadequate food, contract workers at the Dongguan bottler were allowed to eat in the same canteen as permanent workers. (6) The students also reported that following an investigation by the Ministry of Labor and Social Security (MLSS), the Hangzhou bottler had promised to convert some contract workers into permanent status and sign formal labor agreements with them. (7) The students issued an updated report in May 2009. (8) Here is an excerpt of this report noting a few positive developments resulting from their first report:

“Under the pressure of public opinion, Coca-Cola was forced to make a few improvements:

1) – In our previous investigation, we emphasised the issue of inadequate provision of meals: the dispatched workers in Dongguan Coca-Cola Company cannot get enough to eat and the quality of the meals was very low. After the publication of our report, many journalists became interested in this issue and some of them went to the company to conduct their own investigation. The result is that the Dongguan Coca-Cola Company has taken steps to improve the quality of meals for dispatched workers and planned to expand the canteen to allow dispatched workers to eat alongside with permanent workers. We have been informed that now all workers are having their meals in the same canteen. In addition, because the Dongguan Bottling Company does not provide accommodation, the company is now providing 200 RMB per month of housing subsidy to the dispatched workers.

2) – Based on our follow-up investigation, some of the bottling companies have raised wage levels. For example, the Huizhou Bottling Company raised their minimum wage from 726 RMB to 1,050 RMB a month; Guangzhou Bottling Company from 960 RMB to 1050 RMB. Furthermore, we heard from a worker from a Coca-Cola bottling company in Jilin Province (which we did not investigate) that since the publication of our report last December their wage has been raised as well.

3) – Due to our strong demand and under public pressure, some local labor bureaus have investigated the Coca-Cola bottling companies implicated in our report. While the result of their investigation has not been made public, we believe that the government will gather some useful information from their investigation.”

Second round of student investigations ends in violence
In order to research whether the reforms were actually being implemented, four students took summer jobs at the Hangzhou plant through the Zhiqiang labor dispatch company. But two of the students were threatened and one was badly beaten by Zhiqiang company managers, when they resigned work to resume their studies on 12 August 2009, and tried to collect their pay checks.

Xiao Liang suffered serious wounds over his left eye, and to his left hand and right ear. The Coke Concerned Students Group sent a protest letter, asking supporters to demand that Coca-Cola and Swire Beverages intervene to correct the abuses to contract laborers at Hangzhou. Coca-Cola was unwilling to arrange a meeting for the students at the bottling plant in Hangzhou, claiming that neither Coca-Cola nor its Hangzhou bottler had any responsibility for the actions of its labor sub-contractor.

On 31 August, the Hong-Kong based Students & Scholars Against Corporate Misbehavior (SACOM) issued an open statement supporting the demands of the Coke Concerned Student Group and requesting protest letters be sent to the Coca-Cola Company, Swire Pacific and Swire Beverages (see http://sacom.hk/archives/570). These integral units of the Coca-Cola System continue to deny any responsibility for any actions taken by its labor dispatcher at Hangzhou. The Coca-Cola Company also rejected any general criticism of its system of extensive labor sub-contracting, calling the Zhiqiang dispute a “single case.”

SACOM supports the Coke Concerned Student Group to call on Coca-Cola to take full responsibility for its abusive use of the ‘flexible’ labor system in its supply chains. They demand that:

(1) Coca-Cola apologizes publicly to all four affected students, who have safeguarded their legitimate interests in accordance with the local law but were insulted and assaulted.
(2) Coca-Cola pays for Xiao Liang the injured student-worker’s medical fees.
(3) Coca-Cola Hangzhou bottling plant signs contracts directly with all laborers dispatched from Zhiqiang and many other agencies.
(4) Coca-Cola converts all its subcontracted workers into full time employees within a reasonable time frame.
(5) Coca-Cola invites the Coke Concerned Student Group, SACOM, and credible not-for-profit labor organizations to organize in-factory labor rights training program for all workers who produce goods for Coca-Cola in China.

International criticism of Coca Cola
It should be pointed out that unions representing Coca-Cola workers around the globe have been campaigning against its abuse of contract labor in their own countries. In 2007 the International Union of Food Workers (IUF)’s Global Coca-Cola Workers Alliance issued a “Charter of Demands Against Job Destruction,” denouncing the improper use of sub-contracted, agency, and casual workers by Coca-Cola bottlers throughout the world, and demanding the securing of greater decent permanent employment relationships in all countries (English version at http://www.iuf.org/drupal/files/Alliance_Charterofdemands_final_en.pdf translations into Chinese (traditional characters) at
http://www.iuf.org/drupal/files/Alliance_Charterofdemands_final_chin_trad.pdf and into Chinese (simplified characters) at
http://www.iuf.org/drupal/files/Alliance_Charterofdemands_final_chin.pdf)

The unions underline that:
“a sustainable, successful business must be built upon long-term decent labor relations with workers and independent, democratic unions as their legitimate representative organizations. Trade unions must have the right to represent the rights of all employees, including casualized workers. Casual workers must not be restrained from joining unions.”

According to the Coca-Cola Company, all Coke plants in China are unionized and members of the All-China Federation of Trade Unions (ACFTU). The students’ research indicates that the permanent employees represented by these unions indeed enjoy relatively good pay, benefits, and conditions. However these decent labor standards are not extended to the agency, dispatch, or casual employees, which at least in the busy season comprise the majority of Coke workers. The Coke Concerned Students Group has taken up the cause of these workers because their exploitation has not been systematically addressed by the Chinese unions.

The students are disappointed that Coca-Cola has to date not fulfilled its responsibilities. The students hoped to issue another report in September 2009, with the goal of promoting “continuous workplace improvements at the Hangzhou Coke bottling plant.” At the time this article is being published, however, the student activists face increasing pressure from local forces to not to make their report public. The students are discussing how best to continue pursuing their campaign for improving the conditions of contract labour at Coca-Cola bottlers in China.

FOOTNOTES

(1) The Guizhou bottler is owned by COFCO Coca-Cola Beverages, Ltd., a joint venture of the Coca-Cola Company and of COFCO, the major national agribusiness company, now privatized.

(2) Full text of this report in Chinese at http://www.brsbox.com/filebox/down/fc/9980877ffe791f4c0a1669a9b55d68af/rand/178855353.

(3) The Chinese version of the December 2008 Report is available in .pdf format http://www.brsbox.com/filebox/down/fc/b3ab8c05755a0a0acb40dc25aef82758/rand/518229345 and in Word at http://sacom.hk/wp-content/uploads/2009/09/report-dec2008-chi.doc

(4) See the interview with Yang Zhengjun at China.org.cn by John Sexton and Zhang Mingai, December 26, 2008, http://www.china.org.cn/china/features/content_17016542.htm.

(5) According to Article 58 of the Labor Contract Law, the labor contracts between dispatching units and the laborers to be dispatched shall be fixed term labor contracts with a term of no less than two years.

(6) The large Dongguan bottler is operated by Coca-Cola China Industries, Ltd., majority owned by the Coca-Cola Company itself. Coca-Cola should be directly responsible for labor conditions at its supplier.

(7) China.org.cn by John Sexton and Zhang Mingai, 26 December 2008, http://www.china.org.cn/china/features/content_17016542.htm.

(8) Full text of this report in Chinese (May 2009) at http://www.brsbox.com/filebox/down/fc/9980877ffe791f4c0a1669a9b55d68af/rand/178855353.

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