Invest In China: Dealing With Labor Unions And The Communist Party

Invest In China: Dealing With Labor Unions And The Communist Party

Labor Unions

If the employees request the establishment of a labor union, the employer must assent and offer assistance. Moreover, certain thresholds apply which require employers to hire a full-time employee labor representative (companies with at least 200 employees must hire one employee labor representative, with more hires necessary at higher thresholds). Joint Ventures and WFOEs must allocate an amount equal to at least two percent of the actually paid monthly wages of all the employees as trade union funds (this amount must be paid to the local labor bureau if the enterprise has not established a trade union). The trade union must use these funds in accordance with the trade union fund management measures issued by the All-China Federation of Trade Unions, of which the labor union is required to be a member.

Labor union representatives have the right to attend board meetings, although they do not
have voting rights, and they should be invited to attend board meetings if labor issues are discussed. The trade union performs a significant advisory function with respect to individual and collective labor contracts, termination of employees, mediation of conflicts, layoffs, and assisting laid-off employees in finding new employment. The labor union may not impose its will on the employer in these matters. Interestingly, labor unions do not even have the right to strike. However, labor union consent is required in some M&A transactions.

Communist Party Organization

If the employees request the establishment of a Communist Party organization in the workplace, the employer must assent and may be required to provide assistance. A Communist Party organization must be established in any workplace with at least three Communist Party members, and the employer has an obligation to accommodate and support it (details of this obligation are still ambiguous at this point but will likely vary according to the size of the enterprise and the level of Communist Party membership among employees).

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