Trade Unions

Is my PRC affiliate obliged to establish a union in the PRC for its Chinese employees?

The PRC Trade Union Law stipulates that a trade union can be established by employees on a voluntary basis. While the law prohibits an employer from obstructing or restricting its employees from setting up a trade union, the state law does not require the employer to set up the trade union.

However, subject to local rules and practice, it would not be uncommon to see your PRC affiliate required by the local federation of trade unions or the local government to set up a company trade union. For example, in Guangdong and Shanghai, local regulations require those companies that have commenced their business, but which have not yet established a trade union, to support and assist their employees in establishing a trade union within six months of the date of incorporation or commencement of business.

Also, in order to put more pressure on companies to establish a union, union authorities in many regions (e.g., Beijing, Guangdong) delegate the right to collect union fees to the local tax authority.

What is the ACFTU?

The All-China Federation of Trade Unions (ACFTU) is the only legal trade unions federation recognised by the government. Trade union branches, subordinate to ACFTU, are established at different levels according to the administrative hierarchy – from the national, provincial, municipal, district and county levels, to the lower administrative level.

However, Chinese trade unions keep their independence from governmental authorities. Practically, except for trade unions set up in enterprises, trade unions at district or county level and above are more like a political institution, and they usually have greater political influence than the administrative authorities of the government at the same level.

What obligations do I have to establish a company trade union?

According to ACFTU rules, an employer's obligations include:

  • contributing union fees at the rate of 2 percent of the total amount of salaries paid to all of its employees. (For those that have not established a trade union, the same amount may be also imposed as a union preparation fee.);
  • providing the facilities, premises and other resources conditions (e.g., tables, stationery) to the trade union to carry out administrative affairs and activities;
  • continuing to pay the full-time members of the union committee their wages, bonuses, subsidies, and other welfare and benefits.

Are union committee members entitled to any specific employment protection?

Yes. Such protection includes the following:

  • Where a part-time member of union committee engages in union activities during working hours without exceeding three working days per month, the employer shall continue to pay him/her the normal wages.
  • During his/her term of office, the chairman/vice-chairman of a trade union shall not be allowed to be transferred to another role unilaterally by the company without its having obtained prior consent from the union committee and the upper union.
  • The term of the employment contract of the full-time chairman/vice-chairman shall be extended automatically till the expiry of his or her term of office, unless he/she commits gross misconduct or reaches the statutory retirement age.
  • If an employer violates the above provisions, it may be ordered to reinstate the relevant employee and to make up the remuneration difference; it may even have damages imposed at the rate of double the annual pay of the employee.

Please note that, pursuant to Article 9 of the Trade Union Law, no close relative of a principal administrator of any employer may be a candidate for membership of the union committee of that company.

What power does a union have?

As a matter of practice, the principal function of a union is that of a consultative body that discusses issues with management on behalf of employees. Thus, a union has the right to be notified and consulted when an employee's employment is to be terminated and when the employer proposes to undertake a "major matter" affecting the interests of employees, such as issues relating to compensation, labour protection and working hours.

Further, the union has the right to be notified and consulted when the employer proposes to carry out a redundancy plan. However, the requirement is only to consult with the union, and a union does not have the right to veto or block management actions. Also, unions in China do not have the right to lead strikes. On the contrary, unions are legally required to help settle labour disputes. Unions are also charged with helping to mediate disputes. They also have the right to demand collective bargaining.