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Employers Associations and Trade Unions in China

1. Brief Description of Employees’ and Employers’ Organizations

(1) Trade Unions

In China, all trade unions must be affiliated with the All-China Federation of Trade Union (hereafter referred to as “ACFTU”) and there are no independent trade unions in China. ACFTU is a national-level organization that reports directly to the Chinese Communist Party and has branches at the provincial, city, and district levels.

Technically speaking, an enterprise does not need to take positive action to establish a trade union. However, if its employees request the establishment of a trade union, the enterprise may not obstruct the process. In practice, local ACFTU branches have been increasingly pressuring enterprises to set up trade unions from the top town.

(2) Employers’ Organizations

The China Enterprise Confederation (originally known as the “China Enterprise Management Association”) and China Enterprise Directors Association (the “CEC/ECDA”) are non-profit national organizations that are registered with and approved by the Ministry of Civil Affairs of the PRC. 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 Organization of Employers.

2. Rights and Importance of Trade Unions

The fundamental rights and responsibility of trade unions is to safeguard the legal rights and interests of employees. Specifically, trade unions should (1) harmonize employment relationships and safeguard the rights and interests of employees by conducting equal negotiations for employees and forming collective contracts; (2) organize 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 (3) maintain close contact with employees, listen to and forward their views and demands to management, exhibit concern for their daily lives, help them resolve difficulties, and serve them wholeheartedly.

3. Types of Representation

(1) Employee Congress / Employee Representatives Congress

The trade union is the operating organ of the employee congress and employee representatives’ congress (the “EC/ERC”) and is responsible for carrying out their routine activities. In China, state-owned enterprises must 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 organize the EC/ERC only when necessary.

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, labor discipline and 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 finalizing any decision. During the implementation of any regulations or major decisions, the trade union or the employees have the right to raise their concerns with their employer on any inappropriate issues.

(2) General Assembly of Union Membership / Union Member Representative Congress

The general assembly of union membership or the union member representative congress (the “GAUM/UMRC”) oversees grassroots trade unions. 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. Grassroots trade unions with fewer than 100 members should establish a GAUM.

(3) Trade Union Committee (“TUC”)

TUCs are the permanent body of and answerable to the GAUM/UMRC. They, elected by either the GAUM or the UMRC, should report their work to the GAUM/UMRC and are subject to their supervision.

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 organizer 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.

(4) Finance Scrutiny Committee (“FSC”)

Trade unions should set up a system of scrutinizing and monitoring their budgets, financial accounts and funds according to independent accounting principles. Unions of all levels should establish FSCs.
Unions receive their funding from a variety of sources including (1) union fees paid by union members; (2) fees allocated to unions by enterprises, institutional organizations 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); (3) a certain percentage of profits from the union’s enterprise or institutional organization; (4) subsidies from the government; and (5) other income. Union funds are typically used to serve employees or for union activities.

(5) 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.

4. Number of Representatives

Employee representatives shall be elected for the ERC. The number of employee representatives is determined based on the percentage of total employees, but there should be at least 30.

5. Appointment of Representatives

Employee representatives should be elected through democratic process. 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, department, etc.) are present and the candidate shall at least have a majority voting in the electorate to be the representative.

It is also required that employees’ representatives shall be composed mainly of grassroots employees and the number of senior management generally shall not be greater than 20% of the total representatives. In addition, the number of female representatives shall be in line with the number of female employees in the company.

6. Tasks and Obligations of Representatives

Employee representatives shall (1) learn and propagate among employees relevant laws, regulations and policies, reinforcing the ability of participating in democratic management and performing duties properly; (2) communicate with employees in the electorates, listening to employees’ opinions and suggestions and expressing employees’ requests; (3) implement EC resolutions and properly complete all work assigned by the EC; (4) promptly circulate information about the performance of their duties and their participation in EC activities, and accept the assessment and supervision by employees; and (5) observe the employer’s rules and keep the employer’s trade secret confidential.

7. Employees’ Representation in Management

Limited liability companies invested and incorporated by two or more state-owned enterprises or other entities with state-owned investment shall have employee representatives in their board of directors. Other limited liability companies or companies limited by shares may have employee representatives in 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.

In addition, 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.

8. Other Types of Employee Representative Bodies

Apart from the abovementioned employee representative bodies, grassroots Chinese Communist Party (“CCP”) organizations could also organize employees, know the appeals of employees, and help solve disputes between employers and employees in order to establish and maintain harmonious employment relationships.

Any employer with more than three CCP members shall establish a grassroots CCP organization. In addition, employers shall provide the necessary conditions to facilitate the CCP activities.

For more information, please contact Zhong Lun Law Firm our affiliated member firm in China.
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