Brief Description of Employees’ and Employers’ Associations
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. Also, in the case of Wal-Mart in 2006, the ACFTU, for the first time ever, used grassroots techniques to establish unions from the bottom up.
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. CEC is the sole representative from China within the International Organization of Employers. Currently, 30 provinces, autonomous regions and municipalities, which are directly under the central government, 28 national industry departments, 260 industrial cities and tens of thousands of large and medium-sized business have established their own enterprise management associations. The number of enterprises with such management associations has reached hundreds of thousands. These various associations comprise an interconnected national system of management associations.
Rights and Importance of Trade Unions
The fundamental rights and responsibility of trade unions is to safeguard the legal rights and interests of employees. An enterprise may form collective contracts with its trade union (or its elected employee representatives if the enterprise has no trade union). If a union or an elected employee representative submits a written request to engage in collective bargaining, the employer generally cannot refuse without just cause. Collective contracts are binding on the employer and all of its employees. Accordingly, individual employment contracts cannot include standards that are lower than those set forth in the collective contracts. However, it is possible to use terms in individual employment contracts that are more favorable to the employees than what the collective contracts provide.
Employees’ Representation in Management
According to PRC Company Law, 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, according to PRC Company Law, 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.
Other Types of 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. According to the CCP Constitution, any employer with more than three CCP members shall establish a grassroots CCP organization. In addition, PRC Company Law provides that employers shall provide the necessary conditions to facilitate the CCP activities.