German Supply Chain Law: Monitoring employment practices and environmental issues in China

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last updated on 5 May 2022 | reading time approx. 14 minutes



Which risks occur along supply chains in China?

Human rights and environmental risks are particularly prevalent. They include:


Ban of Child Labor for Children under 15 (Art. 2 para. 2 No. 1)

In China, reported cases of child labor, i.e. working minors under the age of 16, have decreased to a consid­er­able extent over the last decades, but certain vulnerabilities still remain in practice. Reasons for this rather positive development are the gradual move of China’s industry away from low-cost, labor-intensive manu­fact­uring as well as stricter and more comprehensive laws on the protection of minors. Unfortunately, there are no official statistics or other data on child labor, so assessment of the current situation can only be based on media reports and analysis conducted by national and international organizations. Another problem is that urban migration of parents leaving their children behind at their home towns or villages still exists on a larger scale, thus exposing these often poorly guarded children to increased risks of child labor. According to estimations, approximately 60 million children are currently being affected by urban migration. This risk exacerbated by the disparity of access to compulsory education in poor rural areas in central and western China, thereby forcing affected children into labor with low entry requirements (mostly manual factory or farm work) at an early age.

The fast growing market of live streaming and other social media networks has led to the exploitation of children as performers or models by their parents. Given the comparatively low barriers to create and publish content online, minor children being used for advertisement and marketing purposes can often happen without being detected or notified to competent authorities in time.

According to a study commissioned by the European Greens/EFA in the EU Parliament in 2021, imports from China into the EU (in particular consumer goods such electronics, clothing, shoes) in the total trading amount of EUR 37 billion are believed to be produced by using children in the workforce.


Forced Labor (Art. 2 para. 2 No. 3)

According to different international sources, there is evidence for ethnic and religious minorities in the North-Western Xinjiang province being detained and thousands of individuals being sent to factories in Xinjiang and other provinces in the country to work on a non-voluntary basis. For example, a report was published by the Australian Strategic Policy Institute (ASPI) on the displacement of Uyghurs and other ethnic minorities (Hui, Kazakhs, Kyrgyz, Tajiks, Uzbeks) from Xinjiang to work in factories across China from 2017 to 2019. The mentioned factories are said to be part of supply chains of at least 82 well-known global brands in technology, clothing and automotive. The report states that individuals are sent from detention camps, live in segregated dormitories, undergo organized Mandarin and ideological training outside working hours, are subject to constant surveillance, forbidden from practicing religious observances and enjoy limited freedom of movement.

The official response to these allegations is that these are labor integration programs that do not involve coercion, but are voluntary and aim at alleviating poverty in Xinjiang. If individuals are detained against their own will, this is usually based on court decisions on the ground of “counter-terrorism”.

As evidence about the non-voluntary nature and negative implications of these programs on affected individuals’ rights is becoming stronger, supply chains that involve activities in Xinjiang province deserve a particularly careful risk assessment depending on the specific circumstances of each case.


Work Safety (§ 2 Abs.2 Nr. 5)

Work safety has been a problem across many industries in China for a long time. Official figures on work-related accidents or deaths are usually very vague and opaque and lack important details about the nature of workplace hazards, most-at-risk industries and the most common causes of death and injury. This prevents the public from assessing and understanding the real scope and problematic areas of work safety in China.

The overall situation has improved over the last two decades, but structural problems remain and the nature of work place accidents has changed significantly. Nowadays, less accidents occur in heavy industries like coal and steel, but a shift towards increasing numbers in service industries and the platform economy (with the major players Alibaba, Meituan, JD etc.) can be observed. Many employers still prioritize productivity and profit above safety of their employees. The most hazardous jobs (and approx. 1/3 of work-related accidents) can be found in China’s poorly regulated construction industry.
 
Along with China’s unprecedented development of the digital economy, delivery drivers are today among the most vulnerable category of workers in the PRC. Countless accidents, injuries and even deaths happen nationwide every day. The officially recorded numbers do not reflect the true scope due to the often unclear labor relationship of delivery drivers and the big internet companies.

Generally speaking, work-related accidents are often due to insufficient safety equipment, training or supervision by the competent trade unions. There is also a relatively high number of accidents caused by illegal storage of chemicals or other hazardous materials or poor zoning of industrial plants, warehouses etc. Furthermore, the number of mental and physical diseases due to overwork in the manufacturing industry has decreased, but has increased in service industries and white-collar jobs (especially in the tech sector).

In addition, there are too often no proper labor contracts, an unclear sub-contractor structure or work-related injury insurance for construction workers which adds another layer of risk.


Labor discrimination (Art. 2 para. 2 No. 7)

Discrimination at the workplace is very common in China and stretches across basically all sectors. Despite some changes in the law and education campaigns, problems related to labor discrimination are still far away from being solved in the near future. Only a few companies are known to have implemented proper diversity rules and policies. Unequal treatment at different stages of employment occurs especially based on the following criteria:

  • gender,
  • age,
  • household registration system (or “Hukou” 户口),
  • physical/mental disabilities,
  • HBV/HIV,
  • ethnicity/religion,
  • sexual orientation.


Workplace violence and sexual harassment at work is an aspect of workplace discrimination that is more commonly raised by Chinese when asked about it. In particular after the global “#MeToo-Movement”, the awareness among the public and willingness of victims to act against perpetrators has increased significantly, especially in more developed areas of China. However, culturally deeply entrenched concepts of gender roles are a major obstacle to achieve gender equality.

Age discrimination often goes along with gender discrimination because of age limits on female job applicants, but has become less problematic than before due to the aging Chinese population.

Another area of work-related discrimination has its origins in China’s household registration system or “Hukou” (户口). This system was first introduced in 1958 and was designed to control internal migration, manage social protection and preserve social stability. In practice, the system’s most obvious negative effect is that it creates a structural disparity in terms of, in particular, access to employment between urban and rural population. Recently initiated reforms aim at reversing these negative repercussions that have existed for decades, but it will take some time to bring China’s rural population on an equal footing with urban workers.

Discrimination of people of non-common sexual orientation (e.g. homosexuals, transgender) is another field where workers in China are at risk. The situation has somewhat improved after homosexuality has been removed as a criminal offense from China’s Criminal Law in 1997 and as mental disorder in 2001. Here just like in other areas, discrimination is more likely to occur in less developed areas, which does not exclude the occurrence of cases in more developed regions. Lawsuits filed by people belonging to the LGBTIQ community show that while there are successful law cases, they remain the exception, and much needs to be done to change the work environment for LGBTIQ people in China.

Lastly, China has significant problems with widespread discrimination of people with physical or mental disabilities. Employers are too often reluctant to create a barrier-free work environment and long-term unemployment of millions of disabled persons creates serious challenges for Chinese society. One of many possible explanations for this is that there is not enough open public discussion about the situation of people with disabilities. In addition, there is a lack of positive role models in the corporate world that have successfully created and implemented inclusive policies within their organization.


Appropriate salary (Art. 2 para. 2 No. 8)

In practice, cases falling under the prohibition on withholding an appropriate salary are often closely related to discrimination at the work place, especially towards women and rural migrant workers. In terms of specific industries, wage payment arrears occur frequently in China’s construction industry because of the common practice of complicated and untransparent sub-contractor relationships. Another publicly known risk area are delayed or failing salary payments (including social insurance contributions) for hospital staff, delivery drivers and workers on manufacturing plants. In general, less developed provinces and areas often struggle more with ensuring payment of an appropriate salary.


Environmental pollution (Art. 2 para. 2 No. 9)

China’s negative track record in the field of environmental protection stems mainly from the economic boom and high-speed growth of heavily polluting industries coupled with no or insufficient regulations on environmental protection and their enforcement. Air pollution (outdoor and indoor), soil and water pollution still occur regularly, especially in urban areas and areas of high industrial concentration. The incredibly high pace of urbanization also contributes to harmful air quality in the form of production of building materials and public traffic. Carbon-intensive industries (such as the conventional energy sector or production of steel, aluminum, cement, coal and others) directly and indirectly lead to air pollution, water scarcity and desertification.

Water overuse (first and foremost by energy-intensive industries and agriculture) has led to serious shortages and polluted water sources along rivers and lakes in different parts of China. Rivers have suffered serious damage also by the construction of major hydropower plants. Some improvement is visible due to stricter controls and enforcement, but nearly 80 per cent of ground water is still qualified as “bad to very bad” according to official sources.

All in all, air, water and soil pollution has led to acute and chronic diseases and deaths of hundreds of thousands of people living in China over the last decades.


Which industries appear particularly vulnerable to adverse impacts of human/labor rights or environmental issues in China?

In China, industries particularly vulnerable to adverse impacts of human/labor rights or environmental issues are:

  • Textile and clothing industry, incl. footwear production
  • Food products
  • Building materials/construction industry
  • Materials for solar power equipment
  • Consumer electronics
  • Electronic equipment (in particular semiconductors)
  • Hair products
  • Cleaning supplies
  • Chemicals
  • Pharmaceuticals

 


Is there any legislation in China which addresses these risks? To what extent is it enforced in practice?

Ban of Child Labor for Children under 15 (Art. 2 para. 2 No. 1)

Chinese laws and regulations on the protection of children from child labor are rather comprehensive.
The Chinese labor inspectorate is mandated to enforce the labor law, which prohibits child labor and sanctions violations. On an international level, no cases of child labor found by the labor inspectorate have been reported to the ILO. Chinese authorities at various levels have implemented measures to ensure that children of internal migrant workers have access to social services, especially compulsory education and quality education programs. However, there are no official statistics. So far, China has not published nor submitted official statistics on child labor. The Chinese central government’s poverty alleviation campaign (which ran until the end of 2020) has played an important role in reducing risks for child labor. When cases of illegal child labor occur, this is often due, at least in parts, to a lack of resources of local labor supervision authorities and/or insufficient supervision by trade unions. China’s overarching plan to achieve “common prosperity” in the coming decades is a multi-faceted, more promising approach to eradicate the roots of child labor, namely unequal distribution of important resources between different social groups, including urban and rural citizens.

Relevant laws and regulations:

  • PRC Constitution; Labor Law; Minors Protection Law; Education Law
  • Compulsory Education Law; Provisions on Prohibition of Child Labor
  • National Mid- and Long-Term Reform on Education and Development Program (2010-2020)

 


Work Place Safety (Art. 2 para. 2 No. 5)

In general, the enforcement of laws regarding work safety has been insufficient in the past. Local labor bureaus are in charge of enforcement, but regularly under-funded, under-staffed and often lack the ability or the will to rigorously enforce relevant laws (especially in less developed regions).

The principal institution for settlement of labor disputes is the so-called Labor Dispute Arbitration Committee (LDAC) as mandatory first instance in all labor disputes. The procedure at LDAC is rather easy to conduct and inexpensive for workers. However, the imitation of action of 1 year after the disputed incident occurred poses problems for work-related diseases that only develop over time. Almost half of labor law cases are settled through mediation at the LDAC. Appeals can be lodged with Chinese courts after the compulsory labor arbitration, but the litigation costs and time bring considerable disadvantages for many workers. At least with regards to the cost factor, this may be changed soon by the coming into force of the newly enacted PRC Legal Aid Law on 1 January 2022.

In the past, trade unions have regularly not thoroughly supervised employing units, arguing they had no enforcement powers, the relevant incident lied outside of their jurisdiction or by pointing at the company not having established a trade union at the company level.

Administrative supervision and enforcement lies with the local governments which are under the purview of the Ministry of Emergency Management (MEM). As said already above, local government departments are chronically under-staffed and have little time or incentives to carry out routine workplace inspections. Instead, they spend most of their time on writing extensive reports about work accidents that have already happened in their jurisdiction. When action is taken, this is mostly only after the incident is completed, but then with sometimes severe measures to punish the responsible persons. This reactive and coercive administrative approach can be observed also in other areas of Chinese law and society, but does often not yield the desired long-term results. If officials investigate, then it is also not seldom that business owners bribe or provide other benefits to make authorities look the other way.

Relevant laws and regulations:

  • PRC Labor Law, Work Safety Law, PRC Trade Union Law
  • PRC Occupational Illness Law, Labor Dispute Mediation and Arbitration Law
  • Regulations on Emergency Response to Work Safety Accidents, Categories and Catalogue of Occupational Diseases

 


Labor discrimination (Art. 2 para. 2 No. 7)

The biggest enforcement problem with below mentioned laws is that they are often too vague and do not have specific implementation rules serving as guidelines for LDACs and courts. Besides, discrimination in employment application is not considered suitable for mediation/arbitration by most LDACs as formally no labor relationship has been established yet. This leads to countless cases of discrimination in the application process not being accepted for settlement by most LDACs.

As a positive sign, China’s Supreme People’s Court (SPC), in a judgement of 1 January 2019, allowed direct filing of civil lawsuits in existing labor relationships based on “equal employment rights”. Since 2013, there have several court judgements raising hopes for better protection against labor discrimination, but the granted damage amount has regularly been too low to serve as real deterrent.

Due to costs and time needed to conclude labor law proceedings, judicial enforcement is often not an option for many vulnerable groups, in particular women and migrant workers. However, this might change very soon when China’s first Legal Aid Law comes into force on 1 January 2022.

Regarding ethnic or religious discrimination, the Chinese government has introduced policies to support ethnic minorities (development funds in minority areas, relaxation of family planning rules, easier university entrance exam rules), but the actual effect of those measures has been limited and has rather reinforced the resentment the Han majority has towards ethnic and religious minorities.

With respect to discrimination based on sexual identity, there are no specific laws to protect people from this social group. Regardless of this lack of specific legislation, in particular the successful lawsuit of a transgender person against termination of their labor contract after undergoing a reassignment surgery has raised hopes for improvement of the employment situation of people from the LGBTIQ community. To be certain about any reliable assessment in this direction, more cases of this kind need to be produced in practice.

Lastly, China’s civil society engagement is rather weak compared to other countries. Among different reasons, this is also due to crackdowns on some civil society organizations in the past which makes supervision and reporting of respective violations harder.

Relevant laws and regulations:

  • PRC Constitution
  • PRC Law on the Protection of Women’s Rights and Interests
  • PRC Law on the Protection of the Rights and Interests of the Elderly
  • PRC Law on Employment Promotion
  • Regulations on Creating a Barrier-Free Environment
  • Regulations on the Employment of People with Disabilities

 


Appropriate salary (Art. 2 para. 2 No. 8)

Although delays or failure in paying legally owed salaries to employees occur in practice, enforcement of laws and regulations protecting employees’ right to an appropriate salary can be described as good and chances for employees to obtain satisfactory results through official channels (LDACs and courts) are relatively high.

Relevant laws and regulations: 

  • PRC Labor Law, Labor Contract Law and Criminal Law


Environmental risks: Environmental pollution and excessive water use (Art. 2 para. 2 No. 9)

Since China issued its 12th Five-Year-Plan (2011-2015), it has put continuous emphasis on environmental protection and climate policy, including water treatment, emission reduction, energy transition and waste management. Since 2014 when the so-called “war on pollution” was declared, numerous regulations, policies and campaigns have been launched on the central and local level.

A major reform was made to the Environmental Protection Law in 2015 which, among other changes, entailed the possibility of heavier fines and opened the door for collective actions by authorized NGOs.

Also since then noticeable is a considerably more rigorous enforcement of environmental protection laws by Chinese courts. Local governments have introduced many additional local regulations and administrative enforcement is serious in most provinces. Lastly, environmental compliance is an important part of China’s constantly evolving Corporate Social Credit System (CSCS) and can have, in case of serious or repeated non-compliance, far-reaching consequences for companies.

Relevant laws and regulations:

  • PRC Constitution
  • PRC Environmental Protection Law
  • PRC Marine Environmental Protection Law
  • PRC Law on Prevention and Control of Environmental Pollution by Solid Waste
  • PRC Law on Prevention and Control of Atmospheric Pollution
  • PRC Law on Prevention and Control of Water Pollution
  • PRC Law on Prevention and Control of Soil Pollution
  • PRC Law on Environmental Impact Assessment
  • PRC Environmental Protection Tax Law
  • PRC Law on Prevention and Control of Environmental Noise Pollution
  • + over 30 national administrative regulations on different aspects of environmental protection

 

Can you provide a case example (e.g. taken from local media coverage) in which a foreign or local company had to deal with such adverse impacts?

There are multiple deficiencies surrounding work in China’s tech sector:

China’s tech industry is growing and expanding at breakneck speed driven by internal as well as international competition for innovation leadership and customer satisfaction. People not working in or having a direct connection to the industry are, in most cases, just amazed by the convenience many technological creations add to their lives and by the many new opportunities to experience modern reality. The downside of this impeccable development has long been neglected by the civil society and the state. White and blue-collar workers alike are subject to grueling working conditions, systematic discrimination (in particular sexual harassment) and other forms of serious rights violations. The so-called “996” work time model (meaning working from 9am to 9pm, six days a week) has become the norm especially among big internet companies such as Alibaba, Tencent, Pinduoduo and others. This led to many cases of serious health issues or even tragic deaths of people who could not cope with the enormous pressure anymore. One of many reported examples is the case of a young employee working at e-commerce platform Pinduoduo who suddenly died on his way home due to excessive physical and mental stress caused by prolonged overtime work.

In order to prevent similar events from happening again in the future and to effectively protect workers in this field from abuse by their employing companies, the Chinese Supreme People’s Court together with China’s Ministry of Human Resources and Social Security, on 26 August 2021, issued a guideline of ten typical cases illustrating the illegal working culture around “996”. Although the use of overtime work is already restricted under China’s labor laws, this legally binding document sends out a strong signal towards the entire industry and its hundreds of thousands affected employees.

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