COLONEL SANDERS CHANGES HIS WAYS, BUT LABOR LAWS

UNCLAS BEIJING 017324

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR EAP/CM AND DRL/ILCSR
DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN
LABOR FOR ILAB - CARTER, OWENS, HELM, ZHAO, SCHOEPFLE
TREAS FOR OASIA/ISA-CUSHMAN
USDOC FOR 4420/ITA/MAC/MCQUEEN
GENEVA FOR CHAMBERLIN

E.O. 12958: N/A
TAGS: ELAB EINV PGOV CH
SUBJECT: COLONEL SANDERS CHANGES HIS WAYS, BUT LABOR LAWS
REMAIN VAGUE


(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET
DISTRIBUTION


1. (U) On August 8, Kentucky Fried Chicken (KFC) announced
at a Beijing news conference that it would stop hiring
employees through labor dispatch agencies (LDAs),and begin
hiring directly. LDAs are labor contractors, who provide
manpower to an employer for a fee. Under this arrangement,
the worker?s contract is with the LDA, regardless of where
he/she works. The LDA, and not the enterprise using the
labor, is responsible for providing all legally mandated
wages and benefits. The case highlights a commonly abused
gray area in Chinese labor law.


2. (U) KFC?s announcement came after two employees
brought KFC to arbitration, claiming that the company was
hiring through LDAs only to avoid legal obligations to
employees. The complainants argued that they reported
directly to KFC managers, and were effectively KFC
employees. They demanded back wages and severance pay
because KFC sometimes sharply cut back on their hours, and
finally terminated them, all without giving notice,
explanation or compensation. Under Beijing labor
regulations, an employer must pay its employees the monthly
minimum wage if it cannot provide full-time work. Beijing
regulations also require severance pay when an employer
terminates a labor contract.


3. (SBU) Shi Fumao, a lawyer from the Beijing Migrant
Workers Legal Aid Station, which represented the two
workers, told the press that his office had received over
20 similar complaints from KFC workers over the past year.
Shi told Laboff on August 15 that ?shaming? KFC in the
media was the key to success in this case. KFC?s concern
for its brand image made it susceptible to negative
publicity. Similar cases involving lower profile employers
can be very difficult to resolve, he said. Under Chinese
labor law, there is no standard for determining when an
employer-employee relationship exists, except the existence
of a written labor contract, nor is there any provision for
"joint employment," under which LDAs and enterprises using
the labor could be held jointly accountable. Shi and other
workers? advocates have publicly called for changes to the
law to prevent the misuse of LDAs to circumvent employer
obligations.

SEDNEY