Identifier
Created
Classification
Origin
07GUANGZHOU699
2007-06-15 08:43:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Guangzhou
Cable title:  

Alleged Labor Violations at Mainland Headwear

Tags:  ELAB PHUM PGOV SOCI CH 
pdf how-to read a cable
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RR RUEHCN RUEHGH RUEHVC
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ZNR UUUUU ZZH
R 150843Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6176
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 0451
RUEKJCS/DIA WASHDC
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 03 GUANGZHOU 000699 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM, DRL/IL
STATE PASS USTR FOR STRATFORD, WINTER
LABOR FOR ILAB NEWTON, LI ZHAO, SCHOEFFLE
TREASURY FOR OASIA/ISA-DOHNER AND KOEPKE
USDOC FOR 4420/ITA/MAC/MCQUEEN
GENEVA FOR CHAMBERLIN

E.O. 12958: N/A
TAGS: ELAB PHUM PGOV SOCI CH
SUBJECT: Alleged Labor Violations at Mainland Headwear
Holdings Factory in Shenzhen

(U) This message is Sensitive But Unclassified. Please
handle accordingly.

UNCLAS SECTION 01 OF 03 GUANGZHOU 000699

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM, DRL/IL
STATE PASS USTR FOR STRATFORD, WINTER
LABOR FOR ILAB NEWTON, LI ZHAO, SCHOEFFLE
TREASURY FOR OASIA/ISA-DOHNER AND KOEPKE
USDOC FOR 4420/ITA/MAC/MCQUEEN
GENEVA FOR CHAMBERLIN

E.O. 12958: N/A
TAGS: ELAB PHUM PGOV SOCI CH
SUBJECT: Alleged Labor Violations at Mainland Headwear
Holdings Factory in Shenzhen

(U) This message is Sensitive But Unclassified. Please
handle accordingly.


1. (SBU) SUMMARY: Following the release of the PlayFair
2008 report, "No Medal For the Olympics on Labour Rights,"
and media reports of alleged labor violations at four Pearl
River Delta (PRD) factories, Congenoff visited one Shenzhen
factory cited in the report - Mainland Headwear Holdings
Limited - to observe labor conditions and discuss the
allegations with company representatives. While problems
exist at Mainland Headwear, particularly with regard to
wages, overtime, and possible "coaching" of employees,
Congen did not observe egregious violations, and some of
PlayFair's allegations did not appear to be accurate. END
SUMMARY.

Unrestricted Access
--------------


2. (U) Mainland Headwear corporate representatives and
factory managers permitted Congenoff unrestricted access to
their Shenzhen factory working areas, offices, and worker
dormitories, allowing him to take photographs and to speak
privately with any employee.

Taking It Personally
--------------


3. (SBU) Mainland Headwear Director and CEO Peter Ho - a
Hong Kong resident and Canadian citizen - repeatedly told
us that the company categorically denies all accusations in
the PlayFair report. He wants to "set the record straight"
by allowing anyone to come visit the factory and observe
working conditions there. Moreover, the company's founder
and current Chairman Ngan Hei-keung has taken these
accusations personally, prompting corporate and factory
management to swiftly respond to the report. (Note:
Mainland Headwear was the first company cited in the report
to respond to the Consulate's request for a site visit and
for comment on the alleged labor violations. We are in the
process of contacting others and trying to call on them.
End Note.)

Alleged Violations - "Wages below legal minimum;
Excessive working hours"

-------------- ---


4. (U) The PlayFair report cites seven alleged labor
violations. With regard to the first, "Wages below legal
minimum, excessive working hours," several factory
employees told Congenoff that they were paid wages of
approximately RMB 1,000 to 1,500 per month for a 40-hour
work week plus moderate overtime. While company
representatives and employees alike said that their wages
met or exceeded minimum legal levels, most factory workers
did not appear to understand how much the company paid them
per hour for overtime and said their pay stubs did not
specify overtime hours worked. In an email to post, Peter
Ho stated that piece-rate workers' average monthly pay is
RMB 1,100, and that supervisors earn over RMB 3,000 per
month. In addition, Ho said that workers not only get paid
in excess of the minimum wage, they are provided adequate
insurance, and free accommodation and food.


6. (SBU) The factory operates continuously, rotating
different groups of workers in two shifts. The company
employs approximately 3,000 workers and staff. According
to Brenda Ko, Chief Financial Officer and Company
Secretary, 800 workers in the computerized embroidery unit

SIPDIS
work either from 7:30am-7:30pm or 7:30pm-7:30am. One
worker told Congenoff that each shift has a 45-minute meal
break, and that he has two days off per week, but not
necessarily Saturday and Sunday.


7. (SBU) CEO Peter Ho suggested that the PlayFair
investigators observed the factory from the outside and
assumed that the same group of workers was forced to work

GUANGZHOU 00000699 002 OF 003


longer hours. Workers during the day shift did not appear
excessively tired; break areas are provided for employees,
and of over 500 workers observed, only one was seen resting
her head at her sewing table. All workers interviewed told
us that overtime was voluntary. Most of the workers were
from rural Guangdong, Fujian, Hunan, or Guangxi and remit a
portion of their wages to family members in their home
towns.


8. (SBU) Ho told Congenoff that under the comprehensive
average overtime plan approved by the Shenzhen Labor
Bureau, workers can work up to 60 hours of overtime per
month during peak seasons. Ho estimated that the average
employee works between 55 to 58 hours of overtime per month
- within the approved limit. Ho said that this practice is
endorsed and verified by the company's customers during
regular factory audits (Note: This reflects a gray area in
Chinese labor labor implementation. The Labor Law limits
overtime to a total of 36 hours per month, a level that
employers, buyers, and often workers say is unrealistically
low. Buyers' social compliance auditors generally accept
higher levels of overtime as consistent with their codes of
conduct if the local labor bureau endorses the factory's
overtime policy, as in this case. Meanwhile, some labor
NGOs and business responsibility advocates question the
accuracy of labor audits altogether. End Note). Ho claims
overtime is paid at one-and-a-half times the normal rate on
weekdays and at three times the normal rate on holidays.

"Difficulty in resigning"
--------------


9. (U) Ho told Congenoff that the turnover rate is low;
those who do quit are not penalized, and pay is not
withheld. Workers did not complain of any restrictions or
penalties for resigning.

"Hiring practice"
--------------


10. (U) Assistant General Manager Yeh Jui-Ming said that
underage applicants occasionally attempt to get jobs at the
factory, some using fake ID cards or relatives' ID cards.
The company refuses to hire them or fires them as soon as
the fake ID is discovered. Factory managers told Congenoff
that most employees are in their 20's. Workers during the
day shift did look to be in their 20's or 30's. The
youngest worker interviewed was 18 years old.

"Misleading inspectors and customers"
--------------


11. (SBU) Company representatives denied that this occurs.
Congenoff noticed that several employees were visibly
uncomfortable answering certain questions, particularly
those concerning wages, but were much more relaxed when
answering biographical questions.

"Health and safety hazards"
--------------


12. (U) Work intensity at the factory did not appear
excessive during our visit. Contrary to the PlayFair
report, no weaving is done at the Shenzhen factory, and
there was little or no ambient dust. Embroidering rooms
and offices are air conditioned; other sewing and finishing
areas have fans and were cooler than the outside
temperature. The factory runs an on-site clinic, but the
health care worker there told us that there had only been
one work-related injury since January. Nearly all sewing
and finishing workers sat on stools without backs, but one
sewer interviewed stated she had no back problems as a
result.

"No legal maternity leave"
--------------


GUANGZHOU 00000699 003 OF 003



13. (U) Ho told Congenoff that the company does provide 90
days of maternity leave, adding that not many of their
workers have become pregnant during their time with the
company. One worker who had recently given birth told us
that she had her baby prior to starting work for the
company, otherwise she would have taken advantage of the
maternity leave policy. Article 4.1.3 of the factory
worker manual states that female staff are entitled to 90
days maternity leave if the pregnancy is in accordance with
family planning regulations.

"No support system, no union representation"
--------------


14. (U) Ho showed us registration documents for the
workers' committee organized at the factory, as well as a
list of members (approximately 1,000). (Note: China's
labor law provides for the establishment of workers'
congresses or congresses of workers' representatives in
enterprises, whether a union exists or not. End note.)
Company representatives also made committee meeting minutes
available for review. The workers' organization also runs
a small convenience store at the factory and has a limited
welfare and recreation program. The committee has several
comment/suggestion boxes in place at the factory to
facilitate communication between labor and management.
Replies by the Chairman to questions or comments submitted
this way are sometimes published in the factory's
internally circulated magazine.


15. (SBU) The Chinese Communist Party also has an
organization at the factory, but Ho admitted that he does
not ask employees about it, nor does he know much about the
organization's activities.

Comment
--------------


16. (SBU) Without knowing sources PlayFair 2008 used in its
research into conditions at Mainland Headwear, Congen
cannot comment on whether the PlayFair report fairly
reflects the conditions their researchers observed.
Congen's own observations did not track fully with
PlayFair's assessment. While labor violations at this
company did not appear egregious, the allegations PlayFair
made are typical of reports from other factories,
especially small or unregistered factories. It appears
that the common view of employees at Mainland Headwear is
that anything paid over minimum wage is acceptable, without
regard to overtime. With respect to worker associations,
we note that even when present, ACFTU unions usually
support company management and plant operations.

GOLDBERG