Alleged Labor Violations at Yue Wing Cheong

UNCLAS SECTION 01 OF 03 GUANGZHOU 000717 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 Yue Wing Cheong Factory in Shenzhen REF: Guangzhou 699 (U) This message is Sensitive But Unclassified. Please handle accordingly. ¶1. (SBU) SUMMARY: Congenoff's visit to a second mainland Chinese company (Yue Wing Cheong Manufacturing) cited in PlayFair 2008's report ("No Medal For the Olympics on Labour Rights") led to conclusions similar to those from his visit to Mainland Headwear (reftel). Yue Wing Cheong clearly has problems with regard to wages, overtime, and possible "coaching" of employees, but Congenoff did not observe egregious violations; some of PlayFair's allegations did not appear to be accurate. END SUMMARY. Unrestricted Access -------------- ¶2. (SBU) Yue Wing Cheong corporate representatives and factory managers permitted Congenoff unrestricted access to their Shenzhen factory, offices, and worker dormitories, allowing him to take photographs and to speak with any employee. In contrast to the visit to Mainland Headwear (reftel),unit supervisors or factory managers at Yue Wing Cheong stayed close at hand to listen to workers' responses to our questions. While these managers did not prompt employees on what to say, the workers did appear more nervous or uncomfortable than those at Mainland Headwear when answering questions. Taking It Personally -------------- ¶3. (SBU) Yue Wing Cheong Vice Chairman and co-founder Susan So - a Hong Kong resident - along with corporate legal representative Leon Nim Leung Chan, repeatedly told us that the company categorically denied all accusations in the PlayFair report. So told us that she is offended by the allegations and is concerned that the report will cause her clients, many of whom are large U.S. retailers, to cancel their orders. So said that a few of their smaller clients had already put holds on their orders. She even half- jokingly suggested that unless they could somehow counter the effects of the PlayFair report, the company could go bankrupt and she would have to retire. Leon Chan noted that the report's accusations are libelous and that he intends to pursue appropriate legal action against PlayFair. Alleged Violations - "Wages below legal standards; Long working hours" -------------- -------------- ¶4. (SBU) The PlayFair report cites eight alleged labor violations. With regard to the first two, wages below legal standards and long working hours, several factory employees told Congenoff that they were paid wages of approximately RMB 1,000 to 1,500 per month for 200-300 working hours. Company representatives allowed us to examine pay records from April 2007 which showed a typical employee working six days a week for 8-10 hours per day. Some pay records showed 10-13 hour work days. ¶5. (SBU) Each worker interviewed told us that overtime was voluntary. Supervisors are paid by the hour, while workers are usually paid by the piece. 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. ¶6. (SBU) Factory managers told us 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. Some pay records indicated that employees exceeded this limit. In addition, employees told Congenoff that the peak season is November and December; pay records examined were from April. Susan GUANGZHOU 00000717 002 OF 003 So said that Yue Wing Cheong's overtime practices are endorsed and verified by the company's customers during regular factory audits (Note: This reflects a gray area in Chinese 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; this was a topic of lively discussion during the recent visit to Guangzhou of DRL DAS Krilla. End Note). Employees and managers said that piece-rate wages during overtime are higher than during normal working hours. "Health and safety hazards" -------------- ¶7. (U) Work intensity at the factory did not appear excessive during our visit. Contrary to the PlayFair report, no weaving or dyeing is done at the Shenzhen factory, and there was little or no ambient dust. Sewing and finishing areas have fans and were slightly cooler than the outside temperature. The factory runs an on-site clinic, but the health care worker was not on duty during our visit. Nearly all sewing and finishing workers sat on stools without backs, but several sewers interviewed stated they had no back problems as a result. ¶8. (SBU) One area used for gluing bag components was poorly ventilated, and workers wore ordinary paper surgical masks that provide no protection against the strong organic solvent odor. There were 12-16 fire extinguishers on each floor of the factory; however, they were placed on each end of the floor near the stairs instead of spread out among the workstations. "Difficulty in resigning" -------------- ¶9. (SBU) Ms. So told Congenoff that the turnover rate is low; those who do quit are not penalized, and pay is not withheld. However, workers must give one month notice before quitting, and employees could lose at least some pay if they do not give appropriate notice. The workers we interviewed did not complain of any restrictions or penalties for resigning. "Deceiving the buyers' inspectors" -------------- ¶10. (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. One unit supervisor who previously worked as a sewer told Congenoff during a private interview that the company does not tell employees to lie to inspectors. ¶11. (U) The report alleges that the factory no longer issues pay slips to employees. However, one worker interviewed pulled her most recent pay slip out of her pocket to show Congenoff how many days and hours per month she had worked and her monthly income. "Excessive fines and punishments" -------------- ¶12. (U) Company representatives deny using punishments described in the report for absenteeism, nor did employees voice concerns in this regard. "No legal maternity leave" -------------- GUANGZHOU 00000717 003 OF 003 ¶13. (U) Ms. So told Congenoff that the company provides 90 days of paid maternity leave, adding that not many of their workers have become pregnant during their time with the company. The maternity leave policy is explicitly stated in the company regulations given to each new employee, according to the factory manager. "No support system, no union representation" -------------- ¶14. (SBU) Factory managers showed us registration documents for the ACFTU-affiliated workers' union organized at the factory in October 2005. The factory manager estimated that 60 percent of employees belong to the union. Some workers we interviewed were members of the union, but were unable to tell us about the union's goals or activities, a not uncommon situation in China. Comment -------------- ¶15. (SBU) Without knowing the sources PlayFair 2008 used in its research into conditions at Yue Wing Cheong, Congen cannot comment on whether the report fairly reflects the conditions observed by their researchers. 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. With respect to worker associations, we note that even when present, ACFTU unions usually support company management and plant operations. ¶16. (U) Photographs taken during our visit were sent to EAP/CM and DRL. GOLDBERG