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
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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"
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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"
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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