A protest by around 600 workers at a Shaanxi state-owned oil firm over unequal pay and the use of agency labour has resulted in what is believed to be the first case of collective bargaining in a Chinese state-owned enterprise (SOE).

The protest at Shaanxi Yanlian Industrial was ignited by a company notice back in May 2012 stating that all auxiliary workers (家属工 [2]) would be terminated and would have to sign new contracts with a labour agency. The workers, most of who had been working at the company for more than ten years, were told that they would not receive any compensation for their change in status.

Auxiliary employees earn considerably less, and have fewer benefits, than formal SOE employees but they are still in a better position than agency workers. At Yanlian, it was reported that auxiliary staff earned on average around 1,700 yuan per month, while formal workers at the plant could earn 5,000 yuan a month. But even such a low salary should still entitle them to compensation of 10,700 yuan after ten years of service. Moreover, once they transferred to a labour agency, they would no longer have the job security and protection they had as SOE auxiliary employees.

On 1 December, the auxiliary workers sought the advice of the Laowei Law Firm, which had established a good reputation following its successful role in the Citizen Watch dispute in 2011 [3] and several other collective bargaining cases. The Shenzhen-based law firm suggested that the workers elect their own representatives, sign a collective petition and start collective bargaining under the supervision of the municipal and provincial trade union federations.

The following day, more than 200 workers signed a letter to the enterprise, municipal and provincial trade unions requesting collective bargaining, and they received a sympathetic response from the provincial trade union federation in Xi’an.

However, the dispute escalated on 11 December when management posted a notice ordering workers to sign the contracts with the labour agency by 15 December at the latest. It threatened that workers who failed to sign would have their salary stopped and that their line managers would be punished with warnings, fines or even layoffs.

In response, the official Workers Daily newspaper published an article about the Yanlian workers’ protest [4] on its 13 December front page stating that the company’s unilateral termination of labour contracts was opposed by the All-China Federation of Trade Unions and was a “blatant breach of Chinese law.”

Five days later on 18 December, the Workers Daily reported that the provincial trade union had made progress [5] and that the company now agreed that any worker’s move to the labour agency would be “voluntary” and workers who had already signed could be released from the new contract. However, the dispute is far from over and Laowei lawyers are still helping the workers with their outstanding complaints, in particular the long-standing demand for equal pay for equal work. [6]

The case has already generated considerable debate in China with labour relations scholar Wang Jiangsong, pointing out [7]that it highlighted the necessity of using collective bargaining to address the issues of unequal pay and the pervasive abuse of agency labour in China’s SOEs:

Workers’ action at SOEs can sometimes be regarded as more than a simple labour relations conflict and therefore poses new challenges for addressing labour disputes. Laowei is exploring the feasibility of introducing collective bargaining in SOEs, facilitating communication between workers and the company, and finding a way to solve the conflict in a rational manner.