Environmental, social and governance (ESG) corporate compliance standards have become a mainstream non-finance branch of business evaluation, advocated and promoted worldwide by the UN. ESG standards also embrace labour protection-related metrics such as forced labour, working conditions and protection, employment discrimination and equal employment. This article summarised and discusses representations and requirements of ESG labour compliance under China’s labour legal system.
GLOBAL AND PRC STANDARDS
GRI, the Global Reporting Initiative, specifically mentions labour protection under “S” of its ESG standards – with requirements set out for occupational health and safety, diversity and equal opportunities, non-discrimination, and forced or compulsory labour. These requirements also reflect the core content of labour standards promulgated by the International Labour Organisation.
The US, EU and many other jurisdictions have formulated their own ESG labour laws. In general, requirements in developed countries are more refined, with more severe penalties imposed for violations.
In comparison, mainland China’s legal system on labour protection, its counterpart to ESG labour compliance, largely comprises principal and framework requirements that continue evolving. However, although China has yet to set out any special laws for formal ESG information disclosure, both Shenzhen and Shanghai stock exchanges now require social responsibility disclosures to be included in annual reports, in accordance with international norms.
Under this global initiative and a growing trend of sustainable development, ESG compliance, including its labour requirements, is bound to attract the attention of more Chinese companies.
China’s labour ESG under Chinese law. Under Chinese law, ESG labour compliance mainly takes the form of regulations regarding forced labour, work conditions and employment protection, discrimination in employment, and equal pay for equal work.
Forbids forced labour. Article 37 of China’s constitution expressly states that personal freedom of Chinese citizens is inviolable. Provisions forbidding forced labour are also found in the Labour Law and Labour Contract Law. Furthermore, the Employment Promotion Law respects labourers’ right to choose their own employment – while the Law on Public Security Administration grants authorities the power to impose administrative penalties on any employer forcing any labour. The crime of forced labour is also set out in the Criminal Law.
Under such laws, companies may not force labourers to establish labour relations or provide labour by way of violence, threat, restriction of personal freedom, or any other means violating the employee’s personal will. Additionally, companies may not hinder resignation by setting up unreasonable obstacles such as conditioning resignation upon the completion of a certain project.
In terms of overtime, companies must first observe relevant restrictive regulations under the Labour Law, while not only taking operating needs into consideration, but also employee willingness. Forced overtime or disguised forms of forced overtime are strictly forbidden. If overtime is necessary for regular production or operation, the company must first reach a consensus in negotiation with the union and employees, unless working hours are prolonged in statutory emergencies. Companies should also compensate overtime staff, either with overtime pay or arranging alternative time off.
Work conditions and protection. Under the Labour Contract Law, employers should provide suitable labour conditions and protection, otherwise the labour administrative department has the power to investigate and punish an employer – while employees have the right to terminate their labour contract and demand economic compensation.
In addition, the law provides special protection to female and juvenile workers, such as forbidding engagement of any juvenile at grade IV physical labour intensity.
In special circumstances, such as during the current pandemic, companies should ensure employees’ health and safety in the workplace, in addition to observing the Law on Prevention Treatment of Infectious Diseases, the Emergency Response Law and local pandemic control policies.
Anti-discrimination. The Labour Law and Employment Promotion Law provide that workers seeking employment shall not be subject to discrimination based on factors such as ethnicity, race, gender or religious belief.
More refined regulations protecting the rights of specific groups can be found in, among others: the Law on the Protection of Rights and Interests of Women; Special Rules on the Labour Protection of Female Employees; the Law on the Protection of Persons with Disabilities; and the Regulation on the Employment of the Disabled.
In judicial practice, companies committing discrimination face legal consequences such as a public apology or compensation for moral damages.
China’s legal system and practice against employment discrimination continues to develop. Given lingering uncertainties with respect to factors and circumstances constituting discrimination, companies are advised to pay close attention to relevant regulations and judicial practice in their own jurisdiction and industry to avoid any potential legal pitfalls, in addition to avoiding any discriminatory conduct expressly stipulated in the above-mentioned provisions.
Equal pay for equal work. This is a primary embodiment of fair employment. Equal pay is required for equal work between male and female employees in the constitution, as well as in the Labour Contract Law and the Interim Provisions on Labour Dispatch for equal work between male and female employees, and between dispatched workers and regular employees.
Disputes over “equal pay for equal work” of dispatched workers are relatively common, with courts tending to hold the expression to be relative rather than absolute.
Courts tend to hold that labourers are, after all, individuals with differences in ability, expertise and experience – making equal pay for equal work on absolute terms neither fair nor realistic.
Therefore, the authors suggest that while formulating a generally fair compensation system based on operating conditions, companies should also refine compensation for dispatched workers on different posts, and set up a differentiated salary system based on labourers’ skills and efficiency, thus balancing fairness and flexibility.
Tracy Liu is a partner and Larry Lian is a Counsel at Jingtian & Gongcheng
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