On December 14, 2102 the U.S. Department of Labor's (“DOL”)’s Bureau of International Labor Affairs (“ILAB”) introduced “Reducing Child Labor and Forced Labor: A Toolkit for Responsible Businesses” (“the Toolkit”), the first guide developed by the U.S. government to help businesses combat child labor and forced labor in their global supply chains.   Multi-national businesses have long been faced with the challenge of ensuring such practices are not conducted in their global operations or supply chain processes.  Many of these companies are currently involved in efforts to combat child and forced labor on an international basis through numerous governmental and philanthropic programs. 

The Toolkit, which can be downloaded at no cost at http://www.dol.gov/ChildLaborBusinessToolkit, provides information and resources to help companies combat such practices.  The DOL unveiled the Toolkit during an event at its Washington, D.C. headquarters for representatives of government, industry, labor and civil society organizations active in efforts to prevent labor abuses in the production of goods.

In a video message announcing the Toolkit, Secretary of Labor Hilda L. Solis stated, "[e]ncouraging businesses to reduce child and forced labor in their supply chains helps advance fundamental human rights that are at the core of worker dignity, whether here in the U.S. or abroad”.
Since 1995, the U.S. Congress has provided funding to ILAB for programs aimed at combating child labor internationally.  ILAB has used these funds to implement more than 250 projects in over 90 countries, in partnership with a variety of governments, international institutions, civil society organizations and industry groups.

The Toolkit was created by the ILAB as part of its responsibility under the Trafficking Victims Protection Reauthorization Act of 2005.  The Toolkit focuses on the need for companies to create social compliance programs that integrate the ILAB’s policies and practices to ensure the business entity acts to prevent child labor and forced labor throughout its supply chain.  The Toolkit provides step-by-step guidance on the following eight critical elements to aid companies that do not currently have social compliance systems in place or those interested in strengthening existing systems:  1) engaging stakeholders and partners; 2) assessing risks and impacts; 3) developing a code of conduct; 4) communicating and training across the supply chain; 5) monitoring compliance; 6) remediating violations; 7) ensuring independent review; and 8) reporting performance.

Child Labor.  The International Labor Organization (“ILO”) estimates there are 215 million children in child labor worldwide, 115 million of them in hazardous forms of work. It also estimates that 21 million people are in forced labor, six million of them children.  
Child labor includes instances of children (minors under age 18) working in the worst forms of child labor (“WFCL”) as described in ILO Convention 182, as well situations where children engage in work that is exploitative and/or interferes with their ability to attend school.   Some examples of WFCL are:   1) all forms of slavery or practices similar to slavery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labor, including forced or compulsory recruitment of children for use in armed conflict; 2) the use, procuring or offering of a child for prostitution or pornography, or for illicit activities, in particular for the production and trafficking of drugs; and 3) work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children.

Forms of work identified as "hazardous" for children may vary from country to country.   ILO Recommendation No. 190 states that in order to determine hazardous work for children and  identify where such situations occur, consideration should be given to:  1) work which exposes children to physical, psychological, or sexual abuse; 2) work underground, under water, at dangerous heights or in confined spaces; 3) work with dangerous machinery, equipment and tools, or which involves the manual handling or transport of heavy loads; 4) work in an unhealthy environment which may, for example, expose children to hazardous substances, agents or processes, or to temperatures, noise levels, or vibrations damaging to their health; and 5) work under particularly difficult conditions such as work for long hours or during the night or work where the child is unreasonably confined to the premises of the employer.  [ILO Convention 182, Section II, Paragraph 3].
According to the Toolkit, child labor spans nearly every sector and kind of work, including harvesting cotton, working as domestic servants, and mining diamonds. The Toolkit mentions it is important to recognize that not all work performed by children is exploitative.   For example, children of legal working age who perform work that does not hinder their mental, physical or emotional development, such as performing household chores and working in non-hazardous activities after school, can be an asset to their families' welfare and their nations' economic development. 

Forced Labor.  The ILO estimates that 20.9 million people are currently victims of forced labor globally.  Of these individuals, 4.5 million are in forced commercial sexual exploitation and 14.2 million are in other forms of labor exploitation spanning sectors such as agriculture, construction, domestic work and manufacturing.  The remaining 2.2 million people are in state-imposed forms of forced labor.

ILO’s defines forced or compulsory labor” in ILO Convention 29 to include "all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily."  “Menace of any penalty” means that a workers believe they will face a penalty if they refuse to work. "Menace" means the penalty need not actually occur; threats of penalty may be sufficient if the employee believes the employer will exact the penalty.  A wide variety of penalties exist which fulfill this element of forced labor, including:  confinement to the workplace; violence against workers or their family members; retention of the employee’s identity documents; dismissal from employment; and non-payment of wages.  A worker can be considered to be in forced labor even if he or she consented to work, if the consent occurred through the use of force, abduction, fraud, deception or the abuse of power or a position of vulnerability, or, if the individual has revoked his or her consent.  According to the Toolkit, forced labor can happen in any industry, but is especially prevalent in industries that require low-skilled labor, such as agriculture and mining, or occupations hidden from public view, such as domestic service.

Reasons companies develop social compliance systems.  The Toolkit lists a number of reasons that motivate employers to develop social compliance systems to combat child or forced labor, including: 

• complying with existing laws such as the Dodd-Frank Act and the Consumer Protection Act;
• meeting public expectations of a companies’ control over labor standards and human rights in their supply chains through voluntary standards such as the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises;
• maintain eligibility for loans from the U.S. Government through programs such as Overseas Private Investment Corporation, which require compliance with specific labor and environmental standards, including standards on child and forced labor;
• recruiting and retraining employees; and
• doing good.

Examples of Government and Industry Projects.  The following are a few examples of government and industry programs aimed at combating global child and forced labor:

• The Better Work program, a joint initiative of the ILO and the International Finance Corporation, is designed to improve labor practices and productivity in the international apparel sector. Better Work is a transparent factory monitoring program conducted by a credible monitor, the ILO, in participating countries.
• ManpowerGroup, a global employment services firm, supports a program in Medillin, Colombia called Jόvenes Visionarios, which helps abandoned and at-risk youth through counseling, training and employment support.  Through one of its sub-projects, Manpower has partnered with the International Organization of Migration to identify youths approaching 18 years of age who will no longer be supported by government assistance.  This project provides these youths access to training facilities, equipment, instructors, courses, vocational assessments and career guidance, as well as psychological counseling.
• In its Mewat Program, Gap Inc. formed a multi-stakeholder group with the Government of India, suppliers, a local training institute and a local nongovernmental organization (“NGO”).  The group designed a program involving 20,000 women who do handwork in their homes or at local community centers.  The women work at home bring their finished products to the community centers for pick-up, which increases efficiency for suppliers.  The local NGO coordinates monitoring of working conditions as well as payment to the workers, who are also provided free training to upgrade their handwork skills.

As the world embarks into the Year of the Dragon, China is making every effort to draw in more and more international business to add to its already skyrocketing economy.  China’s current Labor Law is expected to be amended in 2012. The issue is to what degree and to what effect the 2012 amendments, if enacted, will have on employers.  The changes and effect of the 2012 amendments are yet to be fully known or disclosed, but it is now a good time for all of us to review and ensure compliance with the complexities of China’s labor laws to: (1) reduce risks of legal liability and (2) understand and implement any changes that may be required should the 2012 amendments be enacted. 

China’s employment laws have experienced significant changes from the Iron Rice Bowl employment system 35 years ago(e.g. guaranteed job security with steady income and benefits similar to, but not identical, to the English concept of a breadwinner with ‘cradle to grave’ socialism), to the liberalization of the labor market under the Labor Law of 1994, and then to the Labor Contract Law in 2008 which affected the large majority of full-time positions and required employers to provide employees with written contracts.  Although we do not anticipate a complete transformation from the current Labor Contract Law of 2008, employers should understand that China’s contract employment system is the opposite of the United States’ at-will employment system since the law provides that all employees must be engaged under a written employment contract, which shall at minimum include:

• Terms of Employment.  In China, the law provides for three types of employment terms: definite, indefinite, or piecemeal (a compensation system in which employees are paid for each unit produced or action performed, not on the basis of time worked). 
• Job Descriptions.  Employees must be provided an accurate reflection of the duties and responsibilities of the job position.
• Place of Work.  It is important to state the actual place of work, as well as any other locations at which the employee may report to perform work. 
• Working hours, Rest and Leave Periods.  Compliance with laws regulating working hours, designated rest and leave periods, and holidays provided to the employee should be detailed in the contract, as well as the statutory rule on vacation for employees based on years of service. 
• Wages.  Minimum wages must be paid which are set at the provincial and municipal level, and measured by two standards - monthly and hourly.  The concept of a “salaried” employee is not fully integrated into the Chinese workforce; therefore, a salary needs to be converted to an hourly wage in the contract.  It is noteworthy to mention that it is customary and standard practice to pay an extra month of salary (13th month) prior to the Chinese New Year as part of compensation, and the contract should reflect this 13th month of wages. 
• Social Insurance.  Employers and employees must contribute to a basic pension insurance fund that is administered at the provincial or municipal level, and the contract should accurately reflect the percentage contribution both the employer and employee shall contribute.  If a supplementary pension insurance fund is available for employees as an option to join, the contract should state such and reflect the percentage contribution. 
• Labor Protections.  The contract must state and provide for the specific Work-Related Injury Insurance system as each province in China has its own Work-Related Injury Insurance Regulations requiring employers to pay the medical expenses of injuries, disability, and occupational diseases.  It is noteworthy to mention that the law prohibits employers and employees from contractually opting out of the Work-Related Injury Insurance system.
• Description of Working Conditions.  The contract should provide a general description of working conditions as China’s Labor Law requires employers to inform employees of any occupational hazards during the hiring process, to comply with health, safety, and hygienic working conditions (e.g. Safe Production Law and Occupational Disease Law), and imposes punishments, including but not limited to, warning notices, administrative fines and penalties, and workplace closures of employers for violations of health and safety regulations. 

Other terms that should be included in the contract consist of bonuses or a bonus system, other benefits above and beyond the statutory minimum (e.g. supplemental medical insurance above the national basic medical insurance system), and travel expense and reimbursement policies.  Additionally, depending on the position, an employer may want to consider addenda to the contract (or even separate agreements referenced by the employment contract) for protection of trade secrets and intellectual property, a training agreement detailing employee training, and a ‘sign-off’ agreement by which the employee affirmatively acknowledges receipt and understanding of the rules and regulations and agrees to abide by those rules. 

During the duration of the contract after the probationary period (which is generally one to six months), it is very difficult to involuntary separate an employee since an employee can only be terminated for cause which must be clearly proven, with the exception of redundancy and mass layoff related separations, separation at the end of the contract and separation during the probationary period.  Although an employee can unilaterally terminate an employment contract by providing the employer with 30-days notice before resigning from the company, an employer can only unilaterally terminate an employment contract if an employee seriously breaches the employer’s rules and regulations outlined and detailed in the contract. 

Under the Labor Contract Law, an employer cannot simply terminate an employee for incompetence alone.  If an employee is incompetent, the employer must provide further training to the employee or re-assign the employee prior to terminating the contract.  Therefore, employers generally: (1) implement standard operating procedures in China to maintain a detailed set of rules and regulations stated in the contract and to which employees affirmatively agree in the ‘sign-off’ agreement; (2)  maintain thorough disciplinary records and efforts to improve in order to be able to establish “proof” for termination, dismissal, or involuntary separation.  If a termination of employment is deemed without cause, the employer and employee must reach a severance agreement for an amount to be negotiated.  However, an employer must keep in mind that a severance for a termination or dismissal with cause is calculated roughly one month of wages for each year of service; therefore, a severance for a termination or dismissal without cause always exceeds the customary ‘one-month pay for each year worked’ equation. 

The transformation of China’s economy and evolution of its labor laws in recent decades have built a foundational framework for labor protection and workforce progression. We will provide information on any new amendments effectuated in 2012 to help optimize your economic growth in China.