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### Viewing cable 07GUANGZHOU717, Alleged Labor Violations at Yue Wing Cheong

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07GUANGZHOU717 | 2007-06-22 02:26 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Guangzhou

`

    VZCZCXRO2609
    RR RUEHCN RUEHGH RUEHVC
    DE RUEHGZ #0717/01 1730226
    ZNR UUUUU ZZH
    R 220226Z JUN 07
    FM AMCONSUL GUANGZHOU
    TO RUEHC/SECSTATE WASHDC 6195
    INFO RUEHOO/CHINA POSTS COLLECTIVE
    RUEHC/DEPT OF LABOR WASHDC
    RUCPDOC/USDOC WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEHGV/USMISSION GENEVA 0454
    RUEKJCS/DIA WASHDC
    RUEAIIA/CIA WASHDC

` `

    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

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