VZCZCXRO6869
PP RUEHCN RUEHGH
DE RUEHBJ #7324 2340326
ZNR UUUUU ZZH
P 220326Z AUG 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4522
RUEHC/DEPT OF LABOR WASHDC
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHSH/AMCONSUL SHENYANG 6729
RUEHGH/AMCONSUL SHANGHAI 5606
RUEHCN/AMCONSUL CHENGDU 6975
RUEHGZ/AMCONSUL GUANGZHOU 1277
RUEHIN/AIT TAIPEI 5894
RUEHHK/AMCONSUL HONG KONG 8014
RUEHGV/USMISSION GENEVA 1277

UNCLAS BEIJING 017324 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EAP/CM AND DRL/ILCSR 
DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN 
LABOR FOR ILAB - CARTER, OWENS, HELM, ZHAO, SCHOEPFLE 
TREAS FOR OASIA/ISA-CUSHMAN 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
GENEVA FOR CHAMBERLIN 
 
E.O. 12958: N/A 
TAGS: ELAB EINV PGOV CH
SUBJECT: COLONEL SANDERS CHANGES HIS WAYS, BUT LABOR LAWS 
REMAIN VAGUE 
 
 
(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET 
DISTRIBUTION 
 
¶1. (U) On August 8, Kentucky Fried Chicken (KFC) announced 
at a Beijing news conference that it would stop hiring 
employees through labor dispatch agencies (LDAs), and begin 
hiring directly.  LDAs are labor contractors, who provide 
manpower to an employer for a fee.  Under this arrangement, 
the worker?s contract is with the LDA, regardless of where 
he/she works.  The LDA, and not the enterprise using the 
labor, is responsible for providing all legally mandated 
wages and benefits.  The case highlights a commonly abused 
gray area in Chinese labor law. 
 
¶2.  (U)  KFC?s announcement came after two employees 
brought KFC to arbitration, claiming that the company was 
hiring through LDAs only to avoid legal obligations to 
employees.  The complainants argued that they reported 
directly to KFC managers, and were effectively KFC 
employees.  They demanded back wages and severance pay 
because KFC sometimes sharply cut back on their hours, and 
finally terminated them, all without giving notice, 
explanation or compensation.  Under Beijing labor 
regulations, an employer must pay its employees the monthly 
minimum wage if it cannot provide full-time work.  Beijing 
regulations also require severance pay when an employer 
terminates a labor contract. 
 
¶3. (SBU)  Shi Fumao, a lawyer from the Beijing Migrant 
Workers Legal Aid Station, which represented the two 
workers, told the press that his office had received over 
20 similar complaints from KFC workers over the past year. 
Shi told Laboff on August 15 that ?shaming? KFC in the 
media was the key to success in this case.  KFC?s concern 
for its brand image made it susceptible to negative 
publicity.  Similar cases involving lower profile employers 
can be very difficult to resolve, he said.  Under Chinese 
labor law, there is no standard for determining when an 
employer-employee relationship exists, except the existence 
of a written labor contract, nor is there any provision for 
"joint employment," under which LDAs and enterprises using 
the labor could be held jointly accountable.  Shi and other 
workers? advocates have publicly called for changes to the 
law to prevent the misuse of LDAs to circumvent employer 
obligations. 
 
SEDNEY