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DE RUEHGZ #0699/01 1660843
ZNR UUUUU ZZH
R 150843Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6176
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 0451
RUEKJCS/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 GUANGZHOU 000699 
 
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 Mainland Headwear 
Holdings Factory in Shenzhen 
 
(U) This message is Sensitive But Unclassified.  Please 
handle accordingly. 
 
¶1. (SBU) SUMMARY: Following the release of the PlayFair 
2008 report, "No Medal For the Olympics on Labour Rights," 
and media reports of alleged labor violations at four Pearl 
River Delta (PRD) factories, Congenoff visited one Shenzhen 
factory cited in the report - Mainland Headwear Holdings 
Limited - to observe labor conditions and discuss the 
allegations with company representatives.  While problems 
exist at Mainland Headwear, particularly with regard to 
wages, overtime, and possible "coaching" of employees, 
Congen did not observe egregious violations, and some of 
PlayFair's allegations did not appear to be accurate.  END 
SUMMARY. 
 
Unrestricted Access 
------------------- 
 
¶2. (U) Mainland Headwear corporate representatives and 
factory managers permitted Congenoff unrestricted access to 
their Shenzhen factory working areas, offices, and worker 
dormitories, allowing him to take photographs and to speak 
privately with any employee. 
 
Taking It Personally 
-------------------- 
 
¶3. (SBU) Mainland Headwear Director and CEO Peter Ho - a 
Hong Kong resident and Canadian citizen - repeatedly told 
us that the company categorically denies all accusations in 
the PlayFair report.  He wants to "set the record straight" 
by allowing anyone to come visit the factory and observe 
working conditions there.  Moreover, the company's founder 
and current Chairman Ngan Hei-keung has taken these 
accusations personally, prompting corporate and factory 
management to swiftly respond to the report.  (Note: 
Mainland Headwear was the first company cited in the report 
to respond to the Consulate's request for a site visit and 
for comment on the alleged labor violations.  We are in the 
process of contacting others and trying to call on them. 
End Note.) 
 
Alleged Violations - "Wages below legal minimum; 
Excessive working hours" 
--------------------------------------------- --- 
 
¶4. (U) The PlayFair report cites seven alleged labor 
violations.  With regard to the first, "Wages below legal 
minimum, excessive working hours," several factory 
employees told Congenoff that they were paid wages of 
approximately RMB 1,000 to 1,500 per month for a 40-hour 
work week plus moderate overtime.  While company 
representatives and employees alike said that their wages 
met or exceeded minimum legal levels, most factory workers 
did not appear to understand how much the company paid them 
per hour for overtime and said their pay stubs did not 
specify overtime hours worked.  In an email to post, Peter 
Ho stated that piece-rate workers' average monthly pay is 
RMB 1,100, and that supervisors earn over RMB 3,000 per 
month.  In addition, Ho said that workers not only get paid 
in excess of the minimum wage, they are provided adequate 
insurance, and free accommodation and food. 
 
¶6. (SBU) The factory operates continuously, rotating 
different groups of workers in two shifts.  The company 
employs approximately 3,000 workers and staff.  According 
to Brenda Ko, Chief Financial Officer and Company 
Secretary, 800 workers in the computerized embroidery unit 
 
SIPDIS 
work either from 7:30am-7:30pm or 7:30pm-7:30am.   One 
worker told Congenoff that each shift has a 45-minute meal 
break, and that he has two days off per week, but not 
necessarily Saturday and Sunday. 
 
¶7. (SBU) CEO Peter Ho suggested that the PlayFair 
investigators observed the factory from the outside and 
assumed that the same group of workers was forced to work 
 
GUANGZHOU 00000699  002 OF 003 
 
 
longer hours.  Workers during the day shift did not appear 
excessively tired; break areas are provided for employees, 
and of over 500 workers observed, only one was seen resting 
her head at her sewing table.  All workers interviewed told 
us that overtime was voluntary.  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. 
 
¶8. (SBU) Ho told Congenoff 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.  Ho estimated that the average 
employee works between 55 to 58 hours of overtime per month 
- within the approved limit.  Ho said that this practice is 
endorsed and verified by the company's customers during 
regular factory audits (Note: This reflects a gray area in 
Chinese labor 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.  End Note).  Ho claims 
overtime is paid at one-and-a-half times the normal rate on 
weekdays and at three times the normal rate on holidays. 
 
"Difficulty in resigning" 
------------------------- 
 
¶9. (U) Ho told Congenoff that the turnover rate is low; 
those who do quit are not penalized, and pay is not 
withheld.  Workers did not complain of any restrictions or 
penalties for resigning. 
 
"Hiring practice" 
----------------- 
 
¶10. (U) Assistant General Manager Yeh Jui-Ming said that 
underage applicants occasionally attempt to get jobs at the 
factory, some using fake ID cards or relatives' ID cards. 
The company refuses to hire them or fires them as soon as 
the fake ID is discovered.  Factory managers told Congenoff 
that most employees are in their 20's.  Workers during the 
day shift did look to be in their 20's or 30's.  The 
youngest worker interviewed was 18 years old. 
 
"Misleading inspectors and customers" 
------------------------------------- 
 
¶11. (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. 
 
"Health and safety hazards" 
--------------------------- 
 
¶12. (U) Work intensity at the factory did not appear 
excessive during our visit.  Contrary to the PlayFair 
report, no weaving is done at the Shenzhen factory, and 
there was little or no ambient dust.  Embroidering rooms 
and offices are air conditioned; other sewing and finishing 
areas have fans and were cooler than the outside 
temperature.  The factory runs an on-site clinic, but the 
health care worker there told us that there had only been 
one work-related injury since January.  Nearly all sewing 
and finishing workers sat on stools without backs, but one 
sewer interviewed stated she had no back problems as a 
result. 
 
"No legal maternity leave" 
-------------------------- 
 
 
GUANGZHOU 00000699  003 OF 003 
 
 
¶13. (U) Ho told Congenoff that the company does provide 90 
days of maternity leave, adding that not many of their 
workers have become pregnant during their time with the 
company.  One worker who had recently given birth told us 
that she had her baby prior to starting work for the 
company, otherwise she would have taken advantage of the 
maternity leave policy.  Article 4.1.3 of the factory 
worker manual states that female staff are entitled to 90 
days maternity leave if the pregnancy is in accordance with 
family planning regulations. 
 
"No support system, no union representation" 
-------------------------------------------- 
 
¶14. (U) Ho showed us registration documents for the 
workers' committee organized at the factory, as well as a 
list of members (approximately 1,000).  (Note: China's 
labor law provides for the establishment of workers' 
congresses or congresses of workers' representatives in 
enterprises, whether a union exists or not.  End note.) 
Company representatives also made committee meeting minutes 
available for review.  The workers' organization also runs 
a small convenience store at the factory and has a limited 
welfare and recreation program.  The committee has several 
comment/suggestion boxes in place at the factory to 
facilitate communication between labor and management. 
Replies by the Chairman to questions or comments submitted 
this way are sometimes published in the factory's 
internally circulated magazine. 
 
¶15. (SBU) The Chinese Communist Party also has an 
organization at the factory, but Ho admitted that he does 
not ask employees about it, nor does he know much about the 
organization's activities. 
 
Comment 
------- 
 
¶16. (SBU) Without knowing sources PlayFair 2008 used in its 
research into conditions at Mainland Headwear, Congen 
cannot comment on whether the PlayFair report fairly 
reflects the conditions their researchers observed. 
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.  It appears 
that the common view of employees at Mainland Headwear is 
that anything paid over minimum wage is acceptable, without 
regard to overtime.  With respect to worker associations, 
we note that even when present, ACFTU unions usually 
support company management and plant operations. 
 
GOLDBERG