citizen 1

February 5 was supposed to be like any other day for employees at the Japanese watch company Citizen in Guangzhou, China. But ordinary quickly turned into extraordinarily terrible when over 1,000 employees found out the company was closing the very next day and they would all be out of jobs.

Citizen made the sudden announcement to their employees only one day before closing their doors. They claimed the closure was part of the company’s “reorganization of overseas production” and had announced their intention to close one month earlier to the local labor department. Their excuse for not telling their employees at the same time? Citizen didn’t want to disrupt the last month of work.

However, under the Labor Contract Law, if the number of employees being let go is equal to or exceeds 20 people, the employer must inform the trade union and employees at least one month in advance. So even though Citizen informed the labor department, they still violated labor laws by not telling staff on the production line.

After the announcement of the closure, the 1,000+ workers gathered outside the building and calmly protested for better compensation in light of the sudden dismissal. Citizen originally said that the compensation package would include one extra month’s wages, but after the protests and advice from local labor departments and trade unions, the amount was increased to two months’ salary as well as asking the watch maker to pay the workers’ social security.

citizen 2Image: Flickr (Kristina Alexanderson)

This isn’t the first closure of a foreign company in Guangzhou and it likely won’t be the last. Rising labor and production costs as well as an increasing minimum wage are significantly influencing companies to move their operations to other countries.

Other Japanese companies in China are concerned with the way Citizen dismissed its employees and closed the factory. In the wake of anti-Japanese protests two and a half years ago, many companies hope that this closure doesn’t undo any of the goodwill and cooperation that has been cultivated since then.

This whole situation might have been avoided with a bit more care and attention paid to cultural differences. When withdrawing, it is important to respect both the letter of the law and the spirit of the law in that country. However, with disputes stemming from factory closures becoming more common in the past few years, and worries that these labor issues would lead to criticism of the Chinese government, authorities have been offering more help to companies who wanted to “quietly” withdraw from China.

This seems to be the case in this situation, but with all the workers agreeing to severance packages one week after the initial announcement, Citizen appears to have avoided any long legal arbitrations.

Source: Yahoo! Japan News
Additional Information: Nikkei Asian Review
Top Image: Flickr (kagen33)