A year and a half ago, a Missouri executive named Steve Fleischli came to China to negotiate a discount on delivered goods from some of his Chinese suppliers.
He spent five months in China and lost his job as CEO of North Pole Limited, a leading OEM supplier of camping equipment. He was held for one day by the suppliers, until local police managed to escort him out of the factory. As part of the process, he was forced to hand over his passport to the local police until his case was settled.
Just before the recent Xi/Obama California meeting, a U.S. executive, Hu Zhicheng, was allowed to return to the United States after five years in Chinese legal limbo. He was detained in China in 2008 when a former business partner accused him of commercial theft.
In the most recent case, Chip Starnes, a Florida business owner, was detained by workers at his factory. He said it was just a misunderstanding about pay and a false rumor. They said they had not been paid in two months and they heard the factory will be closed and moved to India.
Starnes, owner of Specialty Medical Supplies (SMS) of Cape Coral Florida, is spending a little more time in his Huairou factory, in the suburbs of Beijing, than he expected. He says he went to China to lay off 30 employees from his plastics division, which he is moving to Mumbai, India, to lower production costs. Instead, he found himself “held captive” in his factory by a group of 100 angry workers, who are insisting that they get the same severance package as the 30 plastics workers. He says there were no plans to lay off any more workers or move the plant to India.
Starnes says he has been coerced into signing agreements, but that he is otherwise fine, apart from lack of sleep, due to bright lights and constant banging of his office windows by workers.
The local police indicated they have investigated and that the “police were at the scene to maintain order and found no threat to Starnes’s personal safety.” Reporters indicated they saw four uniformed police and about a dozen other men who declined to identify themselves standing across the road from the plant.
U.S. Embassy staff stood outside the gate on June 24 and were eventually let in. An Embassy spokesman said the two sides were on the verge of an agreement and that Starnes would have access to his attorneys.
The workers say they only want their past wages and the unemployment compensation due to them under the law, as they believe the company is being shut down and moved to India.
According to a Reuters report, the workers’ demands followed rumors that the entire plant was being closed, though Starnes said no more layoffs were planned.
“We never had that intention. They were never told they were going to lose their jobs,” Starnes told Reuters. “It (the rumor) ran rampant and quickly spiraled out of control. It’s a sad situation.”
Starnes said he was never physically harmed but had been intimidated, and was unhappy about the way local authorities have handled the dispute.
“I think disappointment is a really good word,” Starnes told Reuters.
Starnes said his lawyers were in talks with the workers with mediation from the district labor administration and labor union.
Chu Lixiang, head of the Huairou labor union’s rights and interests department, said Starnes had not paid the workers for two months and they feared the plant was closing and that he would run away without paying severance.
“The workers’ request, firstly, will be for the company to pay up. Second, they (the managers) need to abide by the law, to deliver compensation as deserved. That’s all,” Chu told Reuters.
Foreign Ministry spokeswoman Hua Chunying told reporters at a daily briefing that she hoped the issue could be “resolved through dialogue.”
In the end, Starnes will get back to Florida, the workers will be compensated, the government will collect its taxes and, my guess is, the factory will be closed.
So what is the lesson for today?
If you do not pay your Chinese employees, do not go to China. Unsurprisingly, at a time when foreign firms habitually leave unpaid workers holding the bag, the employees are very suspicious and take things very personally.
If you are not paying your employees, it’s doubtful you are paying your taxes, so the government is not going to be on your side. In fact, the more you pay the more they will get in taxes. Once they hear you may be closing your factory, all of your guanxi is gone. No official is going to put their neck on the line for a foreign company which is about to leave unpaid workers and taxes.
Remember, if you have a dispute in China over wages, payments or terms, send an intermediary who is not part of your company, do not under any circumstances go yourself or send one of your employees – unless you really do not like them.
Do not expect the Embassy to do much other than make sure you have access to a lawyer. You are an American in China and therefore subject to Chinese laws and that is what they will tell you.
The point is, do not assume that things work in China the way they work in the U.S.A. If Chip had read the Dispatches From China, as you now have, he would probably not have made the mistakes he did. On the other hand, if his intention was to move his company and stiff his workers, then he escaped lightly.
Einar Tangen, formerly from Milwaukee, now lives and works in Beijing, China. He is an adviser to Heilongjiang Province, Hebei Province QEDTZ, China.org.cn, China International Publishing Group, Beijing Baotong and DGI DESIGN. He is also a weekly public affairs commentator for CCTV News’ Dialogue and the author of “The Kunshan Way,” an economic development history of China’s leading county level city. While in Milwaukee, he was a partner at Jackson, Morgan and Tangen, president of E-Tech and a senior vice president at Stifel Nicolaus. He chaired various boards in Milwaukee and was a member of the Federal Home Loan Bank of Chicago. Readers who would like to submit questions or suggest areas of interest can send an e-mail to steve.jagler@biztimes.com.
