This article has been written by Shraddha Vasanth, pursuing a Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho.
Luxury fashion brands evoke a sense of aura and pride in the users, however, the practices that these companies follow have often been a subject of debate and criticism. Behind all the glitz and glamour, the fashion industry is known for its ethical breaches, be it employment of child labor, payment of low wages, unhealthy and inhumane working conditions, animal cruelty, destruction of the environment, re-packaging various such business practices as sustainability and the like. They have thus, infamously, earned the term ‘sweatshop’. One such instance is the violation that happened in one of the flagship stores of Gucci in Shenzhen, China.
On Oct. 8, 2011, 5 employees of the Gucci store wrote an open letter on the internet about the exploitation and ill-treatment of employees working at the store. It was said that more than 100 rules were imposed by the company on its employees, including seeking permission for tea and snack breaks, limitation of restroom breaks to 5 minutes, standing for over 14 hours a day continuously, unpaid overtime extending up to midnight. The employees were also fined in case of stolen or missing goods despite having insurance for the same. These conditions were so abysmal that it led to a miscarriage of one of the women employees. Moreover, there were discriminatory policies for the front-line workers and managers, arbitrary policies for the exchange of goods, etc. This article analyses the legal contraventions and the reasons behind the ethical abuses at the Gucci store, from the ancient Chinese and modern viewpoints.
The brand called Gucci
Gucci was founded by Guccio Gucci in Florence, Italy in 1921. Interestingly, the band completed a century this year! At first, Gucci mostly sold leather goods and travel items and gradually moved into equestrian equipment. However, it was fashion designer Tom Ford who reinvented the image of the brand and its campaigning strategies. François Pinault, of Pinault Printemps Redoute (or PPR) eventually acquired the brand in the late 90’s. PPR later changed its name to Kering in 2013 and Gucci remains a part of the same group. It currently operates over 480 stores and is one of the most iconic brands in the luxury fashion industry with offerings in leather goods, shoes, apparel, jewelry, perfumes, home décor, and watches. One such flagship store is located in Shenzhen, China where employment law violations and ethical abuses took place.
Employment laws in China and legal violations
Ethical abuses invariably result in legal violations since the law is essentially based on certain fundamental principles of respect and dignity towards human life. Before we get into the ethical issues, let’s have a look at the employment legislation in China. Similar to Indian laws, China also has multiple sources of labor laws. These are given below:
- The Chinese Constitution;
- National laws like the Labour Law and the Labour Contract Law;
- State regulations;
- Regulations formulated by the Ministry of Human Resources and Social Security (MOHRSS), other ministries, and State Councils;
- Local regulations of provinces, large cities, etc;
- Judicial interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate.
Some of the key provisions under Chinese employment laws are given below for a quick reference; this also helps us understand the nature of legal violations that took place:
- Providing minimum working conditions – An employer is required to provide a basic hygienic and safe working environment to its employees. Protection must be provided against any kind of occupational hazards involved in employment. The employer is also required to conduct regular medical check-ups of employees involved in the handling of hazardous substances. Further, the employer is also required to educate the employees on the hazards they face during employment by conducting seminars, training, or public announcements.
Moreover, the employees are given the power to complain and/ or report to the concerned labor authority in case the employer fails to provide safe working conditions or misappropriated funds set aside for providing medical and health facilities, etc.
- Maximum working week – The Chinese law mandates the weekly working hours to be 40 for employees working under the standard working hour system. The employer has to ensure that at least one resting day per week is provided to the employees. The employer is also required to give 11 days of Holiday leave each year which are, basically, national holidays. Additionally, depending on the employee’s total years of service, the employer is required to give annual leave. Apart from the above, maternity/ paternity leave, sickness leave and disability leave are also to be given by the employer.
- Overtime – The working hours can be extended by the employer in consultation with the trade unions; this should, however, be limited to only one hour per day. In order to compensate the employee for overtime work, the employer is required to pay additional wages, ranging from 150% to 300% of regular wages, depending on the type of overtime work.
Even a cursory reading of the above-mentioned laws reveals that a lot of these provisions were contravened in the Gucci case – both by the company and by the lack of response on the part of the government.
Factors that lead to abuse
There are various conditions that eventually led to such exploitation, some of these can be said to be internal which Gucci resorted to and the others can be attributed to the conditions prevalent in China and the apathy of the government towards such practices. These factors are explained below:
Abuse by Gucci
China essentially follows the contract labor system, called the Dispatch labor system. It is a system that is generally used to employ temporary workers, wherein a contractor sends employees to the company for a commission. The company is responsible to pay only the salary; the social security and other benefits are the responsibility of the contractor. Gucci, however, used dispatch labor to employ workers for over 2 years.
However, the crux of the issue lies in the fact that Gucci exploited the loopholes that were already existing in the system. In China, tolerance towards overtime work without remuneration, inhumane working conditions, illegal employment agreements, and other such practices are largely predominant. But when foreign companies set foot, they generally tend to normalize these practices, despite never allowing them in their own countries. It is often resorted to in the garb of adapting to local conditions. This is called “moral relativism”, where foreign entities level down to such exploitative practices in China and other countries where such practices are prevalent and often go unnoticed or unrectified even by governmental authorities.
Another assumption that foreign entities probably maintain is that local governments are more focused on economic growth and not specifically on compliance of labor legislations. Thus, the lobby on foreign investments, expatriations, and GDP and not on providing healthy, safe conditions of work to its employees. Moreover, it is also a widely known secret that even local governments have economic targets to meet, and also believe that strict implementation of labor laws would force investors away. So, they often turn a blind eye to such malpractices.
Abuse on account of social conditions and governmental policies
This incident is not one of its kind, especially in China. Apart from the conditions mentioned above, forced labor, called Laogai, is promoted and supported by the government; it is a system where prisoners and petty criminals are used to producing cheap commodities that are also exported. Huge population, poverty, and corruption force people, including children to work in such factories and it is this group of marginal labor that is invariably exploited. It would not be wrong to say that such practices are almost a customary way of doing business! In short, it is both companies and the government that end up abusing the system and the employees.
Ethical evaluation of abuses
These violations surely have ethical implications, especially considering that Gucci would not have indulged in such practices in its home country. It is also pertinent as it is systemic exploitation of labor. And China being an ancient civilization, it would be apt to evaluate these practices to understand what’s right and what’s not from both the traditional Chinese as well as modern perspectives.
Confucian ethics focuses on 5 principles, 3 of which apply to this case; they are:
- Ren – Ren is the capacity to show compassion and generosity towards all creatures, and fellow humans. It is essentially about establishing social relationships where a person thinks about and acts towards the welfare of all stakeholders, and this surely applies to business as well. It is the Golden Rule that you don’t do to others what you do not want for yourself!
- Yi – Yi is all about morality, righteousness, and care towards everyone. This was clearly disregarded as there was no care or concern for women, especially, pregnant women, so much so, that she actually had a miscarriage.
- Li – Li is about maintaining dignity and following the rules, codes, and norms that create the fabric of society. This too was violated as it is the responsibility of the employer to care for the employees and at the very least, provide a safe working environment and treat them with dignity.
- Hierarchical obligations – Another angle that becomes pertinent is the Chinese belief system that is rooted in tolerance, hierarchy, and surrender to the leader. It is always considered a disgrace for the Chinese to cry or complain about the situation. And hence, this could be a reason why the employees too tolerated the inhumane treatment for a long time.
2. Labour and Human rights
From a modern perspective, the incident is a violation of the Universal Declaration of Human Rights. The Universal Declaration of Human Rights is a treaty signed and implemented at a national level; almost 80% of the countries have signed and ratified the treaty. However, implementation is largely dependent on the country’s culture, its legislations, and their implementation. Western societies very strictly adhere to the principles enumerated in the Declaration and any breach of the same by a business entity is a violation of not just labor rights but it is a human rights violation as well. Of specific importance are Articles 5 and 23, which provide against torture, cruelty, and inhuman treatment of any person; and a fair and just remuneration and dignity of life and existence to everyone respectively. Thus, as mentioned earlier, moral relativism and justification of such practices on the grounds of way-of-doing-business cannot be pardoned, especially when it comes to matters relating to basic human dignity.
3. Code of ethics
This one, in turn, is related to the above point on labor rights. The Code of Conduct of Kering mentions that the company follows the United Nations Universal Declaration of Human Rights and the European Convention on Human Rights and various other conventions of the International Labour Organisation (ILO), Organization for Economic Co-operation and Development (OECD) guidelines, etc. The code also mentions employees as key stakeholders and inter-alia provides for
- Integrity, loyalty, and responsibility towards employees;
- Respect for human rights;
- Diversity, non-discrimination, and equal opportunities for all;
- A working environment is free of all forms of harassment etc.
This case, thus, becomes a breach of the company’s code of conduct and internal policies as well.
Can businesses be ethical – A few possible solutions
When a business indulges in unethical practices, the question of responsibility and accountability becomes important. So, the question is who is to be held accountable and what’s the way forward?
- Gucci and other businesses – It is imperative that foreign companies follow the laws and practices in the host country with the same amount of strictness as in their home countries. It is important to treat the labor available in other host countries with respect and not merely as instruments to make money. This would require a top-down approach right from the shareholders and management enforcing policies that address these issues.
- The Chinese government – After receiving a lot of criticism about its practices, the Chinese government has been taking steps to prevent corruption and exploitation of labor.
- Employees – Employees, especially, front-line workers need to be made aware of their rights and the redressal forums that address their issues. Moreover, local NGOs and trade unions can collectively bargain for better rights and safer working conditions for all employees.
Business ethics is seen by many as an oxymoron. However, research has shown that following ethical practices enhance the profitability and sustainability of the business in the long run, which in turn benefits all the stakeholders. In this particular case, though it is easy to argue as to who is right or wrong, it does raise larger questions about the system; and systemic issues are always complex as there are various factors, cultural moorings, pressures of various groups, high stakes, etc. and hence, require concerted efforts by all parties. So, it is up to businesses, societies, and individuals alike to take a step towards the ethical way and do the right things; as Aristotle says “We do not act rightly because we have virtues, but we rather have these because we have acted rightly.”
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