Fujian Court Imposes Criminal Penalties for Wage Arrears

May 9, 2005

A court in Nanping, Fujian province, imposed prison terms of six months to one year on the officers of a real estate company for failure to pay a construction contractor who then failed to pay workers, according to the Ministry of Justice Web site. The construction company could not pay the workers because the real estate company failed to deposit money into the construction project fund. While other employers may have faced criminal charges for withholding wages, this seems to be the first public report of a third party being held criminally responsible. In this case, the real estate company was also required to pay an extra 350,000 yuan ($42,288) into the construction fund.

Some National Peoples Congress members recently proposed that employers who withhold wages be subject to criminal penalties (see, e.g., Beijing News). The theory behind criminalizing this behavior is that withholding wages is a theft of property. Thus no new laws would be necessary to charge employers in wage arrears cases. Here, only the real estate company officers were charged because in practice most construction companies rely on money deposited for them in construction funds to pay their workers. If contracting companies fail to deposit funds, construction companies are unable to pay workers.

Wage arrears are a growing problem in China, so government agencies are now requiring construction companies to deposit workers' wages into a construction fund to ensure that they will be paid when the project is completed. Construction companies typically do not pay workers until the end of the job because managers fear that workers will disappear before the job is complete.