However, the report in New Express attracted government attention. On March 28, Zhang Fengqi, Deputy Director of the Guangdong Provincial Labor and Social Security Department, demanded that his department thoroughly investigate the claimed violations of labor rights exposed by the newspaper. That afternoon, related government agencies held an emergency meeting and issued enquiry notices to the China division of Yum! Brands Inc. and McDonald's Guangdong branch to present material on their employment practices.

According to Zhang Xiang, a spokesperson for the Guangdong Provincial Labor and Social Security Department, between March 29 and April 12, the department arranged 16 people to check more than 20 boxes of material from McDonald's and KFC, and talked with over 9,000 employees.

Zhang said the investigation mainly covered seven low-pay regulation violations, working hour violations, the failure to give employees their contracts and the inclusion of unfair clauses in contracts.

On April 10, the Guangdong Provincial Labor and Social Security Department released its investigation results, which confirmed that the fast-food restaurants had broken labor rights regulations in several areas. Surprisingly, the probe results failed to conclude that the restaurant chains had paid workers below the minimum wage.

The All China Federation of Trade Unions (ACFTU), the sole national trade union federation, also participated in the investigation.

"ACFTU has attached a lot of importance to this incident. If labor rights violations do exist and cannot be rectified, our organization will report them to government labor agencies and even support workers to sue their employers," said Li Shouzhen, a senior official with ACFTU, on April 3. He said all enterprises in China, regardless of their size, investment scale and ownership, were not allowed the privilege of transcending laws and regulations in drafting company rules.

The ACFTU also asked trade unions all over China to launch a nationwide campaign to investigate labor rights violations. It was not long before another 10 cities exposed labor rights violations by local McDonald's and KFC restaurants, and the scandal spread further.

"The lack of trade unions in foreign-funded companies has put workers at a disadvantage," said ACFTU senior official Guo Jun. He said the ACFTU would actively promote the establishment of trade unions, wage negotiation systems and wage guarantee schemes in foreign companies.

On April 4, Kong Xianghong, Vice Chairman of the Guangdong Federation of Trade Unions, announced that a preparatory panel on setting up a trade union in McDonald's Guangdong branch, consisting of labor and management representatives, had been set up and the Guangdong Federation of Trade Unions and McDonald's had reached a consensus on basic issues.

On April 16 McDonald's China promised that trade unions would cover all the 40 McDonald's outlets in Zhejiang Province by the end of this year.

Vacant protection

Zhang Xiang from the Guangdong Provincial Labor and Social Security Department said that according to laws and regulations McDonald's and KFC would be given a period for rectification and a penalty would be imposed if they failed to offer a remedy in this period.

Both companies argued that they had not broken any rules regarding the signing of contracts. In the Labor Law of China , the 12th provision says employers of university students who do part-time jobs to support their studies can choose not to sign a work contract. Based on this, the China division of Yum! Brands Inc. argued that its part-time university student workers were not entitled to legal labor status and so were not covered by the scope of the Labor Law of China.

"Some people have recently confused our labor relations in Guangdong, which are allowed by law, with the full-time labor relations regulated by the province's new labor regulation that took effect on January 1, 2007, which has led to some unnecessary misunderstandings," said a statement from the China division of Yum! Brands Inc.

"The university students we have hired are neither full-time employees nor part-time employees. They are a special group of employees," explained Cui Huanming, the marketing director of the Guangdong branch of the China division of Yum! Brands Inc.

However, this notion was seriously challenged. Labor lawyer Zhu Yongping said he did not believe the explanation held water. Zhu said that as he understood it, every adult Chinese citizen who received payment for his or her work had forged a labor relationship with the employer. Under such circumstances, both the employer and the employee are subject to Labor Law regulations.

Lu Ying, a professor of the School of Law of Sun Yat-Sen University, said unless the university students were working as interns, any other form of provision of labor had created factual labor rights, which should be subject to protection under the Labor Law as well as the minimum wage standard for part-time workers of Guangdong Province.

However, China's laws and regulations seem to have ignored the labor protection rights of the small group of university students doing part-time work. There is not one single provision on how to protect these students' labor rights in any law or regulation.

Renowned labor lawyer Liang Zhi said that the violation of labor rights by McDonald's, KFC and the China division of Yum! Brands Inc. had aroused enormous government concern over the implementation of laws and regulations of foreign companies in China and the labor rights protection of Chinese employees in these companies. He asserted that this incident would boost China's labor law legislation and implementation.