Last week, Chip Starnes, the owner Specialty Medical Supplies in Coral Gables, Florida, was held captive by employees of his medical supply plant on the outskirts of Beijing for six days until he agreed to pay them generous severance packages. He was released last Thursday.
Starnes has reportedly agreed to hire some of those workers back, this time under different contracts. In a shocking episode that won't be soon forgotten, the American executive, whom workers feared would shut down the plant entirely, was strong-armed into paying two months' salary and compensation totaling nearly $300,000 to 97 workers, according to USA Today.
These sorts of situations aren't uncommon when settling debt disputes in China, says Dan Harris, a lawyer at Harris & Moure and author of a blog at chinalawblog.com. "[Hostage taking] is just a tactic that's used to get paid," says Harris, who has helped numerous executives get out of hostage situations. "They use it when a relative gets killed in the factory. Injured workers do it."
If you're facing a dispute in China, here's how to protect yourself.
Establish relationships with authorities early on.
"As soon as you come to China, you should stop by the various government offices to introduce yourself and tell them what you'll be doing," says Harris. Explain how many people you plan to employ and how happy you are to be there. "It really matters," he says. If they don't know who you are, they won't jump to help when you call with an emergency.
Give everyone employment contracts.
"Often, Americans will go to China, hire three employees, not like two, and fire them," says Harris. "Then those people will come back asking for [an unreasonable amount of severance] and the American will be like, 'You only worked for two months and did a terrible job.' The American will ask us to fight it, but he'll lose for the following reason: He didn't have a written contract."
Having such documentation is the only way to ensure you have the law on your side and won't fall prey to what Harris calls "automatic mass severance," which must be paid when a worker is let go. In the document, clearly state what you consider to be grounds for termination and what may constitute a reasonable severance, given the circumstances. Chances are, you'll still need to negotiate the final payout, but it's far better to cut a $7,000 severance check than to pay $50,000 in legal fees, says Harris.
Do not meet face to face.
Resist the urge to meet in person when there's a dispute, says Harris. He advises against setting foot in China if you're facing a legal battle, owe money, or need to close down a facility. Especially if you're asked to meet in the factory or a backwater town, where the other party is likely to have the community's support.
If you must meet face-to-face, do so in a big city--ideally, in a five-star, locally-owned hotel. These hotels are more likely to have good security. Plus, says Harris, "a big, wealthy hotel controlled by powerful Chinese people won't want the publicity of something bad going down."