BYD’s project in Brazil recently made international headlines after workers employed by one of its contractors were allegedly subjected to “working conditions analogous to slavery.” The incident has attracted widespread attention, not only because of BYD’s prominence in its industry, but also because the growing number of Chinese companies—particularly privately owned enterprises and small and medium-sized enterprises—expanding overseas has brought their employment practices outside China under increasing scrutiny. Although this is an isolated incident, it highlights the broader labor and employment compliance challenges facing Chinese companies as they expand abroad.

This article provides a brief commentary on issues reported in the media, based solely on publicly available online information as of the date of writing. It does not express any legal opinion or formal position of the authors regarding the incident and is intended for general reference only.

I. Overview of the Incident at BYD’s Brazil Site

According to media reports, the Bahia Regional Office of Brazil’s Labor Prosecution Service (Ministério Público do Trabalho, or MPT) alleged that BYD’s construction contractor, Jinjiang Group, had committed a number of labor violations. These allegedly included providing inadequate living conditions, imposing excessive working hours, and requiring workers to surrender their passports. The allegations led several Brazilian authorities to take coordinated enforcement action and quickly drew international attention.

Among other allegations, the Brazilian authorities claimed that more than 100 workers had been housed in overcrowded and substandard dormitories, with some beds lacking mattresses or bedding; that more than 30 workers had been required to share a single toilet; and that kitchen and dining facilities had been located unacceptably close to construction materials and toilets. They further alleged that workers had been required to rise at 4:00 a.m. and queue to wash before starting work at 5:30 a.m.; that some had worked for 25 consecutive days without a day off, resulting in work-related injuries; and that the company had collected and retained workers’ passports, restricting their freedom of movement.

BYD promptly announced that it had terminated its relationship with Jinjiang Group, the contractor in question. Jinjiang Group and workers involved in the project subsequently issued a statement attributing the allegations to communication difficulties and cultural differences and denying that the workers had been subjected to “forced labor.”

As of the date of writing, the incident continues to unfold in both the public and legal spheres. In addition to disrupting the progress of BYD’s project, it serves as a warning to other Chinese companies that cross-border labor and employment compliance must be given greater attention when expanding overseas.

II. Key Legal Issues Raised by the Incident

Based on our research and experience, Brazil affords comparatively strong protection to workers’ rights by global standards. Although Brazil is a developing country, left-leaning political and social traditions have historically exerted considerable influence, and the country has a strong tradition of labor activism and worker protection. Its legal criteria for identifying forced labor also reflect the requirements of the relevant fundamental conventions of the International Labor Organization (ILO).

Under applicable Brazilian law, employers must provide accommodation and working conditions that meet relevant health and safety standards. They may not retain workers’ identity documents without justification. Working hours must remain within statutory limits, and overtime must be compensated in accordance with the law. Denying workers adequate rest for an extended period may contribute to a finding of forced labor or labor performed under conditions analogous to slavery.

These requirements govern worker protection within Brazil, while also interacting with the growing body of legislation that incorporates labor protections into global supply-chain regulation. Chinese companies operating across borders must therefore comply strictly with the laws of the jurisdictions in which they operate and with applicable international standards. They must also guard against cross-border labor and employment risks, including the risk of forced labor.

Chinese law likewise protects workers and prohibits forced labor. In serious cases, the Criminal Law of the People’s Republic of China imposes criminal liability on employers that compel employees to work by restricting their personal freedom. In 2022, China formally ratified the ILO Forced Labor Convention, 1930 (No. 29) and the Abolition of Forced Labor Convention, 1957 (No. 105). In this respect, China’s worker protections are consistent with, or at least broadly similar to, those of Brazil and other jurisdictions.

In practice, however, certain employment practices that, for various reasons, have long been widely accepted or taken for granted in China—such as routinely excessive overtime and inadequate working conditions justified by a “striver culture” or an ethos of enduring hardship—may directly trigger local laws and international standards when replicated in other countries or regions. As the BYD Brazil incident illustrates, they may even lead to allegations of forced labor.

Before entering an overseas market, Chinese companies should therefore familiarize themselves with local cultural norms, applicable labor and employment laws, and enforcement practices. Strict legal compliance is essential, but companies should also adapt their employment-management practices to local social and cultural conditions. Doing so will help them avoid both legal exposure and reputational crises.

三、ESGIII. An ESG-Based Cross-Border Labor Compliance Framework for Companies Operating Overseas

ESG encompasses environmental, social, and governance considerations and has attracted widespread attention in recent years. It also offers a useful lens through which to analyze and understand the issues raised by the BYD Brazil incident.

In China, companies tend to focus more heavily on environmental matters, including the country’s carbon-peaking and carbon-neutrality goals, the low-carbon economy, and green development, while social issues are often overlooked. Yet social issues are particularly complex and sensitive. Human rights and labor rights lie at their core and are closely intertwined within the framework of fundamental labor standards. The alleged forced-labor concerns arising from the BYD Brazil incident, for example, implicate both human rights and labor rights and form an essential part of the social pillar under virtually every ESG standard. Chinese companies must therefore pay close attention to social issues when expanding overseas; incidents such as the one involving BYD’s Brazil project make this need all the more urgent.

ESG originated in the investment sector and traditionally operated primarily as a form of soft law. A company’s failure to observe soft-law standards might therefore have cost it financing opportunities or business partners, but would not ordinarily have resulted in legal liability. In recent years, however, ESG-related requirements have increasingly been incorporated into binding law. Jurisdictions in Europe and the United States have enacted modern-slavery, supply-chain, and due-diligence laws that expressly require companies subject to their jurisdiction to comply with relevant ESG requirements, including in their global operations. Failure to do so may result in serious consequences, including barriers to market access, fines, detention of shipments, and even criminal liability.

There are, however, hundreds of ESG standards worldwide, and standards issued by different bodies are not uniform. Major stock exchanges and regulators in China and abroad have also adopted their own ESG disclosure requirements. These include the Shanghai and Shenzhen stock exchanges in China, as well as Nasdaq and the Hong Kong Stock Exchange outside mainland China. Companies therefore often struggle to determine which standards they should follow.

A systematic approach is needed, extending from macro-level policy and the interpretation and implementation of legal instruments to the resolution of individual cases. Chinese companies operating overseas should make this complexity manageable by developing an ESG compliance framework—or a broader sustainable-development compliance framework—tailored to their own circumstances and responsive to the requirements of both the host jurisdiction and the destination markets for their exports. Companies at different stages of development naturally have different ESG compliance needs. Start-ups may need more policy guidance and room to grow, while mature companies face more demanding compliance expectations. Given the significant cultural, historical, and legal differences they encounter abroad, Chinese companies cannot simply transplant domestic governance models into foreign markets. Their approach must be adapted flexibly to local conditions. Before entering a particular market, a company should first assess the relevant compliance environment and identify the standards it will apply. It must then embed those standards in its internal management processes, including its internal rules, policies, procedures, and contractual documentation.

From a labor and employment perspective, this requires the establishment and operation of a cross-border labor compliance framework. Policies addressing the social pillar of ESG—including prohibitions on forced labor and employment discrimination—must be integrated into the company’s operations, management, and strategy. Legal counsel can assist by converting high-level commitments into practical, enforceable rules and incorporating specific provisions into contracts and other agreements. This enables the company to respond lawfully and effectively to non-compliance within its supply chain or misconduct by employees.Only through adequate preparation at the policy, process, and implementation levels can Chinese companies achieve compliant operations and sustainable development in overseas markets.

IV. Conclusion

The BYD Brazil incident illustrates a range of legal and compliance issues that Chinese companies may encounter when expanding overseas. Based on currently available public information, the Brazilian authorities have already taken administrative measures, including ordering work to stop, arranging for the repatriation of workers alleged to have entered or worked in Brazil irregularly, and imposing fines. Further steps may include orders requiring rectification within a specified period and administrative hearings.

The incident has already caused serious reputational harm to BYD and the other companies involved. The parties currently offer conflicting accounts: one side alleges forced labor and breaches of local law, while the other attributes the matter to cultural misunderstandings and improper or excessive enforcement. The truth of the allegations and their proper legal characterization therefore remain to be determined.

The BYD Brazil incident should serve as a warning to Chinese companies about cross-border labor compliance in their overseas operations. As they continue to pursue their “going global” strategies, achieving compliant operations and sustainable development worldwide has become critically important. Companies operating abroad should draw lessons from this incident and further develop both their cross-border labor compliance frameworks and their broader ESG compliance systems. At the same time, companies should embrace responsible business conduct and proactively adapt to the legal and cultural environment of host jurisdictions and to relevant international standards, thereby securing a sustainable competitive advantage over the long term.

*Hou Peiqi also contributed to this article.

This article was originally published on January 7, 2025, on the “Cross-Border Employment Compliance CEC” WeChat official account.