Kraft Foods Inc has been accused of violating China's new labor law for failing to consult with employees before shifting its headquarters from Beijing to Shanghai.

Employees have formed a union, asking for compensation and an apology as the headquarters shift will force more than half of the 340 workers to lose their jobs if they fail to accept the relocation, said Chen Baoqing, chairman of the labor union.

"Kraft should have informed its employees before making the decision,'' Chen told Shanghai Daily in a telephone interview.

Kraft Foods announced it would move its Chinese headquarters from Beijing to Shanghai in January as part of an operation to restructure after it bought the biscuit and snacks division of Danone in November.

The shift, scheduled to begin in the third quarter and to be finished before the end of the year, drew widespread criticism among employees because no explanation for the move was offered.

"We have considered employees' benefits and offered higher compensation than the law requirements but employees have their own thoughts," said Li Lingping, communication director from Kraft Foods China.

Negotiations between the world's second largest food and beverage giant and the labor union have been happening over the past two months. But no agreement has been reached.

"We are still working on details to settle the disputes," the labor union chairman Chen said. According to China's new labor law, companies are required to consult with staff before making major decisions that may affect employee interests.

Kraft earlier said (during the consolidation with Danone's biscuits): "Any decision will be made based on a comprehensive assessment of various factors in line with its business strategy in China."

Kraft entered the Chinese market in 1984 and set up its Beijing headquarters in 2006. In the past two years, Kraft has achieved double digital growth in China, reaping the benefits from increased consumption and the economy boom.

The company had invested more than US$200 million in China by 2006, including a US$72 million biscuits factory in Beijing.

After acquiring Danone's biscuits, Kraft now has seven manufacturing facilities in China, producing products such as Oreo and Ritz.

It is now the biggest overseas biscuits maker in China with more than 20 percent market share.

(Shanghai Daily March 24, 2008)