OSI Group to lay off 340 workers amid Chinese food scandal

OSI Group LLC said on Monday it was laying off up to 340 workers at its Chinese subsidiary Shanghai Husi Food Co., Ltd., all but shutting down its presence in the region, after a food safety scandal blew up in July.

The 340 lay offs include 226 workers directly employed by Shanghai Husi, as well as 114 contracted to the company.

OSI Group says the only staff to be kept on in the area will be those involved in the investigation.

All Shanghai Husi’s employees have been on paid leave since July 21, 2014.

In July, Chinese TV showed workers mixing rotten meat with fresh meat and then repackaging it, as well a picking up meat products from the floor and selling it on to clients, such as McDonald’s and KFC.

The scandal seriously damaged McDonald’s and KFC’s operations in the country. Fast food sales in Japan and Hong Kong also plummeted as the scandal spread.

The two fast-food companies have since suspended or cut ties with Shanghai Husi.

In an online statement, OSI Group wrote that its Workers Redundancy Plan (WRP) has been reviewed by local authorities and the trade union. It is only redundancy when a person is dismissed because the job is no longer required – if they place new workers in those jobs, it is not redundancy.

The company wrote:

“It was our expectation that they (the workers) could resume their work as soon as possible. Unfortunately, due to circumstances beyond our control, this will not be the case.”

Significant financial and customer loss

OSI Group says it has experienced considerable financial and customer losses over the last two months at Shanhai Husi. With the probe still underway it is very unlikely that production will resume any time soon.

OSI Group added:

“This is a difficult decision for a responsible employer like OSI. Besides the compensation package, we are also working closely with local government agencies to provide support to affected workers, including career development coaching, job search, and skills training.”

Six Shanghai Husi executives were arrested in August on suspicion of processing and marketing “fake and inferior” produce.

As part of their efforts to more closely monitor food supplies, local authorities have told multinational fast-food chains to publish their suppliers’ names online.

So far, 214 food processing plants and 22 fast-food businesses have been inspected by local authorities, leading to 78.1 tonnes of smoked beef patties, 18 tonnes of Chicken McNuggets, and 48 tonnes of beefsteaks being confiscated.