A court in Hangzhou, an AI hub in eastern China, has ruled that a senior tech worker’s dismissal after being replaced by artificial intelligence was unlawful. Legal scholars say the decision is a reassuring sign for labor rights as China’s central leadership pushes industries to adopt AI.
The Hangzhou Intermediate People’s Court upheld a lower court’s ruling that the company’s termination of the employee’s contract was not justified. The court said the reasons the company cited did not amount to negative circumstances such as business downsizing or operational difficulties, nor did they meet the legal standard that makes it “impossible to continue the employment contract.”
The worker, identified only by his surname Zhou, was a quality assurance supervisor at a Hangzhou tech firm. He primarily worked with large language models, verifying the accuracy of answers they generated for users. Zhou earned about 300,000 yuan a year (roughly $43,900) before AI took over his duties. The company reassigned him to a lower-level role with a 40% pay cut; he refused, and the company then ended his contract, citing AI’s disruptive impact and reduced staffing needs.
Zhou first won an arbitration claim demanding higher compensation for wrongful termination. The company challenged that decision in court in 2025, losing at the district level and again on appeal. The Hangzhou court also found it unreasonable that the alternative position offered came with a substantial salary reduction.
A Zhejiang lawyer, Wang Xuyang, said AI adoption does not automatically justify terminating labor contracts to cut costs. The ruling follows similar disputes in other Chinese cities. Last year, a data-mapping worker in Beijing who was replaced by AI also won an arbitration ruling that the company’s switch to AI was a business choice, not an uncontrollable event, and that shifting the cost of technological transformation onto the employee was unlawful.
The decisions come as corporate profits are squeezed amid a sluggish Chinese economy and rising costs linked to global events, factors that may push businesses to seek further cost reductions through automation.
Jasmine Ling contributed to this report.