A Hangzhou intermediate people’s court has ruled that dismissing a senior tech worker after replacing him with artificial intelligence was unlawful, a decision legal scholars say bolsters labor rights as China urges industries to adopt AI.
The court upheld an earlier ruling that the company’s termination of the employee’s contract was not justified. Judges found the reasons the employer gave did not amount to negative circumstances such as business downsizing or operational difficulties, nor did they meet the legal threshold that would make it impossible to continue the employment contract.
The worker, identified only by his surname Zhou, was a quality assurance supervisor at a Hangzhou technology firm who primarily checked the accuracy of answers produced by large language models. Zhou earned about 300,000 yuan a year (roughly $43,900) before AI systems took over much of his work. After AI assumed his duties, the company moved him to a lower-level position with a 40% pay cut. He refused the reassignment and the company terminated his contract, citing AI’s disruptive impact and a reduced need for staff.
Zhou first prevailed in arbitration, which ordered higher compensation for wrongful termination. The company appealed the arbitration decision to court in 2025, losing at the district level and again on appeal. The Hangzhou court also found it unreasonable that the alternative role offered came with a substantial salary reduction.
Zhejiang-based lawyer Wang Xuyang said the ruling underscores that adopting AI does not automatically justify terminating labor contracts to cut costs. Similar legal outcomes have emerged in other Chinese cities. Last year a Beijing data-mapping worker who was replaced by AI won an arbitration ruling that the company’s shift to AI was a commercial choice rather than an uncontrollable event, and that employers cannot shift the costs of technological transformation entirely onto employees.
The rulings arrive as many Chinese companies face squeezed profits amid a sluggish domestic economy and rising costs linked to global events. Those pressures could push some firms to pursue deeper automation and workforce reductions, raising new legal and social questions about how the costs of technological change should be shared.
Jasmine Ling contributed to this report.