A Chinese court has ruled that companies cannot legally fire workers simply because artificial intelligence can perform their jobs more cheaply.
The decision from the Hangzhou Intermediate People’s Court found that AI-driven replacement does not, by itself, meet the legal threshold for a “major change in objective circumstances” under Chinese labour law.
The case is being closely watched by employers as AI adoption accelerates across technology, media, marketing and customer service roles.
What did the court decide?
The dispute centred on a technology worker, identified by the surname Zhou, who worked in a quality-assurance role checking the accuracy of content generated by AI language models.
The company attempted to move Zhou into another role with a lower monthly salary, reportedly cutting pay from 25,000 yuan to 15,000 yuan. When Zhou rejected the reassignment, the company terminated the employment contract.
Labour arbitration first backed Zhou, before the employer took the matter to court. The Yuhang District Court found the dismissal unlawful, and the Hangzhou Intermediate People’s Court later upheld that decision.
The court said adopting AI was a business strategy, not an unforeseeable external change that made the employment contract impossible to perform.
Why it matters for AI and work
The ruling does not prevent companies from using AI or restructuring roles. It does, however, make clear that automation alone is not enough to justify removing a worker.
Employers must still show valid legal grounds for termination. They must also make reasonable reassignment offers if a role changes, rather than using a lower-paid alternative as a pathway to dismissal.
For media, advertising and technology businesses, the decision adds to a growing global debate about how companies manage AI adoption while protecting workers’ rights.
Retraining over replacement
The court said companies pursuing AI-led change should prioritise retraining workers for more advanced roles that still require human oversight.
Wang Tianyu, researcher with the Chinese Academy of Social Sciences, said technological progress still needed to operate within legal limits.
“Technological progress may be irreversible, but it cannot exist outside a legal framework,” Wang said.
The court also noted that employees have a role to play in adapting to changing workplace demands, including building skills that help them work alongside AI systems.
The decision comes as governments and regulators continue to examine how AI is reshaping employment. The European Union’s AI Act, for example, includes provisions covering AI systems used in employment and worker management.