Chinese court rules AI adoption not valid grounds for dismissing workers
A ruling by the Hangzhou Intermediate People’s Court finds that companies cannot justify layoffs solely on the basis of replacing workers with AI systems.
A court in China has ruled that companies cannot dismiss employees simply because their roles are replaced by artificial intelligence. The decision was issued by the Hangzhou Intermediate People’s Court in a case involving a technology firm.
The dispute centred on a worker whose role was automated. He was offered a demotion and a significant salary reduction, which he refused. The company then terminated his contract, citing AI-driven restructuring.
The court found that this reasoning did not meet legal requirements. Employers must show valid economic or operational grounds, and technological change alone is not sufficient. The dismissal was therefore ruled unlawful, and compensation was awarded.
The judgment also clarifies broader practice. Companies cannot unilaterally reduce pay or terminate contracts solely due to AI adoption. Existing labour protections continue to apply, regardless of technological shifts.
The ruling comes as Chinese firms expand the use of AI across sectors, while policymakers balance innovation with labour market stability.
The decision builds on an earlier case from December. In that instance, another court found that AI implementation did not meet the legal threshold required to terminate an employment contract in a mapping company dispute.
