A Hangzhou Intermediate People’s Court decision has set a notable precedent for employment law in the age of AI and automation, holding that companies cannot fire workers solely because artificial intelligence can take over parts of their tasks. The court affirmed a labour tribunal ruling in favour of an employee whose position had been partially automated, finding that automation by itself does not constitute lawful grounds for dismissal.
The worker, identified by the surname Zhou, was hired in 2022 by an AI-related company as a quality assurance supervisor, with a monthly salary of 25,000 yuan. His responsibilities included reviewing AI-generated outputs, matching user queries, and filtering illegal or inappropriate content to ensure accuracy and compliance. Gradually, the employer automated portions of these duties using large language models and other systems. The company then proposed reassigning Zhou to a lower-paid role at 15,000 yuan per month; he refused the reassignment as unreasonable.
After Zhou declined the new post, the employer terminated his contract, citing organizational restructuring and reduced staffing needs, and offered compensation. Zhou challenged the dismissal and the proposed settlement through arbitration, which concluded the termination was unlawful. The Hangzhou court upheld that arbitration decision.
In its ruling, the court said that replacement of work by AI does not amount to a “major change in circumstances” as defined under China’s Labour Contract Law—the legal threshold that would allow an employer to unilaterally terminate a contract for economic or organizational reasons. The court also found the employer had not demonstrated that Zhou’s role had become impossible to perform, nor that the reassignment to a lower-paid position was reasonable or justified.
The Hangzhou ruling is consistent with several recent Chinese judgments finding that AI-driven replacement, on its own, cannot be used to justify dismissal. Similar disputes have arisen in other sectors, including cases involving automated map data roles, where courts likewise protected workers against termination based solely on automation.
Legal observers say the decision highlights ongoing efforts by Chinese courts to balance technological adoption with worker protections. As employers increasingly deploy AI to streamline tasks, this ruling signals that courts may require stronger evidence—beyond mere automation—that jobs are truly redundant or that proposed reassignment terms are reasonable before allowing lawful dismissal.
For employees and employers alike, the case underscores the importance of careful handling of workforce changes prompted by automation: employers should document business needs, explore reasonable alternatives, and ensure any reassignments meet legal standards; employees have legal recourse if they believe a termination is unjustified. The Hangzhou decision will likely be cited in future disputes over AI and employment rights as automation grows across industries.
