‘AI Is Not Grounds for Dismissal’ : Chinese Court Issues Landmark Ruling

Kathmandu — A court in Hangzhou, China, has ruled in favour of an employee in a dispute involving replacement by artificial intelligence, a verdict experts say sends a reassuring message for labour rights protection in the age of automation. The ruling was released on the eve of International Workers’ Day.

The case, made public on Tuesday by the Hangzhou Intermediate People’s Court in Zhejiang Province, involved an AI-related tech company that fired a senior technician but refused to pay higher compensation. The court upheld a lower court’s decision that the dismissal was unlawful.

The employee, surnamed Zhou, joined the company in November 2022 as a quality assurance supervisor with a monthly salary of 25,000 yuan. When his tasks were later taken over by AI large language models, the company attempted to reassign him to a lower-level post at 15,000 yuan per month. After Zhou refused, the company terminated his contract citing organisational restructuring and offered about 311,000 yuan in compensation. An arbitration panel also ruled the dismissal unlawful, prompting the company to appeal to the district court and subsequently to the Hangzhou Intermediate Court.

The intermediate court found that AI taking over a job does not constitute a “major change in objective circumstances” as defined under China’s Labour Contract Law. It also ruled that the alternative position offered a substantially reduced salary and was not a reasonable reassignment, deeming the termination unlawful.

Wang Xuyang, a lawyer from Zhejiang Xingjing Law Firm, noted that the ruling establishes an important principle: while companies may benefit from AI-driven efficiency, they must also bear corresponding social responsibilities. Last December, a Beijing arbitration panel similarly ruled that AI replacement does not justify dismissal. The ruling is considered significant as China’s core AI industry exceeded 1.2 trillion yuan in 2025, with next-generation intelligent terminal penetration expected to surpass 90 percent by 2030.