A Chinese court ruled that companies cannot terminate employees solely due to their jobs being replaced by artificial intelligence.
The statement from the Hangzhou Intermediate People's Court indicated that a tech firm in eastern China unlawfully dismissed an employee after he refused a demotion related to the automation of his role through AI.
"The reason for the dismissal does not fall under negative circumstances such as business downsizing or operational difficulties. It also does not meet the legal condition that would make it impossible to continue the employment contract," the court stated.
Companies cannot unilaterally lay off employees or reduce salaries due to technological advancements, the court added.
The employee, referred to as Zhou, was a quality control specialist at the tech firm, responsible for verifying the accuracy of outputs from large language models.
His role was taken over by an AI system, prompting management to propose a demotion and a 40% salary cut.
Zhou refused the transfer, and the company terminated his employment, citing staff reductions due to the implementation of neural networks. The case was escalated to arbitration and then to the Chinese judicial system, which upheld the decision for a compensation package.
This ruling is based on a precedent set by a Chinese court in December 2025, which determined that the introduction of AI did not meet the necessary legal standards for a company to terminate an employee's contract.
Chinese companies are eager to implement AI systems as part of a government initiative to achieve leadership in artificial intelligence.
Meanwhile, strategists from the Communist Party of China have expressed their commitment to prioritizing labor market stability amid slowing economic growth and high youth unemployment.
Notably, in December, a Nobel laureate predicted a wave of unemployment due to AI by 2026.