In China, it is forbidden to fire people because of AI

The Chinese court ruled that companies do not have the right to dismiss employees solely due to replacing them with artificial intelligence.

In a statement from the People’s Court of the Intermediate Court of Hangzhou, it was stated that one of the technology firms in eastern China unlawfully dismissed an employee after he refused a demotion related to the automation of his work with AI.

“The reason for dismissal does not fall under negative circumstances such as business downsizing or operational difficulties. It also does not meet the legal condition that makes it impossible to continue the employment contract,” the court stated.

Companies cannot unilaterally dismiss people or cut wages due to technological progress, the authorities added.

The employee involved in the case, referred to as Zhou, is a quality control specialist at a tech company. He was responsible for verifying the accuracy of results produced by large language models.

His work was taken over by an AI system, leading management to decide on a demotion and a 40% salary reduction.

Zhou refused the transfer, and the company dismissed him, citing staff reduction due to the implementation of neural networks. The case was taken to arbitration, then to the Chinese judicial system. It supported the payment of a compensation package.

The decision is based on a precedent set by a Chinese court in December 2025. At that time, it was ruled that the implementation of AI did not comply with the necessary legal norms allowing a company to terminate an employment contract with staff.

Chinese companies are striving to implement AI systems as part of a government program to achieve leadership in artificial intelligence.

Meanwhile, strategists of the Communist Party of China announced their readiness to prioritize stability in the labor market amid slowing economic growth and high youth unemployment.

Recall that in December, a Nobel laureate predicted a wave of unemployment due to AI in 2026.