Chinese court says companies cannot fire workers simply due to AI replacement

(SeaPRwire) –   A court in China has ruled that businesses cannot dismiss employees only to replace them with artificial intelligence systems, as authorities balance the need to maintain domestic labor market stability with the global race to advance AI technologies.

According to a statement released by the Hangzhou Intermediate People’s Court, the court determined that a tech firm based in eastern China had unlawfully fired one of its staff members after he refused to accept a demotion when his role was automated by AI.

“The dismissal grounds the company put forward do not fall into negative situations like corporate downsizing or operational difficulties, nor do they satisfy the legal requirement that makes it ‘impossible to continue performing the employment contract,’” the court stated in the article published on April 28.

Enterprises are not allowed to unilaterally lay off workers or cut salaries on the grounds of technological advancement, the court noted in a separate statement that referenced the same case.

This ruling comes as Chinese companies rush to deploy AI systems as part of a state-led push to take the lead in the new technology sector. Meanwhile, Chinese Communist Party planners have signaled their intention to prioritize labor market stability as the country deals with a slowing economy and high youth unemployment rates.

Read more: Policy Adviser Says China Must Prevent Large-Scale Job Cuts Caused by AI

Per court filings, the employee at the heart of the case, a quality assurance specialist at a tech company who is only identified by the surname Zhou, was previously responsible for checking the accuracy of outputs generated by large language models. When an AI system took over his duties, he was demoted and forced to accept a 40% pay cut.

After Zhou turned down the job reassignment, the company dismissed him, citing staff reductions resulting from AI adoption. The case first went through arbitration before entering China’s court system, which ruled in support of granting Zhou a compensation package.

This ruling is built on a precedent set by another Chinese court in December, which concluded that AI implementation did not meet the necessary legal criteria for a mapping company to terminate one of its employees’ work contracts.