Jakarta, INTI - A Chinese court ruled that companies cannot terminate employment or layoff their employees just to replace them with artificial intelligence (AI). This decision followed the court's finding that a technology company in eastern China had illegally fired one of its employees.
The Hangzhou Intermediate People's Court said in a published article that the termination cited by the company did not fall under negative conditions such as business downsizing or operational difficulties. It also did not meet the legal condition that made the company “impossible to continue the employment contract.”
The court stated in a separate statement, citing the same case, that companies cannot unilaterally layoff employees or cut their salaries due to technological advances.
Employee was Replaced by AI
According to case documents, a quality assurance professional at a technology company, identified with his surname as Zhou, was laid off because his role was replaced by AI. He had been responsible for checking the accuracy of the output from a large language model (LLM). When the AI system took over his job, he was demoted and forced to take a 40% pay cut.
When Zhou refused the demotion, the company fired him, with the reason as staff reductions caused by AI. The case then went to arbitration and then to the Chinese courts, which upheld the compensation package.
This ruling was built on a precedent set by another Chinese court in December 2025, which found that AI implementation did not meet the legal standards required for a company to terminate an employee's contract.
Conclusion
A Hangzhou court ruled that a company cannot lay off employees solely because of AI systems and automation. The court found that the reason did not constitute a legally recognized negative circumstance. The case involved Zhou, a quality assurance professional who received a 40% pay cut and demotion after AI replaced him. He was then laid off after refusing reassignment. The ruling confirms that companies cannot cut salaries or unilaterally dismiss employees due to technological advances.
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