Chinese courts rule that companies cannot justify firing workers solely because AI can perform their jobs more cheaply

Hangzhou Intermediate People's Court and a Beijing arbitration panel ruled in late April that AI-driven job replacement does not automatically constitute a 'major change in objective circumstances' under China's Labor Contract Law, which would justify terminating employment contracts. One case involved a tech worker whose responsibilities were absorbed by large language models (AI systems that understand and generate text); the company offered him a reassignment with a reduced salary of 15,000 yuan ($2,180) per month, which the court found unreasonably low and ruled the dismissal unlawful.

The courts determined that a company's decision to adopt AI technology and reorganize around it does not automatically make a labor contract impossible to perform, and that companies pursuing technological upgrades must also consider employees' legitimate rights and interests. The Hangzhou court stated that companies should prioritize retraining workers and helping them transition to higher-level roles requiring greater human involvement.

The rulings signal an attempt by China to balance rapid AI deployment with labor stability, according to Wang Tianyu, a researcher with the Chinese Academy of Social Sciences, who stated that 'technological progress may be irreversible, but it cannot exist outside a legal framework.'