Chinese court rules AI-related dismissal illegitimate

A Chinese court has ruled that dismissing an employee due to the introduction of artificial intelligence is illegitimate. The case originated in the Yuhang District Court in Hangzhou, where a quality control worker, identified as Z., was offered a 40% salary reduction because their role was partially replaced by AI. When the employee refused the pay cut, the company terminated them, citing the “impossibility of contract execution.”

The Yuhang District Court ruled against the company, a decision later upheld by the Intermediate Court. The ruling establishes a significant legal precedent by framing the adoption of AI not as an unavoidable natural occurrence, but as a managerial choice that must be justified. This decision challenges the growing trend of using digital transformation as a legal basis for workforce reductions and salary cuts.