A court in Hangzhou ruled that a company cannot lawfully fire an employee just because AI could replace the role at lower cost, in a case that ended with more than 260,000 yuan in compensation for the worker. [1, 2]
The Hangzhou Intermediate People’s Court upheld earlier labor arbitration and trial rulings in favor of Zhou, a 35-year-old AI quality inspector who was fired after he refused a demotion and pay cut. The company had sought to reduce his monthly salary from 25,000 yuan to 15,000 yuan before terminating him, saying AI could take over his work. [1, 2]
Judge Shi Guoqiang said, “We don’t believe AI technology has reached the point where it can substantially replace human workers,” according to the court’s account of the case. Ding Ye, head of the court’s Civil Fifth Court, said companies may see AI as a way to boost efficiency and cut costs, but workers should not bear the risk of job or salary losses from technology change. [1, 2]
The court said AI-based cost savings do not amount to a material change in objective circumstances that would justify ending a labor contract. It also ruled that the proposed demotion and pay cut were not a reasonable negotiated solution. Zhou was awarded compensation for wrongful termination. [1, 2]
The dispute began after Zhou joined a fintech company in Hangzhou in 2022. He was later demoted and faced pay cut attempts in 2025 before the dismissal that led to the lawsuit. [2]
The case follows a similar 2024 ruling by the Guangzhou Intermediate People’s Court, which found that AI replacement did not by itself justify ending a labor contract. Hangzhou, home to many of China’s leading AI companies, has now added another closely watched ruling on how employers can use automation in personnel decisions. [1, 2]
