China: Dismissal Based on the Replacement of a Worker with AI Is Not Automatically Lawful.

The Hangzhou Intermediate People’s Court has ruled on a case that is likely to play a significant role in the international debate on the relationship between automation, artificial intelligence and employment protection. According to reports in the Chinese press, a company’s decision to replace human tasks with AI systems does not, in itself, constitute a valid ground for dismissal.

The case concerned an employee of a technology company operating in the artificial intelligence sector, who had been hired as a quality control supervisor. His duties consisted of verifying the reliability of outputs generated by language models, including from the standpoint of content lawfulness, personal data protection and the overall accuracy of results produced by automated systems.

Following the development of the technologies used internally, the company took the view that part of the employee’s duties could be performed directly by AI systems. The employee was therefore offered a different position within the company, involving a lower-ranking role and a significant reduction in remuneration. After the employee refused the proposed reassignment, the company proceeded with his dismissal, relying on a corporate reorganisation linked to technological progress.

The Chinese court held that the circumstances could not be characterised as a “substantial change in the objective circumstances”, a concept provided for under local labour contract legislation to justify, in certain cases, the termination of the employment relationship. According to the Court, that notion refers to exceptional and structural situations, such as corporate transactions, business transfers or events making the continuation of the employment contract objectively impossible — circumstances which were not proven in the case at hand.

The decision also emphasises the reasonableness of the alternative measures offered to the employee. A reassignment involving lower-level duties and a material reduction in salary was not considered sufficient to satisfy the employer’s obligation to seek fair measures in the context of a technology-driven reorganisation.

The principle emerging from the ruling is particularly significant: the adoption of artificial intelligence tools may certainly pursue efficiency and competitiveness objectives, but it does not entitle the employer to unilaterally shift the costs of digital transformation onto employees. Automation, therefore, does not automatically amount to a lawful ground for termination.

The ruling falls within a context in which China is promoting the increasing integration of AI into production processes, while at the same time signalling the need to accompany innovation with appropriate employment safeguards. For businesses, the message is clear: technological transition must be managed through reasonable processes of reorganisation, reskilling and dialogue with employees, without disproportionately impairing the position of the personnel concerned.