AI cost-cutting not a legal excuse to fire workers, Chinese court says
AI cost-cutting not a legal excuse to fire workers, Chinese court says
Publish Date: 2026-05-04 03:42:00
Source Domain: www.scmp.com
- A Chinese court has ruled it illegal for a company to terminate an employee based on the argument that it is cheaper to replace them with artificial intelligence (AI).
- The case involved a 35-year-old worker surnamed Zhou who was fired from a fintech firm in Hangzhou after he refused a demotion and pay cut, being told his AI-generated responses job could be replaced by AI.
- The Hangzhou Intermediate People’s Court found that the company’s decision to terminate Zhou’s contract was illegal and ordered the firm to pay him over 260,000 yuan (approximately US$38,000) in compensation.
- Judge Shi Guoqiang stated that AI has not yet reached a level where it can substantially replace human workers.
- The court ruled that AI replacement did not constitute a “material change in objective circumstances” that could justify contract termination, adhering to legal standards usually applied in situations like mergers and acquisitions.
- This ruling echoed a similar 2024 decision by the Guangzhou Intermediate People’s Court, which also found that an AI replacement did not qualify as a change in “objective circumstances.”
