Courts in Hangzhou and Beijing have ruled in separate cases that terminating employees to replace them with AI is illegal, amid rising concerns about unemployment due to automation.
A case brought to the Hangzhou Intermediate People’s Court in eastern China involved an employee responsible for verifying the accuracy of outputs from large language models (LLMs), Bloomberg reports.
When his work was automated by AI, the worker refused to accept a demotion and a 40% pay cut, leading to his layoff.
The court ruled that the termination grounds cited by the company did not fall under negative circumstances such as business downsizing or operational difficulties. Nor did they meet the legal condition that made it impossible to continue his employment.
In a separate statement, the court said companies cannot unilaterally fire employees or reduce salaries due to technological progress.
The ruling builds on a precedent set by a landmark case from December 2025, in which the plaintiff, surnamed Liu, worked as a traditional manual map data collector, according to The Next Web.
As the company moved from manual to fully automated data collection in 2024 and canceled its navigation products department, Liu was fired, citing a major change in objective circumstances.
However, the court ruled that automation driven by AI didn’t meet the legal standard for termination.
The rulings come as workers around the world are increasingly uneasy about their future prospects. A 2025 survey found that 32% of employees think that AI will lead to fewer job opportunities for them.
Tech workers are especially affected, as 86 companies globally laid off around 80,000 employees in the first quarter of 2026, citing AI as a cause of the terminations.
However, experts say that automation may be a convenient excuse for layoffs resulting from business failures such as over-hiring and weak customer demand.
Even industry stakeholders appear to agree with the experts. OpenAI CEO Sam Altman recently spoke about the trend of “AI washing,” where AI is blamed for layoffs that would happen anyway.
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