A court in China has ruled that companies cannot dismiss employees solely to replace them with artificial intelligence systems, reinforcing labour protections amid rapid technological change. The decision, reported by Fortune, follows a case where a tech firm in Hangzhou terminated an employee after he refused a demotion linked to AI-driven automation.

The Hangzhou Intermediate People’s Court found the dismissal unlawful, stating the company failed to meet legal conditions such as operational difficulty or inability to continue employment. It further emphasised that businesses cannot unilaterally reduce salaries or terminate staff purely due to technological advancement.

The ruling reflects China’s balancing act between accelerating AI adoption and maintaining labour market stability, particularly amid rising youth unemployment and economic pressures, as policymakers seek to safeguard workforce resilience in a rapidly evolving digital economy.