AI cost-cutting not a legal excuse to fire workers, Chinese court says
A Chinese court has ruled that firing a worker to replace them with AI is not a valid reason for termination, ordering a fintech firm to pay over 260,000 yuan in compensation. The court found that replacing a worker on cost grounds did not constitute a 'material change in objective circumstances' that justified terminating a labour contract.
A court in China has ruled it illegal for a company to terminate an employee because an AI replacement would be cheaper. A 35-year-old worker surnamed Zhou was fired after refusing a demotion and pay cut at a fintech firm in Hangzhou. The company told him his role could be replaced by AI. Zhou filed for labour arbitration and won at every stage, with courts ordering the firm to pay him over 260,000 yuan in compensation. The Hangzhou Intermediate People’s Court found that replacing a worker on cost grounds did not justify terminating a labour contract. A similar ruling was made by the Guangzhou Intermediate People’s Court in 2024.
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