A tech worker in China is laid off and replaced by AI. Is it legal?

Artificial Intelligence robots demonstrate working on power grid control units during a media organized tour at Guangdong Power Grid Robotics Laboratory in Guangzhou, in southern China's Guangdong province, Thursday, April 16, 2026. Andy Wong/AP

Andy Wong/AP

A court in eastern China's Hangzhou city, an AI hub, has ruled in favor of a senior tech worker whose company replaced him with artificial intelligence (AI).

The decision is being hailed by legal scholars as a reassuring signal for labor rights protection at a time when the central Chinese leadership is pushing for industries to widely adopt AI technology.

The Hangzhou Intermediate People's Court upheld an earlier decision by a lower-level court that the tech worker's dismissal was unlawful.

"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 the employment contract,'" the court said in a published article.

At the heart of the case is whether a company can use AI replacement as a pretext for laying off human workers.

The worker, identified by the court only by his surname Zhou, was employed at a tech firm in Hangzhou, Zhejiang province, as a quality assurance supervisor. The tech firm was not named by the court. Zhou primarily worked with AI large language models and verified the accuracy of answers they generated for users.

Zhou earned an annual salary of 300,000 yuan ($43,900) before AI took over his job. The company reassigned him, but to a lower-level position with a 40% pay cut.

He refused and the company ended Zhou's contract citing the disruptive impact of AI on the role and reduced staffing needs.

Zhou filed an arbitration claim demanding higher compensation for wrongful termination and won. The company disagreed and filed a lawsuit in 2025. It lost at a district-level court. Now it lost again in the appeal.