Landmark decision in China: legal ban on firing employees to replace them with AI

©Vitaly Gariev via Unsplash

The Hangzhou Intermediate People's Court ruled that the dismissal of a worker replaced by artificial intelligence was illegal. Meanwhile, in the USA, a bipartisan proposal on transparency is making headway.

In Hangzhou, China's tech capital, a court has just drawn a line that no company has yet encountered so explicitly: replacing an employee with an artificial intelligence system is not, in itself, sufficient grounds for dismissal and becomes an illegal practice.

The Hangzhou decision

The Hangzhou Intermediate People's Court issued its decision on April 30, 2026, on the eve of Labor Day, as part of a collection of "typical examples of protecting the rights of enterprises and workers in the AI era". At the heart of the case is an employee named Zhou, hired in November 2022 as a quality control supervisor in a technology company, with a monthly salary of 25,000 yuan (or 3,200 euros). His job was to check the accuracy of the results produced by linguistic models. However, following the introduction of an AI system capable of performing these same tasks, the company offered him a transfer to a lower position with a 40% pay cut. When he refused, he was dismissed on the grounds of downsizing due to automation.

Mr. Zhou challenged the decision through arbitration... and won. The company appealed to a lower court in 2025, where it also lost. The appeal to the Intermediate Court had the same result, namely unlawful dismissal, with an order to pay over 260,000 yuan (33,300 euros) in damages. The Court established that the introduction of AI does not constitute a "significant change in objective circumstances" (the condition laid down by Chinese labor law to justify unilateral contract termination), and that a company's voluntary adoption of a technology cannot result in a transfer of economic risk onto the workers.

And this is not an isolated case: in December 2025, the Beijing municipal government had already published a compendium of labour arbitrationsa similar dispute, concerning a cartographic data collection agent replaced by an automated system, with the same outcome.

The US response: transparency rather than prohibition

The American approach to the problem is different. On November 6, 2025, Senators Mark Warner (Democrat, Virginia) and Josh Hawley (Republican, Missouri) introduced the AI-Related Job Impacts Clarity Act. This bipartisan bill does not outlaw AI-related layoffs, but does require large companies and federal agencies to report on them. Within thirty days of the close of each quarter, listed companies and certain private players would have to report to the Department of Labor the number of jobs eliminated, created and/or transformed as a result of artificial intelligence, specifying the sector concerned. The department would then be required to aggregate this data and publish a report accessible to Congress and the general public. The aim is to provide an empirical basis for future training and employment protection policies. The bill has been referred to the Senate Committee on Health, Education, Labor and Pensions.

Two models under the microscope

These two models reflect distinctly different philosophies: where China intervenes directly in the employment relationship, placing a jurisdictional limit on the use of AI as a downsizing tool, the US relies on data collection, allowing the market considerable freedom of action, but under increasing political and public pressure. In both cases, the fundamental issue remains the same: the cost of technological transition continues to weigh on workers.

(©GreenMe.it 2026/Managing editor : Julie Morgan - The Press Junction/Picture : Vitaly Gariev via Unsplash)