A case that shakes up the rules of the game

The case published by the Hangzhou People's Court in Zhejiang province concerns a worker surnamed Zhou, who since November 2022 worked as a quality assurance supervisor at a technology company focused on AI. His task was to connect user queries with large language models, filter illegal content, and ensure the accuracy of AI system outputs. His monthly salary was 25,000 yuan (approximately 3,640 US dollars).

Everything changed when the company deployed more advanced language models that could handle part of his work on their own. The company decided to transfer Zhou to a lower position with a salary of 15,000 yuan per month. After he refused, they gave him notice with compensation of 311,695 yuan, justifying it with organizational changes and lower staffing needs.

Zhou turned to an arbitration committee, which ruled that the dismissal was illegal and awarded him higher compensation. The company appealed the decision to the district court and subsequently to a higher instance. The latter confirmed the original verdict in April 2026.

Why the court did not support the company

The key question was whether replacing a human with AI represents a "significant change of objective circumstances" which, according to Chinese labor contract law, can lead to termination of employment. The court concluded that it does not. Such a change typically relates to events like company relocation or merger, not to the voluntary deployment of new technology.

"While companies may benefit from increased efficiency thanks to AI, they must also bear corresponding social responsibility. Replacement by artificial intelligence does not automatically justify termination of the employment contract," stated lawyer Wang Xuyang from the Zhejiang Xingqing law firm, according to the Xinhua agency.

Besides, the court pointed out that the company did not prove that the contract had become impossible for the employer to fulfill. The offered alternative position moreover meant a drastic salary reduction, which the court labeled as unreasonable reassignment.

China does not stand alone. Beijing sent a clear signal earlier

The case from Hangzhou is not unique. Already on December 26, 2025, the Beijing Municipal Human Resources and Social Security Bureau published a set of typical arbitration cases, including a dispute over dismissal due to AI. At that time, it concerned a map data collector whose work was taken over by an automated system.

The arbitration committee then clearly stated that the adoption of AI was a voluntary decision by the company to remain competitive. By designating AI as the reason for dismissal, the company transferred the risks of technological development onto the employee. This case also ended with the invalidity of the dismissal.

Both decisions stem from the same principle: the costs of technological transformation must not be borne exclusively by workers. Companies should not use AI as an excuse for layoffs nor as a tool to circumvent their obligations.

The Chinese AI market is growing, and so are concerns about replacement

According to official data, the Chinese core AI industry exceeded 1.2 trillion yuan (roughly 165 billion US dollars) in 2025 and includes more than 6,200 related enterprises. By 2030, the penetration of intelligent terminals and agents in China should exceed 90 percent.

Such massive deployment of AI raises legitimate concerns about abuse of automation. Recent media reports about a company in Shandong province that used a digital replica of a former employee to continue his work attracted widespread attention. In open-source communities, moreover, a trend of "harvesting human capabilities" into reusable AI skills is appearing.

Economist Pan Helin, a member of the expert committee of the Chinese Ministry of Industry and Information Technology, argues that while job losses caused by AI may be inevitable, companies must ensure fair treatment during the transitional period — including reasonable reassignment and adequate compensation.

What does Goldman Sachs say? Up to 300 million jobs are at risk

According to a 2023 Goldman Sachs report, generative AI can affect the equivalent of 300 million full-time jobs worldwide. Analysis based on data from more than 900 occupations estimates that roughly two-thirds of US professions are to some extent vulnerable to automation.

"Although the impact of AI on the labor market will likely be significant, most jobs and industries are only partially exposed to automation and are therefore more likely to be complemented by AI, not replaced," the report states. Historically, jobs lost due to automation have been offset by the creation of new positions — according to a study by economist David Autor, 60 percent of today's workers are employed in professions that did not exist in 1940.

Nevertheless, Goldman Sachs warns: "It is only the beginning of AI adoption, and the impact on jobs will largely depend on how employers ultimately use this technology."

Europe already has rules. What about the Czech Republic?

While China is resolving AI and labor law through the courts, Europe has had the AI Act approved since March 2024 — the world's first comprehensive legislation regulating artificial intelligence. According to this regulation, systems used in employment and worker management fall into the high-risk category.

This means that employers in the EU must, before deploying AI tools for evaluation, recruitment, or worker management, carry out a risk assessment, ensure transparency, and enable human oversight. The law also bans emotion recognition in the workplace and social scoring of employees.

In the Czech Republic, it applies that the mere introduction of automation is not a statutory reason for dismissal. An employer may give notice for organizational reasons (§ 52 letter c) of the Labor Code), but must prove that the work has actually ceased or substantially changed — and that they offered the employee suitable alternative employment. The mere justification "we replaced him with AI" would hardly hold up before Czech courts.

Moreover, since February 2025, a ban on unacceptable risks associated with AI has been in effect in the EU, including manipulative systems. Czech authorities will have the power to receive complaints about AI systems and request explanations of decisions affecting workers' rights.

Where all this is heading

The case from Hangzhou is not just a Chinese matter. It is a warning for the whole world: technological progress must not be a privilege at the expense of human dignity. Whether in Shanghai, Berlin, or Prague, the same rules apply — companies must bear responsibility for their decisions, not transfer it to the most vulnerable.

The Chinese government, in its government work report this year, called for improved measures to support employment and entrepreneurship in response to AI development — which is the first time the impact of AI on jobs has entered the national political framework. Europe has its AI Act. Now it is about how effectively it will be enforced.