A Chinese tech worker lost his job after a language model took over his role. The company offered to transfer him to a lower position with a 40 percent pay cut. He refused. He was fired. What followed was watched by all of China.
At the end of April 2026, an appeals court in Hangzhou, one of China’s largest technology hubs, issued a ruling that immediately made headlines around the world: an employer cannot dismiss a worker simply because artificial intelligence has begun doing their job. The case carries particular weight because of where it took place. Hangzhou is the birthplace of Alibaba, home to DeepSeek, and a symbol of China’s ambitions in artificial intelligence.
AI Replaced Him
Zhou joined a fintech company in Hangzhou in 2022 as a senior quality assurance specialist. His job involved reviewing the outputs of large language models similar to ChatGPT or Gemini. He verified the accuracy of responses and filtered out illegal content and content that threatened users’ privacy. He earned 25,000 yuan per month, approximately 76,000 Czech korunas.
Gradually, however, artificial intelligence itself took over his tasks. In January 2025, the company proposed transferring Zhou to a lower position with a salary of 15,000 yuan, or about 46,000 Czech korunas. Zhou rejected the proposal, and the company promptly dismissed him, arguing that restructuring and the introduction of artificial intelligence had reduced the need for human workers. It offered him severance pay of 311,695 yuan (approximately 900,000 Czech korunas).
Zhou rejected that as well. He turned to an arbitration commission, which ruled in his favor and declared the dismissal unlawful. The company disagreed and filed a lawsuit.
Three Instances, Three Defeats
The case passed successively through three levels of the Chinese judicial system. Zhou won at all three.
First, the arbitration commission ruled on the case, followed by a district court. The company appealed to the Hangzhou People’s Court, a court of intermediate instance. In April 2026, it upheld the previous rulings and also published the case as part of a series of “typical examples of protecting employees’ rights in the artificial intelligence industry.”
The court stated that “the grounds for terminating the employment relationship, which were not presented as adverse circumstances such as workforce reductions or operational difficulties, did not meet the statutory condition that would make continued performance of the employment contract impossible.” According to the court, companies cannot unilaterally dismiss employees or reduce their wages simply because they have introduced new technologies.
Judge Shi Guoqiang of the Hangzhou court told state television broadcaster CCTV that technological progress cannot stand outside the legal framework. The compensation the court awarded Zhou amounted to 260,000 yuan, approximately 750,000 Czech korunas.
Law Versus Business
In its defense, the company cited a provision of the Chinese labor code that allows a contract to be terminated in the event of a “substantial change in objective circumstances” that makes its performance impossible. The court rejected this argument. It found that this provision typically applies to situations such as a company’s relocation, mergers, or structural changes, not to a voluntary decision to cut costs.
Zhejiang lawyer Wang Xuyang told the state-run Xinhua news agency that adopting artificial intelligence does not in itself entitle a company to terminate an employment contract merely to save money.
Zhou’s case is not an isolated one. Chinese courts are dealing with similar disputes with increasing frequency. In 2024, the Intermediate People’s Court in Guangzhou considered the case of a graphic designer whose position had been taken over by artificial intelligence. The court reached the same conclusion: a company’s technological upgrade cannot in itself constitute an “objective circumstance” justifying the unilateral termination of a contract.
In Beijing, the Municipal Labor Bureau published the case of a data-mapping worker in 2025 whose dismissal after being replaced by artificial intelligence was likewise declared unlawful. The arbitration authority found that the company had shifted the costs of technological transformation onto the employee, which was unacceptable.
Hangzhou Is a Technology City
The case took place in a city that itself symbolizes China’s technological rise. Hangzhou, home to nearly 12 million residents, has become a haven for some of the most ambitious technology companies. Alongside DeepSeek, it is home to Unitree Robotics, Deep Robotics, BrainCo, Manycore Tech, and the game studio Game Science. Chinese media collectively refer to these companies as Hangzhou’s “six little dragons.”
It was here that the court issued a ruling that restrains companies in their race toward artificial intelligence. China’s Communist leadership, meanwhile, holds two mutually contradictory positions: on the one hand, it promotes the mass adoption of artificial intelligence as a state priority; on the other, it emphasizes the need to stabilize the labor market.
Unemployment among non-students aged 16 to 24 reached 16.9 percent in March 2026. The overall urban unemployment rate was 5.4 percent.
Expert Opinions
Chinese journalist Jiang Jingjing warned against interpreting the ruling too broadly in a commentary for the online newspaper Fengmian: “It is an old problem, and artificial intelligence is merely a new excuse.” According to him, courts cannot guarantee that artificial intelligence will not take over jobs. They can only ensure that workers receive fair compensation in accordance with the law when such developments occur.
It is worth noting that China applies a civil law system, unlike countries such as the United States or the United Kingdom, where courts must follow previous rulings. This principle does not apply in China, so the Hangzhou ruling does not automatically bind other courts across the country. Its signaling value, however, is clear.
Zhou’s case shows that Chinese courts are willing to side with employees even when technology companies argue that changes in their industries are inevitable. And companies betting on artificial intelligence as legal cover for layoffs may soon discover that this strategy is not enough in court.
Sources: fortune.com and npr.org
