Learning from China, Companies Strictly Prohibited from Layoffs Due to This

A court in China has issued a firm ruling prohibiting companies from terminating employment contracts merely to substitute human workers with artificial intelligence (AI) technology. The decision was handed down by the Hangzhou Intermediate People’s Court following the discovery of illegal dismissal practices by a technology firm in eastern China. In the case, an employee was sacked after rejecting a downgrade in position when their job was taken over by an AI system. The court determined that the reasons provided by the company were not legally valid. “The reasons for termination put forward by the company do not fall under negative conditions such as business downsizing or operational difficulties, nor do they meet the legal requirements that make it ‘impossible to continue the employment contract’,” the court stated, as quoted from the Times of India on Monday (4/5/2026). Furthermore, authorities stressed that companies cannot unilaterally carry out layoffs or salary reductions solely due to technological progress. On the other hand, companies in China are indeed racing to adopt AI as part of the national strategy to dominate global technology.