KUALA LUMPUR - A Chinese court on April 28 has ruled that companies are not allowed to fire workers simply to replace them with artificial intelligence (AI) systems, as authorities try to balance job stability with rapid AI development.

The court found that a technology company in eastern China had illegally dismissed a worker after he refused a demotion when his role was taken over by AI, according to the Hangzhou Intermediate People’s Court.

“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 the article.

In a separate statement, the court added that companies cannot reduce salaries or lay off workers on their own just because of new technology.

The ruling comes as Chinese firms quickly adopt AI under government support, while authorities also focus on keeping the labour market stable amid economic slowdown and high youth unemployment.

The worker involved, a quality assurance staff member identified only as Zhou, was responsible for checking AI-generated outputs at a tech company.

After an AI system replaced his role, he was demoted and his salary was cut by 40%.

When Zhou rejected the new role, the company dismissed him, citing job cuts linked to AI use, and the case was later taken through arbitration and court proceedings, where compensation was awarded.

The ruling follows a similar case in December where another Chinese court said AI adoption alone was not a valid reason to terminate an employee’s contract.