In the city of Hangzhou, the Chinese capital of the tech sector, a court has set a limit that no company had yet met so explicitly: replacing an employee with an artificial intelligence system is not, in itself, a sufficient reason to fire him, and it becomes an illegal practice.
The Hangzhou ruling
The Hangzhou Intermediate People’s Court published the decision on April 30, 2026, close to Labor Day, as part of a collection of “typical examples of protecting the rights of businesses and workers in the AI era”. At the center of the case is a worker named Zhou, hired in November 2022 as a quality control supervisor at a tech company with a monthly salary of 25,000 yuan. His task was to verify the accuracy of the outputs produced by linguistic models, then, with the introduction of an AI system capable of carrying out those same tasks, the company offered him a transfer to a lower position with a 40% salary reduction. His opposition was followed by dismissal, justified by the reduction of staff due to automation.
Mr. Zhou challenged the provision through arbitration and won. The company appealed to a lower court in 2025, also losing at that stage. The appeal to the Intermediate Court produced the same outcome, i.e. illegitimate dismissal, with a sentence to pay over 260,000 yuan in compensation. The Court ruled that the introduction of AI does not constitute a “significant change in objective circumstances” (the condition required by Chinese labor law to justify unilateral termination of the contract) and that the voluntary adoption of a technology by a company cannot result in a transfer of economic risk to workers. It is not the first case, given that in December 2025 the Beijing Municipality published a collection of labor arbitrations including a similar dispute, relating to a map data collector replaced by an automated system, with an identical outcome.
The US response: transparency, not prohibition
The American approach to the problem is different. On November 6, 2025, Senators Mark Warner (Democrat, Virginia) and Josh Hawley (Republican, Missouri) filed the AI-Related Job Impacts Clarity Act, a bipartisan bill that does not ban AI-related layoffs but requires large companies and federal agencies to report them. Within thirty days of the end of each quarter, listed companies and some private entities should communicate to the Department of Labor the number of positions eliminated, created and/or transformed due to artificial intelligence, specifying the sector to which they belong. The Department would then have the obligation to aggregate the data and publish a report accessible to Congress and the public, with the aim of building an empirical basis on which to base future policies on training and employment protection. The bill is assigned to the Senate Health, Education, Labor and Pensions Committee.
Two models compared
The two systems reflect very distinct philosophies, in which China intervenes directly in the employment relationship, placing a jurisdictional limit on the use of AI as a tool for staff reduction, while the United States focuses on data collection, leaving the market the freedom to act but under growing political and public pressure. In both cases, the issue is the same and the cost of the technological transition falls on the workers.
