A Hangzhou appeals court has ruled that a Chinese tech company illegally fired a quality assurance worker after replacing his job with a large language model and offering him a 40% pay cut as the alternative. The Hangzhou Intermediate People's Court released the case on April 28, days before International Workers' Day, as part of a set of typical examples on AI and worker rights, Bloomberg reported.
What happened to Zhou
Zhou, identified only by his surname, joined the unnamed firm in November 2022 as a quality assurance supervisor checking the accuracy of LLM-generated answers, according to state media. He earned 25,000 yuan a month, roughly $3,640. When AI took over the verification work in 2025, the company offered him a different role at 15,000 yuan. Zhou refused. They fired him.
He took the company to arbitration and won. The firm sued in a district court that August, lost, appealed, and lost again.
The legal logic
Chinese labor law allows termination under two narrow conditions: "negative circumstances such as business downsizing or operational difficulties," or situations where it has become "impossible to continue the employment contract." Adopting a new technology, the judges noted, is a deliberate business choice. Not the kind of unforeseeable shock the law had in mind.
"Technological progress may be irreversible, but it cannot exist outside a legal framework," Zhejiang lawyer Wang Xuyang told state-run Xinhua. He was talking past the case, more or less. The ruling itself cuts narrower: a firm that wants to automate has to keep paying or do a real layoff with severance, not bury the cut inside a coerced demotion.
Not the first one
Hangzhou's ruling builds on a similar Beijing case flagged in December by the city's Human Resources and Social Security Bureau. A map data entry worker hired in 2009 was let go in late 2024 after his employer switched to AI-based collection. He won arbitration on the same logic: the company chose to automate, so the company eats the cost.
That's the pattern starting to harden across Chinese jurisdictions, even though the country runs a civil law system where lower-court decisions don't formally bind anyone. Two cases in five months, two different cities, both released through official channels. Less like coincidence than guidance.
Why this is awkward for Beijing
Beijing has spent two years pushing every industry it can reach to bolt AI into workflows. It has also, per NPR's reporting, made stable employment a stated priority as the broader economy slows. Those two goals are in obvious tension whenever a manager looks at a payroll line and a model API and does the math.
In effect, the courts have answered that question: do the math, but pay for it. Companies remain free to deploy AI. They're not free to let workers cover the bill.
That company has exhausted its appeals at the intermediate court level. The exact compensation figure has not been disclosed.
