• The Hangzhou Court ruled that replacing Zhou with an AI model didn’t justify his forced termination.
• This decision sets a vital precedent in China, the 2nd top AI nation, in dealing with AI-driven layoffs.
• Xinhua’s Wang Tianyu noted future laws must prioritize 1 goal: managing AI substitution properly.

A Chinese court has issued a landmark ruling that could set a legal precedent regarding artificial intelligence (AI) labor substitution disputes.

The Hangzhou Intermediate People’s Court, located in Hangzhou, a rising AI hub in China, ruled in favor of a worker identified as Zhou, who was substituted by an AI large language model (LLM). According to Xinhua, Zhou worked as a quality assurance supervisor, meaning his task was to match users’ queries to AI models and ensure that neither illegal nor privacy-violating content reached them, to allow for accurate outputs.

Nonetheless, Zhou’s role was quickly taken by other LLMs, and the company decided to demote him to a position with a reduced wage. When he refused, the company offered a package to terminate his contracts, citing organizational restructuring and reduced staffing needs.

He refused to receive the sum and took the matter to court. Finally, the court reached this decision, ruling that AI replacement did not constitute a “major change in the objective circumstances” leading to contract termination, according to Chinese laws.

Zhou’s termination was considered unlawful, and the alternative position offered was not deemed a reasonable reassignment proposal due to the relevant pay reduction.

China is one of the top AI countries in the world, second only to the U.S., where similar debates are taking place, as more companies use AI to justify layoffs.

Wang Tianyu, a researcher with the Chinese Academy of Social Sciences, told Xinhua that these cases are relevant, addressing subjects like the dignity of workers as human beings and how the legal framework should manage issues like AI substitution and proper treatment in these cases.

“Technological progress may be irreversible, but it cannot exist outside a legal framework,” he stated.

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