Chinese Court Awards Compensation to Worker Replaced by AI

A court in China has ruled in favour of a worker whose company replaced him with artificial intelligence, awarding him 260,000 yuan in compensation. The worker, whose surname is Zhou, joined a tech company in the eastern city of Hangzhou in 2022 as a quality assurance supervisor overseeing large language models used in AI products.

The company later said AI could do his job and offered him a demotion along with a 40% pay cut. When he refused the offer, the company fired him. Zhou disputed the dismissal. Last month the Hangzhou intermediate people’s court ruled that the company had been wrong to fire him and ordered the payment.

The case has attracted widespread attention as an example of how China balances adoption of AI with job security, especially at a time of high youth unemployment. Chinese state media reported the ruling as sending a message to labour rights protection efforts in the age of automation.

People in China tend to be more positive than those in the UK or the US about AI’s potential to improve their lives. A recent survey by the polling firm Ipsos found that more than 80% of people in China were excited about products that use AI, compared with fewer than 40% in the UK or the US.

The race across different sectors of the economy to integrate AI quickly is starting to cause concern about potential job losses. China is struggling with persistently high youth unemployment, with 17% of people aged 16 to 24 unable to find work according to the latest data.

A fellow at the Brookings Institution who studies China’s technology and industrial policy said there were signs of a shift in Beijing’s approach to job losses caused by AI. Previously Chinese policymakers seemed to downplay these risks and official messaging on AI focused on the new jobs that AI was creating.

The fellow said the process was compared to the restructuring of the labour market during the Industrial Revolution.

The Hangzhou case is not the first time authorities have ruled in favour of workers who have lost their jobs to AI. Last year the Beijing local government published details of an arbitration case in which a company fired a woman who had worked as a manual data collector for 15 years.

The company said an automated data collection tool could do her job. An arbitration committee ruled that the company was entitled to incorporate AI into its business model but that this did not constitute a significant change in objective circumstances that could be the legal basis for terminating an employment contract.

The committee said that while enjoying the benefits of technology, employers should simultaneously assume corresponding social responsibilities. A senior fellow at Yale University’s Paul Tsai China Centre in Beijing said the recent cases showed that where the tech change is a foreseeable, controllable business upgrade, employers cannot simply pass the transition costs on to employees.