Common Questions

What is China's Labour Contract Law and how does it protect workers?

Enacted in 2008, China's Labour Contract Law sets out employment rights including a requirement for written contracts, severance protections, and an obligation on employers to attempt retraining or reassignment before dismissal for changed circumstances.

Why did Chinese courts rule AI automation is not a major change in circumstances?

Courts in Beijing and Hangzhou found that adopting AI is a deliberate, foreseeable employer strategy, not an uncontrollable external event. A planned business decision does not meet the statutory threshold for a major change in objective circumstances.Source: Hangzhou and Beijing court rulings, 2025-2026

What does China's Labour Contract Law require before an employer can dismiss a worker?

For dismissal on grounds of changed circumstances, the employer must first attempt to agree a new role or retraining arrangement with the worker. Unilateral dismissal without that attempt is unlawful.Source: China Labour Contract Law, Article 40

Background

China's Labour Contract Law, enacted in 2008, is the primary statute governing employment in the People's Republic of China. Its Article 40 permits dismissal when there has been a "major change in objective circumstances" rendering the employment contract impossible to perform, provided the employer first attempts retraining or reassignment. Courts in both Hangzhou and Beijing applied this clause in 2025 and 2026 to rule that employer-initiated AI automation does not qualify as such a change, because it is a deliberate and foreseeable business decision.

The law was introduced partly in response to decades of weak worker protections under market-reform-era norms. It established written contract requirements, severance entitlements, and procedural obligations before dismissal. Its provisions apply to virtually all employment relationships in China, giving the AI-dismissal rulings broad potential reach across the country's manufacturing, technology, and service sectors.

The December 2025 Beijing ruling in the Liu case and the April 2026 Hangzhou rulings have together turned Article 40's "major change" clause into the central doctrinal battlefield for AI-era labour rights in China. Legal commentators have noted that if this interpretation is confirmed at higher levels, Chinese employers face a statutory duty to manage AI transitions through internal redeployment before resorting to dismissal.