A Chinese court has declared it illegal for companies to fire employees because an AI could do the job cheaper, setting limits on AI-driven job displacement. The ruling came after a fintech firm fired an employee for refusing a demotion and pay cut following the implementation of AI.

A court in China has ruled it illegal for a company to terminate an employee on the grounds that an artificial intelligence replacement would be cheaper, affirming limits on AI-driven job displacement amid a wave of anxiety over the technology’s potential to fuel unemployment. A 35-year-old worker surnamed Zhou who oversaw AI-generated responses at a fintech firm in Hangzhou, capital of east China’s Zhejiang province, was fired after refusing a demotion and pay cut. The company told him his role...