The Hangzhou Intermediate People's Court has ruled that replacing a worker with an AI model does not justify the termination of a labor contract, setting a significant legal precedent in China. The court sided with Zhou, a quality assurance supervisor, who was demoted and offered a termination package after his role was replaced by an AI large language model. Zhou refused the offer and took legal action, resulting in the court's decision that AI substitution does not constitute a "major change in objective circumstances" under Chinese law. This ruling highlights the growing legal challenges surrounding AI-driven layoffs in China, the world's second-largest AI hub. The decision underscores the need for a legal framework to manage AI substitution, as emphasized by Wang Tianyu of the Chinese Academy of Social Sciences, who noted the importance of addressing worker dignity and proper treatment in the face of technological advancements.