Many AI and Automation HR “Solutions” Face Growing Legal Challenges

by Stacey Lett, Regional Manager – Eastern U.S. – Proactive Technologies, Inc. ^®

If a worker, who has proven themselves competent for a job, is fired and replaced by another employee without just cause and due process, that most likely can be challenged by regulatory agencies and end up in the U.S. courts. But what happens if that same person is fired and replaced by automation or even a robot? Do the same principles apply?

In China, a tech worker was laid-off and replaced by AI. The case landed in court and the lower court ruled in favor of the worker. The case was taken to the Hangzhou Intermediate People’s Court, which “upheld an earlier decision by a lower-level court that the tech worker’s dismissal was unlawful.”

Explained the article. “The decision is being hailed by legal scholars as a reassuring signal for labor rights protection at a time when the central Chinese leadership is pushing for industries to widely adopt AI technology.” “At the heart of the case is whether a company can use AI replacement as a pretext for laying off human workers.”

It continued, “”The termination grounds cited by the company did not fall under negative circumstances such as business downsizing or operational difficulties, nor did they meet the legal condition that made it ‘impossible to continue the employment contract,'” the court said in a published article.”

The facts of the case: “Zhou [the Plaintiff] earned an annual salary of 300,000 yuan ($43,900) before AI took over his job. The company reassigned him, but to a lower-level position with a 40% pay cut. He refused and the company ended Zhou’s contract citing the disruptive impact of AI on the role and reduced staffing needs. Zhou filed an arbitration claim demanding higher compensation for wrongful termination and won. The company disagreed and filed a lawsuit in 2025. It lost at a district-level court. Now it lost again in the appeal.”

“Hangzhou court also ruled that it was not reasonable that the alternative position the company offered Zhou came with a substantial salary cut.”

“Last year, a data mapping worker in Beijing who was replaced by AI and dismissed also won his case through arbitration. The arbitration panel said the tech company’s decision to switch to AI was a business choice rather than from an uncontrollable event.”

Considering these were a legal decisions made in the communist People’s Republic of China practicing capitalism, it seems that this could put a lot a pressure on democratic countries that preach the virtue of their version of capitalism and their form of government. This could move leaders in countries like the U.S. to finally address worker’s concerns about the pace at which AI is being rolled out without considering established worker rights and labor law.

In fact, cases are moving through the U.S. courts. In Mobley v. Workday currently in U.S. District Court, “…four plaintiffs over age 40 arguing that the AI-powered recommendation system embedded within Workday discriminates against older applicants. According to Workday, it has more than 11,500 users globally and counts more than 60% of the Fortune 500 among its clients.” Millions of job seekers over 40 just got the green light to sue Workday

Government leaders may be forced to expedite a “should have already been done” review of the impact of solutions that threaten to displace a wide swath of the workforce without consideration of “what will they do now” or if it is even lawful regardless if the courts here have a history of siding with Big Tech. What happens to a society when unemployment and underemployment have reached such high numbers that it threatens democracy and capitalism for all?

People have been bringing up the lack of guardrails and guidance to ethical and pragmatic introduction of technology with detrimental impacts to not just protected classes, but indiscriminately to the worker-citizens of all trades and careers. The reason they have not been as vocal in opposition to how it is being done as one would expect might be because it isn’t clear where AI and automation will ultimately land to know better the full impact. Perhaps when they do, the reaction could be profound and late.

If the courts in the U.S. side with Big Tech and modify established and litigated, widely accepted and understood worker rights in their favor, what will a national backlash look like? Silence, up until now, may have been due to growing deliberation of a dripping of information, but as facts metastasize into a new reality the volume in opposition could rise to be deafening. Firms and their HR leaders should tread forward with this in mind.

If your firm faces challenges in maximizing your worker’s capacity and competence, and have shed your fear of even looking for other solutions, check out Proactive Technologies’ structured on-the-job training system approach to see how it might work at your firm, your family of facilities or your region. Contact a Proactive Technologies representative today to schedule a GoToMeeting videoconference briefing to your computer. This can be followed up with an onsite presentation for you and your colleagues.