layoffs

Chinese courts have ruled that AI adoption alone does not justify dismissing workers. Finnish employers have far broader discretion — but the legal risk emerges earlier than many boards realize.

When a Hangzhou tech company tried to replace its AI quality-assurance supervisor with a large language model — offering him a 40% pay cut to a different role, then firing him when he refused — China's courts ruled the dismissal illegal. The Hangzhou Intermediate People's Court decision, published in late April as part of a set of typical AI-related labor cases, established a principle now drawing international attention: AI adoption alone does not justify firing workers.

Finnish employers operate under very different rules, but the underlying question Chinese courts raised is one Finnish boards will face soon, if they aren't facing it already: at what point does deploying AI shift from being a productivity-driven investment to a decision that results in a reduction of the workforce?

"There is no black and white answer to that," says Sanna Honkinen, head of employment practice at Hannes Snellman. And that ambiguity, she warns, is where the legal risk lives.

The Chinese precedent

The Hangzhou ruling, upheld on appeal on April 28, centered on a quality assurance supervisor identified only as Zhou. Hired in 2022 at a monthly salary of 25,000 yuan (USD3,676) to oversee his employer's AI output, Zhou was told in 2025 that the company intended to replace his role with a large language model. He was offered a different position at 15,000 yuan — a 40% pay cut — and dismissed when he refused.

The Intermediate People's Court ruled that AI-driven job replacement does not constitute a "major change in objective circumstances" under China's Labor Contract Law, the legal threshold normally required to justify redundancy-based termination. The court also found the reassignment offer unreasonable on its own terms. The ruling built on a December 2024 Beijing arbitration decision involving a map data worker dismissed after AI took over his role, reaching the same conclusion: adopting AI is a business choice, not an unforeseen event, and its costs cannot be shifted unilaterally onto employees.

The cases have drawn international legal attention because they cut against the assumption — common in at-will jurisdictions like the United States — that AI-driven restructuring is a straightforward business decision. Finland's framework sits between these poles.

The Finnish legal reality

Finnish employers have considerably more discretion than their Chinese counterparts to restructure around AI.

"In Finland, the employer has the right to decide what business activities are operated and how business and roles within the company are organized," Honkinen says.

Roles can be terminated for financial, production-related, or reorganization reasons linked to technological development, including AI adoption, provided the amount of work has genuinely declined. But that discretion comes with procedural strings attached.

Under Finland's Co-operation Act, employers with at least 50 employees must begin change negotiations if planned measures could materially affect employees' work tasks, working methods, working hours, or lead to layoffs or dismissals on financial or production-related grounds. Employers with 20 to 49 employees face similar obligations in cases involving broader personnel reductions.

Employers must also assess whether employees can be reassigned or retrained before dismissals take place. "The employer has to consider whether the employee can be placed into another role or trained for another role," Honkinen says.

That retraining obligation is narrower than it sounds. Companies do not have to educate employees into entirely new professions — the expectation is shorter-term training into adjacent roles where employees already possess the core capabilities needed.

The timing trap

The harder question for Finnish boards is not whether they can reduce roles, but when AI adoption becomes serious enough to trigger the formal negotiation process.

That is Honkinen's central warning. Companies that drift from AI experimentation into operational deployment without recognizing the transition can find themselves on the wrong side of the procedural line.

"At what point does the company have sufficient information on the estimated impacts on employees?" she says. There is no clean answer in the statute — and the timing matters, because employers cannot make business decisions that directly result in headcount reductions before change negotiations have been completed. 

At the same time, change negotiations cannot be held on a “just in case” basis without a concrete plan and an assessment of workforce impacts. "That is something that needs to be remembered," Honkinen says.

As understanding of AI’s concrete impact on business operations grows, it becomes increasingly likely that we will see more change negotiations carried out already at the stage when new AI investments are being considered, she adds.

The Chinese rulings flagged a structurally similar issue from the opposite direction. Courts there argued that if AI restructuring becomes necessary, employers should first prioritize retraining workers, offer reasonable reassignment terms, and provide support measures before moving to dismissals. Two very different legal systems have landed on overlapping employer obligations.

In management books, layoffs are described as an unfortunate but sometimes necessary instrument for safeguarding a company’s future.

At Listeds, we started looking into this topic because many leaders told us they felt left out of the conversation: media stories tend to focus on those who lose their jobs (as the stories should), but rarely on the moral and emotional strain on the person delivering the news. 

We conducted an online survey for leaders on LinkedIn and through our newsletter. Fifty business leaders and management team members answered our question about how it actually felt to conduct layoffs. The vocabulary we were used to changed. Out went “rightsizing”, in came “lonely,” “sad,” and “numb.” Someone said, it felt “like I had betrayed my team,” while another one delivered the cruelest job description of all: [I was] “made to be the human buffer between a corporation and grieving, vulnerable employees.”

Our dataset of 50 responses offers a rare peek into that other side. The responses came mostly from Finland, and the respondents were largely CEOs and management team members in SMEs, listed firms, and growth companies. 

The results reveal three points.

1. It’s never just business. Leaders don’t experience layoffs as a clean business decision. Even when they believed the move was necessary to save the company, they still reported feelings of shame, guilt, or sadness.
   
   

2. The pain extends beyond the moment. The pain did not stop at delivering the news to the one who was about to leave. Instead, the most painful part was carrying the consequences for everyone else. Many agonized over the people who stay.
   
   

3. Humanity helps. What got them through was trusting the process – and leaning on transparency and small, human gestures, not PowerPoint presentations polished to perfection.

This chimes with Western and Nordic research. Recent research supports that instinct. A 2025 Norwegian study by Grønstad and Bernstrøm found that when organizations downsize, short-term sickness absence rises among those who remain. The effect was partly explained by reduced organizational commitment — a reminder that how people feel after a layoff shapes their health and engagement.

Scandinavian work on “relational leadership” has likewise found that leaders in high-trust cultures experience layoffs as a kind of norm violation: after spending years building psychological safety, now they are forced to break it.

The emotional undertow

When asked, “How did it really feel?”, leaders did not write about the numbers. They wrote about themselves.

• “Lonely, sad, unsure.”

• “Felt like I had betrayed my team.”

• “It was so sad… the most heartbreaking task to perform.”

• “At that point: numb.”

• A smaller group reported a kind of relief: “First it’s hard, but then you feel empowered because the hard decision is communicated.”

The issue can be examined through the lens of cognitive dissonance: leaders hold two beliefs at once: “I care about my people” and “I am taking away their income.” The bigger the gap, the stronger the emotion. In Nordic contexts, where equality and proximity to staff are strong, the gap is often wide.

The real hardest part

On paper, the hardest part of layoffs is deciding which positions to cut. In practice, the leaders we surveyed said the real strain began afterwards. 

What stayed with them was not the spreadsheet work but the human aftermath: watching the faces of staff as the news landed, knowing what it meant for families, keeping up the morale among those who remained, repeating the process in subsequent rounds, and holding the line when individuals pleaded for exceptions.

Their reflections echo Western research on moral injury in leadership. The distress that arises not from doing something objectively wrong, but from acting against one’s own values under a sense of duty. Unlike middle managers who can appeal to “orders from above,” senior leaders cannot outsource the blame. They are the headquarters of decision-making.

What humane looks like in the Nordics

When asked how they handled the process as humanely as possible, a quiet consensus emerged:

Do it yourself. Many insisted on delivering the message personally. Delegating the hardest conversation of all, they said, would have felt like evasion.

Explain the reasoning. Again and again came variations of the same verb: to listen. They described walking people through the logic, answering questions, and staying available. 

Offer a soft landing. Several provided extended notice, outplacement help, or generous severance. 

Prepare and stay present. One leader wrote simply, “I prepared, I listened, I was present”. 

Seek perspective. Some spoke of debriefing with HR, the chair, or a trusted peer.

The surprises

We also asked, “Was there anything that surprised you?” The answers were revealing:

• Some expected anger, and got acceptance: “I expected more anger. But they handled it surprisingly well.”
  
  

• Others were surprised that the company did not appreciate their effort, but employees did.
  
  

• A few were struck by how shocking the news was: “people froze totally.”
  
  

• One noted that laid-off employees were more upset with those who stayed than with the company itself. Classic survivor-syndrome dynamics.
  
  

What leaders want to tell other leaders

Our final question was the most generous: “What would you tell another leader facing layoffs right now?” Echoing similar pieces of advice, the answers offer a tiny handbook:

• “Take time, this is your main job right now.”

• “Communicate as much as humanly possible, be present.”

• “Empathy is vital; let people leave with dignity.”

• “Follow the procedure… you're not alone.”

• “Try to make decisions that don’t make you lose sleep.”

• And, importantly: “It’s not your fault.”

This last point may be the most useful insight for executives reading this. Western studies on job-insecurity interventions show that employees recover faster when leaders remain visible, human, and not visibly broken by the process. Leaders, therefore, have to regulate their own guilt: not to be cold, but to stay present for those who remain.

So the benefit for leaders is threefold:

1. Understanding: What you are feeling is not unusual.
   
   

2. Preparation: Expect it to take longer than planned — and to require openness, stamina, and genuine presence to keep the process humane.
   
   

3. Insight: Finally, please remember that your people will watch how you treat those who leave to decide whether to stay loyal to you.

In the quiet after the meeting ends, leadership is stripped to its essence: the weight of care, offered to those who leave and those who remain to rebuild.