The implementation of artificial intelligence may form part of a corporate restructuring, but it does not automatically justify dismissal The introduction of artificial intelligence tools is transforming the way many companies organise their activities. The automation of certain tasks, reduced production times and new ways of working may change workforce requirements and lead companies to reconsider their organisational structures.

This transformation raises an increasingly relevant employment law question: can a company justify an objective dismissal or collective dismissal on the grounds that it has implemented artificial intelligence?

The answer cannot simply be yes because a company has introduced an AI tool. Artificial intelligence does not constitute an independent ground for dismissal. Its implementation may form part of the technical or organisational grounds recognised under Spanish employment law when it produces a genuine change in production methods, working systems or organisational structures and there is a sufficiently established connection between that change and the need to eliminate specific positions.

This issue has gained particular relevance following High Court of Justice of Madrid Judgment 864/2026 of 8 October 2026, issued in the context of a collective redundancy procedure involving a video game development company.

The decision is of particular interest, although it should be approached with caution. It is a judgment of a High Court of Justice rather than the Spanish Supreme Court and therefore does not establish binding case law on the use of artificial intelligence as a basis for workforce restructuring.

Artificial Intelligence Is Not, in Itself, a Ground for Dismissal

The starting point is Article 51 of the Spanish Workers’ Statute, which regulates collective dismissals based on economic, technical, organisational or production-related grounds.

The provision recognises technical grounds where there are changes, among other things, in the means or instruments of production; organisational grounds where there are changes in working systems and methods or in the organisation of production; and production-related grounds where there are changes in demand for the products or services offered by the company.

This is precisely the framework within which the introduction of artificial intelligence may become relevant.

The question is therefore not whether the company uses AI, but what transformation the technology produces within the business and why that transformation makes it necessary to reorganise the workforce.

This distinction is fundamental. A company cannot justify the elimination of a position simply by stating that it has introduced artificial intelligence. It must explain what technology has been implemented, which tasks it changes, what impact it has on the production process and why that impact affects specific positions.

The Video Game Company Case

The case analysed by the High Court of Justice of Madrid concerned a company operating in the video game development sector that initiated a collective redundancy procedure affecting thirteen employees.

The company was also experiencing financial difficulties. According to the facts considered by the Court, its net turnover fell from approximately €7.99 million in 2023 to €4.60 million in 2024, while that financial year ended with losses of more than €3.5 million. The company had also reported its insolvency situation to the Commercial Court.

The restructuring affected different areas of the organisation and not all redundancies were based on the same grounds.

In the artistic department, the company explained that the use of AI-generated images made it possible to improve certain visual results and reduce the time required to produce particular scenes. This technological transformation led the company to reorganise its 3D art team and reduce the number of professionals required.

In other areas, however, the company relied on different grounds, including the lower profitability of certain projects, a reduction in the number of new video games and the simplification of scripts.

This distinction is important because AI was not presented as a generic explanation for the entire restructuring. It was relied upon as a specific factor affecting the reorganisation of the artistic department.

An Important Clarification About What the Madrid High Court Actually Decided

There is an important point to clarify when interpreting the judgment.

The appeal before the High Court of Justice of Madrid concerned a screenwriter included in the collective redundancy procedure. Her dismissal had been declared unfair at first instance and she sought a declaration of nullity, alleging, among other matters, a breach of the guarantee of indemnity and a lack of good faith during the consultation period.

The dismissal of the 3D modeller, whose dismissal letter expressly referred to the impact of artificial intelligence on the production process, had been declared fair at first instance. However, that decision was not appealed.

Therefore, the High Court of Justice of Madrid was not directly reviewing the validity of the 3D modeller’s dismissal.

The relevance of the judgment lies in the fact that it describes and analyses that context within the collective redundancy procedure and provides insight into how the company had justified the reorganisation of the artistic department.

This distinction is important because it would be inaccurate to state that the Madrid High Court has established that “AI allows companies to dismiss employees”. What the decision provides is guidance on how a technological transformation may fit within the traditional categories of ETOP grounds and on the need to establish its actual impact on the organisation.

The Implementation of AI Must Produce a Genuine Organisational Change

The approach emerging from the case is that the company must establish an actual transformation.

It is not sufficient to demonstrate that an artificial intelligence tool has been purchased or that the company intends to automate certain processes.

There must be a connection between the technology and the organisational restructuring.

In practical terms, the company should be able to explain which tasks have been automated or reduced, how the working process has changed, which functions are no longer required and why those changes affect particular positions.

Documentation therefore becomes particularly important.

A dismissal letter that merely states that the company is introducing AI will have limited evidential value if it does not explain the concrete impact of that transformation on the affected position.

By contrast, where the company can document the previous production process, the new organisational model and the reduction in specific functions, the connection between the business reason and the elimination of the position becomes considerably stronger.

AI Can Fall Within Technical and Organisational Grounds

The judgment allows technological transformation resulting from artificial intelligence to be considered within the traditional categories of Spanish employment law.

If the technology modifies the means or instruments used to produce goods or provide services, there may be a technical dimension.

If it modifies working methods, the distribution of functions or the organisation of production, there may be an organisational dimension.

If the technological transformation is linked to a change in demand for the company’s products or services, it may also have a production-related dimension.

Article 51 of the Spanish Workers’ Statute does not require the business reason to have a specific technology-related name. What matters is that the established facts fall within one of the legally recognised categories.

For this reason, referring to an “AI dismissal” may be useful from a general communication perspective, but legally it is more accurate to refer to a corporate restructuring in which the implementation of artificial intelligence produces technical or organisational changes affecting specific positions.

The Causal Link Is the Central Issue

The company must be able to explain why the implementation of the technology creates a need to eliminate specific positions.

This causal connection is likely to be one of the most important elements in any restructuring based on technological transformation.

It is not enough to establish two facts independently: that the company uses AI and that it needs to reduce its workforce.

The relationship between the two must be explained.

For example, if a tool allows certain tasks to be performed in a fraction of the time previously required, the company should explain how that productivity improvement changes staffing requirements, which functions remain and which functions are no longer necessary.

The business rationale must be capable of being translated into legally sufficient employment documentation.

This approach is consistent with recent case law from other Spanish High Courts of Justice, which requires companies to establish an actual change in production methods or working systems and its connection with the reduction of functions or staffing requirements.

Technological Transformation Does Not Remove the Requirements of the Consultation Period

Where AI implementation forms part of a collective redundancy procedure, the company must still comply with all requirements applicable to that procedure.

Technological transformation does not reduce the company’s information and consultation obligations or allow the consultation period to become a mere formality.

The company must provide employee representatives with sufficient information to understand the grounds for the procedure and negotiate in good faith.

In this context, documentation concerning the implementation of the technology may become particularly important: which processes are being changed, which functions are affected, what the future organisational structure will look like and which criteria have been used to determine the positions affected.

Suárez de Vivero’s Corporate Restructuring practice addresses precisely these issues, including the alignment of business rationale, evidence, workforce impact, consultation obligations and documentation throughout the process.

The Selection of Affected Employees Must Also Be Justified

A technological transformation may explain why a company needs to reduce a particular function, but it does not necessarily determine which individual employee should leave the organisation.

These are two different questions.

Once the need to reorganise a team has been established, the company must also be able to justify the criteria used to determine the positions or employees affected.

Experience, specific knowledge, expertise, ability to assume the functions that remain or the requirements of the new organisational model may all be relevant, provided that they are objective and consistent with the restructuring.

The selection process cannot become an arbitrary decision hidden behind technological transformation.

For this reason, planning a restructuring based on AI should address both the business rationale and the criteria used to determine which positions are affected.

Can a Company Use AI to Replace Jobs?

From an employment law perspective, a company may reorganise its structure where economic, technical, organisational or production-related grounds exist and the relevant legal requirements are satisfied.

The question is not whether technology can replace certain tasks. The question is whether that replacement produces a genuine business transformation that falls within one of the legally recognised grounds and whether the company can demonstrate it.

The introduction of AI may therefore form part of a restructuring, but it does not automatically make the dismissal of employees whose functions can be partially automated fair or lawful.

The company must establish the actual impact of the technology, the need for the restructuring and the connection between those two elements.

Not Every Technological Restructuring Has to Result in Dismissals

Technological transformation can lead to different business responses.

In some cases, it may be necessary to eliminate certain positions. In others, the company may reorganise functions, train employees, modify processes or redistribute responsibilities.

Article 52(b) of the Spanish Workers’ Statute also provides for objective termination where an employee fails to adapt to technical changes introduced in their position, subject to specific requirements, including the employer’s obligation to provide prior training designed to facilitate adaptation.

This demonstrates that Spanish employment law provides different responses to technological transformation.

Companies should therefore analyse the specific circumstances before opting directly for the elimination of a position.

The Importance of Documenting the Before and After

In a restructuring linked to artificial intelligence, evidence should begin to be prepared before any dismissal is communicated.

The company should be able to reconstruct how the production process operated before the transformation, what changes were introduced and what the resulting structure looks like.

This documentation may include process analyses, organisational charts, job descriptions, productivity assessments, technical documentation, workforce planning and the criteria used to establish the new organisational structure.

The objective is not to create documentation artificially to justify a decision that has already been made, but rather to properly document a genuine business transformation.

Early employment law advice is particularly important at this stage. Suárez de Vivero advises companies on restructuring processes from the assessment of business grounds and alternatives through to documentation, negotiation, implementation and litigation.

Artificial Intelligence and Employment Law: An Area That Will Continue to Evolve

The Madrid High Court judgment should be regarded as a relevant development, but still as part of evolving case law.

The judgment does not establish a general rule under which the implementation of artificial intelligence automatically justifies dismissal.

Nor does it determine when an AI tool legally replaces an employee or what level of automation is sufficient to justify eliminating a position.

What it confirms is the need to assess technological transformation within the traditional framework of ETOP grounds and to establish its actual impact on the organisation.

As technological developments continue, these issues are likely to reach the courts more frequently. For companies, this makes a preventive approach particularly important: employment structures should be analysed before technology is implemented and the impact of the transformation on the organisation should be properly documented.

The Role of Employment Law Advice in Technological Transformation

The implementation of artificial intelligence should not be assessed solely from a technological perspective.

Where it affects work organisation, it may involve employment contracts, job functions, training, employee representatives, data protection, internal policies and, ultimately, workforce restructuring.

At Suárez de Vivero, we advise companies on Technology and Work Organisation in Spain, including artificial intelligence in workforce management, automated decision-making, algorithmic management, consultation obligations and employment disputes related to technology.

Where technological transformation involves workforce reductions, our team also advises on Corporate Restructuring, including collective redundancies, reorganisations, negotiations with employee representatives and litigation arising from restructuring processes.

Where an employment decision is subsequently challenged, we advise companies on Employment Litigation in Spain, including individual and collective dismissals and disputes arising from restructuring processes.

A Technological Transformation Must Be Legally Explainable

The main conclusion emerging from this new scenario is straightforward: AI may transform an organisation, but it does not replace the need to legally justify a business decision.

A company implementing artificial intelligence may modify its processes, reduce production times and reorganise its teams. But where that transformation affects employment, the company must be able to explain what has changed, why it has changed and what connection exists between that transformation and the decisions taken regarding its workforce.

Technology may be the trigger for a restructuring. It is not, by itself, the legal justification for dismissal.

At Suárez de Vivero, we advise national and international companies on technological transformation, corporate restructuring, collective dismissals and employment litigation, integrating legal analysis with the organisation’s strategic and operational needs.

Frequently Asked Questions About Artificial Intelligence and Objective Dismissal