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Medium reported severity Lawsuit Dismissed

Video game studio's layoff letter said AI-generated images made a 3D artist's post unnecessary; court held the dismissal fair, Madrid appeal ruling recounts

A Spanish video game studio that went from a profit in 2023 to losses of about 3.5 million euros in 2024, and had notified a court of its insolvency, opened a collective dismissal (ERE) on 30 October 2024 covering 13 of its 83 employees; an agreement was reached and the dismissals took effect in December 2024. According to a judgment of the High Court of Justice of Madrid as reported by EFE, Xataka and a lawyer's analysis, the dismissal letter given to a 3D artist said that images generated with artificial intelligence improved the visual quality of the studio's games and cut production time per scene, that it was adopting an AI-based production process, and that two senior 3D artists were therefore enough, so her post was abolished. The first-instance court held her dismissal fair and she did not appeal. The High Court's judgment 864/2026 of 8 October 2026 concerned a scriptwriter dismissed in the same procedure, whose letter did not mention AI: it dismissed her appeal, leaving her dismissal unfair but not void. Xataka says the letter relied above all on economic and productive causes, that the studio presented AI as a consequence imposed by its clients rather than as a direct cause, and that AI by itself does not justify a dismissal. The studio is not named and the judgment was not read.

AI system
Unidentified image tool
Occurred
16 Dec 2024
Reported
29 October 2026
Event location
Spain
What the AI did
Relation unknown
Reported harm
Professional Harm
Whose AI use
An institution’s AI use
Setting
Work · Justice
Evidence
AI involvement reported · Causal attribution alleged · 3 sources
5 claims: 5 reported. 4 open questions
People reported harmed
At least 1 person

AI system as recorded: Generative AI image production that, according to the employer's dismissal letter as recounted in the judgment, improved visual quality and reduced production time per scene in the studio's games; no product is named

What Happened

The collective dismissal. A Spanish video game studio went from a profit of about 646,000 euros in 2023 to losses of more than 3.5 million euros in 2024 and notified a commercial court that it was insolvent. On 30 October 2024 it announced a collective dismissal (expediente de regulación de empleo, ERE). With no legal workers' representatives, staff elected a three-member negotiating committee; the company presented its report, a technical report, its selection criteria and a list of the 13 affected employees out of 83. Consultations closed with an agreement of 20 days' pay per year of service, paid at once, and the dismissals took effect in December 2024. The labour inspectorate found no fraud or coercion.

The AI justification. According to the Madrid High Court judgment as reported, the dismissal letter given to a 3D artist said that using images generated with artificial intelligence improved the visual quality of the studio's games and made production faster because each scene needed much less time, that the studio needed a new production process based on AI, and that two senior 3D artists were therefore enough, so her post disappeared. EFE reports that the AI-based process led to the reduction and reorganisation of the 3D art team. The first-instance court held her dismissal fair; she did not appeal.

The appeal. A scriptwriter dismissed in the same procedure, whose letter did not mention AI, sued for nullity, arguing that the negotiation was a sham and that she was selected in retaliation for an earlier claim. The Madrid court of first instance declared her dismissal unfair but not void in March 2026; on 8 October 2026 the social chamber of the High Court of Justice of Madrid dismissed her appeal (judgment 864/2026). Several outlets presented the ruling as the first Spanish judgment endorsing an AI-justified collective dismissal. Xataka and a lawyer's analysis say the High Court did not review the 3D artist's dismissal. Xataka says her letter relied above all on economic and productive causes, that the employer presented AI as a consequence imposed by its clients rather than as a direct cause, and that AI by itself does not justify a dismissal. The judgment itself was not read, and the studio is not named.

Reported harm

A 3D artist lost her job in a collective dismissal whose letter cited the studio's switch to AI-generated images; the first-instance court held the dismissal fair, according to reports of the Madrid High Court judgment.

How Harm Occurred

The employer abolished a 3D artist's post on the stated ground that AI-generated images let a smaller art team produce the studio's games faster; the first-instance court held the dismissal fair.

Outcome

Resolved

The first-instance court held the 3D artist's dismissal fair and she did not appeal. In a separate claim by a scriptwriter dismissed in the same procedure, the Madrid court of first instance (social section, No. 50) declared her dismissal unfair but not void in March 2026, and the High Court of Justice of Madrid (judgment 864/2026, 8 October 2026) dismissed her appeal seeking nullity and damages; that judgment could be appealed to the Supreme Court for unification of doctrine.

What remains unknown

  • The name of the studio and which AI image tools it adopted; no source names either.
  • How many of the 13 dismissed workers belonged to the 3D art team; EFE says several, the other sources describe one 3D artist.
  • The date and court of the 3D artist's first-instance judgment; the scriptwriter's first-instance judgment came from the Madrid court of first instance (social section, No. 50) in March 2026.
  • Whether the scriptwriter lodged a further appeal to the Supreme Court; the judgment could be appealed for unification of doctrine.

What the evidence supports

AI involvement: reported. The harm is the employer's dismissal of a 3D artist in response to its own adoption of AI image generation. According to the Madrid High Court judgment as reported by EFE, Xataka and a lawyer's analysis, her dismissal letter said AI-generated images improved quality and cut production time per scene, so the 3D art team could be reduced to two senior artists and her post abolished; the first-instance court held the dismissal fair. No source says an AI system produced any output about the worker, so the relation is unknown under the consequential-response exemption.

5 claims: 5 reported. What the statuses mean

Reported A video game studio that had moved from profit in 2023 to losses of about 3.5 million euros in 2024 and had notified a court of its insolvency announced a collective dismissal on 30 October 2024; it named 13 of its 83 employees, an agreement was reached, and the dismissals took effect in December 2024.

Causal attribution. Procedural facts from the judgment as relayed by the wire, a tech outlet and a lawyer; one origin (the judgment).

  • infobae.com(opens in new tab) supports · Spanish
    'Se trata del caso de una empresa que en octubre de 2024 inició los trámites para un ERE por causas económicas, técnicas, organizativas y productivas, reflejando graves pérdidas económicas en 2024 y un proceso de insolvencia mercantil.'
  • xataka.com(opens in new tab) supports · Spanish
    'presentó un ERE que afectó a 13 de sus 83 trabajadores'
  • carloscr.es(opens in new tab) supports · Spanish
    'pasó de un beneficio de unos 646.000 euros en 2023 a pérdidas de más de 3,5 millones en 2024'; '30 de octubre de 2024 · Anuncio del ERE'; 'La empresa entrega la memoria, el informe técnico, los criterios de selección y la lista nominativa de los trece afectados (de una plantilla de 83).'; 'La empresa acepta y se cierra el periodo de consultas con acuerdo.'; '16 de diciembre · Efectos de los despidos'
Reported The dismissal letter given to a 3D artist in the studio's art team said that AI-generated images improved the visual quality of its games and made production faster per scene, that the studio was adopting a production process based on AI, and that two senior 3D artists were therefore enough, so her post was abolished.

Causal attribution. The employer's stated justification, from its dismissal letter as recorded in the judgment; one origin. Whether the studio actually used AI image tools in production is the employer's statement.

  • infobae.com(opens in new tab) supports · Spanish
    'La empresa argumentó que el uso de imágenes generadas por inteligencia artificial mejoraba la calidad visual de sus productos (videojuegos) y, al mismo tiempo, permitía ser mucho más ágiles y eficientes, ya que el tiempo de inversión necesario por escena era notablemente inferior.'
  • xataka.com(opens in new tab) supports · Spanish
    'La carta de despido de la modeladora mencionaba que la IA mejoraba la calidad visual y "permite ser más ágiles y eficientes". Por eso bastaban dos artistas 3D sénior y su puesto desaparecía.'
  • carloscr.es(opens in new tab) supports · Spanish
    'la empresa justificó la reducción del equipo de arte 3D en la implantación de un proceso de producción basado en IA generativa, que reducía el tiempo de trabajo por escena.'
Reported The first-instance court held the 3D artist's dismissal fair; she did not appeal, so the Madrid High Court did not review it.

Causal attribution. First-instance outcome as recounted in the High Court judgment and relayed; one origin.

  • xataka.com(opens in new tab) supports · Spanish
    'recibió una carta de despido en la que sí se citaba la IA, pero el juzgado de instrucción ya había declarado como procedente su despido. El TSJ de Madrid no examinó este último despido que no había sido recurrido y se cerró como procedente.'
  • carloscr.es(opens in new tab) supports · Spanish
    'El despido de la compañera que trabajaba en ese equipo fue declarado procedente en instancia, y esa parte no se recurrió.'
Reported In judgment 864/2026 of 8 October 2026, the social chamber of the High Court of Justice of Madrid dismissed the appeal of a scriptwriter dismissed in the same collective dismissal, whose letter did not mention AI; her dismissal remained unfair but not void.

Causal attribution. Outcome of the appeal as reported; one origin. Whether a further appeal was lodged is not reported.

  • infobae.com(opens in new tab) supports · Spanish
    'En una sentencia fechada el pasado 8 de octubre a la que ha tenido acceso EFE, la sala de lo social desestima el recurso presentado contra un fallo del tribunal de instancia nº 50 de Madrid de marzo de este año.'
  • xataka.com(opens in new tab) supports · Spanish
    'La sentencia 864/2026 del TSJM, del pasado 8 de octubre, resuelve el recurso de una guionista que consideraba que su despido (en el marco de un ERE) debía considerarse como nulo.'; 'En su carta de despido no se mencionaba a la IA como motivo para justificar el despido.'
  • carloscr.es(opens in new tab) supports · Spanish
    'El Tribunal de Instancia (Sección Social, plaza 50 de Madrid) declara su despido improcedente (con unos 3.268 euros más de indemnización), pero no nulo.'; 'Contra la sentencia cabe recurso de casación para la unificación de doctrina ante el Tribunal Supremo.'
Reported Xataka says the dismissal letter relied above all on economic and productive causes, that the employer presented the introduction of AI as a consequence imposed by its clients rather than as a direct cause, and that AI by itself does not justify a dismissal; the lawyer's analysis says the reorganisation, combined with proven losses, led the first-instance court to hold the 3D artist's dismissal fair.

Causal attribution. Interpretation by a tech outlet and a lawyer of the same judgment; recorded as counterevidence to the AI framing.

  • xataka.com(opens in new tab) supports · Spanish
    'La empresa alegó causas económicas, técnicas, productivas y organizativas, pero la carta se apoya, sobre todo, en las económicas y las productivas.'; 'La empresa justificó muy bien esa prioridad por las causas económicas, organizativas y productivas, y no presentó la implantación del uso de la IA como una causa directa, sino como una consecuencia impuesta por sus clientes.'; 'Por sí misma la IA no justifica el despido.'
  • carloscr.es(opens in new tab) supports · Spanish
    'Combinada con unas pérdidas acreditadas, esa reorganización sirvió en instancia para declarar procedente el despido de la animadora 3D.'

Sources

3 sources inspected. Sources that repeat one account do not corroborate each other.

How the sources were read, and where the events happened

Read in Spanish by the research agent (an AI) on 2026-10-30 and translated by the research agent (an AI) into English; no human translator or reviewer was involved. EFE wire report published by Infobae, 29 October 2026, which says EFE had access to the judgment; HTTP 200, full text read. The judgment itself was not read. Applies to s1.

Read in Spanish by the research agent (an AI) on 2026-10-30 and translated by the research agent (an AI) into English; no human translator or reviewer was involved. Xataka report, 29 October 2026, citing judgment 864/2026 and quoting the employer's allegation; HTTP 200, full text read. It calls the first-instance court a "juzgado de instrucción", which the other sources do not. Applies to s2.

Read in Spanish by the research agent (an AI) on 2026-10-30 and translated by the research agent (an AI) into English; no human translator or reviewer was involved. Analysis by a Spanish lawyer on his firm's website, October 2026, citing the judgment by number, appeal number and ROJ STSJ M 12114/2026 and setting out its procedural timeline; HTTP 200, full text read. Applies to s3.

Event countries: Spain. Affected-person countries: Unknown. Court countries: Spain.

The collective dismissal was carried out under Spanish labour law (an ERE overseen by the Spanish labour inspectorate) and litigated in Madrid courts; no source locates the studio or the worker beyond that, so the worker's country of residence is left unknown and the event country rests on the Spanish employment relationship.

Reviewed for publication 2026-10-30: Published as a consequential-response case: a video game studio's dismissal letter, as recounted in Madrid High Court judgment 864/2026 of 8 October 2026, said AI-generated images made a 3D artist's post unnecessary, and the first-instance court held the dismissal fair. The facts come from a wire report, a tech outlet and a lawyer's analysis of the judgment, which was not read.

People described

A 3D artist in the art team of a Spanish video game studio

People reported harmed in this case

At least 1 person

0 AI participants · 1 other person harmed

Additional affected people are described without a reliable count.

The 3D artist whose dismissal letter cited AI-generated images (Xataka, the lawyer's analysis). EFE says the AI-based process made several workers in the 3D art team unnecessary without giving a number, so any others remain unquantified. The scriptwriter who appealed is not counted because her letter did not mention AI.

Counted once within this case. The same person may appear in other cases. This count does not establish AI causation.

Tags

#dismissal#collective-dismissal#workplace-ai#labour-court#video-games#spain#consequential-response

Cite this case

Compiled per our published methodology: verification statuses, sourcing standards, and corrections process.

APA

NOPE. (2026). Video game studio's layoff letter said AI-generated images made a 3D artist's post unnecessary; court held the dismissal fair, Madrid appeal ruling recounts. AI incidents. https://nope.net/incidents/2024-spain-video-game-studio-layoff-letter-said-ai-generated-images-made-3d-artists-post-unnecessary-dismissal-held-fair

BibTeX

@misc{2024_spain_video_game_studio_layoff_letter_said_ai_generated_images_made_3d_artists_post_unnecessary_dismissal_held_fair,
  title = {Video game studio's layoff letter said AI-generated images made a 3D artist's post unnecessary; court held the dismissal fair, Madrid appeal ruling recounts},
  author = {NOPE},
  year = {2026},
  howpublished = {AI incidents},
  url = {https://nope.net/incidents/2024-spain-video-game-studio-layoff-letter-said-ai-generated-images-made-3d-artists-post-unnecessary-dismissal-held-fair}
}

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