Australia’s largest bank has had a very public U-turn as it automates its workforce. The Commonwealth Bank of Australia (CBA) has been ordered to rehire 45 workers after making the case that their jobs had been replaced by a chatbot AI. The unusual reversal followed a complaint from the Finance Sector Union (FSU), which argued that the bank misled staff and the public about its AI rollout.

The jobs in question were originally axed after CBA claimed that a new “voice bot” had led to a decrease in call volumes of around 2,000 a week. The workers’ roles, which mainly consisted of answering queries and complaints, were labelled as “no longer required” by the bank. Dozens of the 45 staff affected had worked at the bank for many years, some for more than three decades.

But according to the workers, this was a blatant distortion of reality. CBA may have launched a “voice bot” AI in May this year, but this did not lead to an immediate drop in call volumes. In fact, the staff said calls were increasing at the time, to the extent that management was having to reallocate managers and offer overtime packages to handle the workload.

Frustrated by a lack of response from the bank, the FSU took the matter to a fair work tribunal. It argued that the bank “did not have the appropriate consultation to justify why roles were redundant” and did not refer to how it had calculated the number of roles that were required. The union went on to suggest that the real reason behind the layoffs was a decision to transfer some of the call centre functions to India. It pointed to the simultaneous recruitment there as evidence for its claims, stating that it created “the perception that this chatbot announcement was a cover for offshoring.”

In evidence submitted to the tribunal, CBA admitted that its calculations about redundancies were based on a flawed assumption. CBA representatives said the bank had not factored in a “considerable increase in call volume” that occurred at the same time as the layoffs. The unexpected surge, which was described as lasting for “months”, directly contradicts the bank’s public rationale for the redundancies. “This error meant the roles were not redundant,” CBA stated in the tribunal.

The admission has led to a sharp change in approach by the bank. CBA has apologized to the workers and announced that they would be allowed to return to their former roles, apply for other roles in the bank, or accept redundancy packages. “We have apologized to the employees concerned and acknowledge we should have been more thorough in our assessment of the roles required,” the bank said in a statement to Bloomberg.

The FSU called the announcement a “massive win” for its members, but warned that “the damage has already been done”. Workers who were informed that they had been made redundant were put through “weeks of anxiety and fear,” wondering how they would pay their bills. The union used the case as an example of the pitfalls of large-scale AI adoption without sufficient prior consultation or preparation.

CBA is not retreating from AI, despite the episode. In fact, it is doubling down on its AI commitments, with the bank announcing another deal this week. Last Monday, CBA said it was forming a new partnership with OpenAI to develop next-generation generative AI. The technology will be used for “advanced scam detection and prevention” and to improve the bank’s fraud prevention and money laundering controls. It will also help to provide “personalized services and support” for the bank’s customers. The bank said this would help “accelerate the responsible use of AI to deliver benefits across the bank, and ultimately for our customers,” but the damage caused by this scandal will take longer to heal.

AI is transforming the industry around the world, with major banks automating large numbers of staff. Bloomberg Intelligence predicts that as many as 200,000 jobs could be cut at global banks in the next three to five years due to the adoption of automation and AI. These technologies will be used to replace staff performing middle and back office, middle office, and operations roles. While banks are betting on AI to cut costs and boost efficiency, this case has shown how automation can backfire and erode trust with both staff and customers.

The 45 workers involved will have to decide whether to return to roles that the bank has now admitted they should not have been axed. The FSU expects many will still resign, which is why it described this as a “massive win”. This is because, the union argues, there is “nothing to restore their faith in management”. But for the bank, it has at least signaled a change in approach that will likely make it more cautious in its dealings with staff as it makes its next moves in AI. The union has also confirmed that while this matter is settled, it has another case before the Fair Work Commission (FWC) that looks at the bank’s consultation obligations around its use of AI. If that case also succeeds, it will go further in curbing the bank’s ambitions for automation and AI.