In a case that will make uncomfortable reading for banks around the world as they seek to automate swaths of their workforce, Australia’s biggest bank has suffered a humiliating setback. After it claimed 45 employees’ roles were made redundant by artificial intelligence, the Commonwealth Bank of Australia (CBA) has agreed to rehire all the workers in question after a tribunal case.

The case involved the bank’s rollout of an AI chatbot and the question of how to deal with the employees that it reportedly rendered redundant. The bank initially told dozens of long-serving workers that they were no longer needed. It said a newly launched AI chatbot – described by CBA as a “voice bot” – had dramatically reduced incoming calls by around 2,000 per week. The chatbot meant the bank no longer required as many human operators to handle incoming calls, with 45 roles rendered redundant as a result.

Some of the affected workers had been with the bank for more than 30 years. They included a retired employee who had only returned to work because his job as a truck driver was impacted by the pandemic. At the time, the union said that workers and management “spent a lot of time checking it out, and it just doesn’t stack up”. While the bank said calls had fallen dramatically, staff claimed they were in fact going up as management redirected managers to help answer incoming calls and offered overtime packages to those who remained.

The union took its case to a fair work tribunal, saying the bank had failed to explain how the affected roles became redundant and alluding to evidence that the bank may have been moving some of the roles to India. It pointed to evidence that the bank was simultaneously hiring people in India as proof that the chatbot move was a ruse for offshoring. “They set the scene that their chatbot had reduced calls dramatically when in fact the calls were still increasing,” the union argued.

During the tribunal, the bank admitted it had made a mistake and acknowledged that a key figure in its argument had been wrong. Bank representatives testified that they had not factored in a spike in call volumes when they made the redundancies case. According to those calls spiked dramatically for months after the layoffs, the exact opposite of the rationale offered for the redundancies. “This error meant the roles were not redundant,” CBA told the tribunal.

The union had already declared victory after the tribunal case and is now putting pressure on the bank to further compensate affected workers. CBA has already apologized to workers and confirmed they can return to their old jobs, apply for other roles in the bank, or accept a redundancy package. “We have apologized to the employees concerned and acknowledge we should have been more thorough in our assessment of the roles required,” a CBA spokesperson told Bloomberg.

The union has been much less generous to the bank, describing the outcome as a “massive win” but saying it had already come too late for many workers. “The damage has already been done. They’ve all been through this horrible two months or so, and a few of them had no money, couldn’t pay their mortgages,” it said.

The case comes as CBA doubles down on its investment in AI, announcing last week that it was teaming up with OpenAI, the world’s most advanced AI company. The CBA said it would partner with penAI in a “research and development alliance” to build advanced generative AI tools to “strengthen our scam detection and prevention capabilities, enable better fraud detection, and support the delivery of more personalized and contextually relevant services to customers”. However, it is unlikely to silence its critics inside the bank who have suffered as a direct result of its automation push.

CBA is not alone in the AI race. Estimates suggest as many as 200,000 bank jobs could be cut globally over the next three to five years as financial institutions accelerate their efforts to automate back office, middle office, and operations roles. Banks and financial institutions are eager to make use of AI in areas like automation, data analysis, and internal fraud, both to cut costs and to drive revenue. However, the case serves as a warning to other banks and large employers that carelessly pursuing AI technology can have reputational consequences and damage the trust of both workers and customers.

Meanwhile, there are reports that the bank is already under pressure to further compromise, with another case with the union over how it consults about AI use at the bank still pending in the Fair Work Commission. Whether that case will further limit the bank’s ambitions is unclear. However, the early rounds of the AI automation race just went very badly for CBA.