Australian lenders are moving aggressively into artificial intelligence, and other banks around the world are poised to follow, with predictions that automation will soon replace large swaths of bank workers. In Australia, the move to automation is already here, but a notable first in the shift came not from an announcement by the bank itself, but from the embarrassing misstep of the nation’s largest financial institution, Commonwealth Bank of Australia (CBA).

The bank is being forced to rehire 45 workers after claiming their positions had been made redundant by the addition of a new AI chatbot. The decision comes after a worker dispute that was taken to a tribunal and in which the bank was accused of misleading workers and the public about its “voice bot” technology.

The employees in question were long-serving members of the bank’s team. Last month, dozens of workers received letters saying their role was no longer required. In a statement at the time, the bank said its newly introduced AI “voice bot” had resulted in a drop in calls of about 2,000 a week, making some of the employees’ positions redundant. Some of those affected had been with the bank for more than three decades.

But the employees contested the explanation, saying calls were not down but rather continuing to rise at the time of the layoffs. In fact, management was trying to respond to a perceived jump in demand for customer calls by redeploying branch and IT managers to the team, and offering overtime to existing staff members.

The union took the matter to a fair work tribunal, where it argued that CBA had not “sufficiently explained the basis of the declared redundancies.” It also alleged that CBA may have been using the chatbot announcement to cover up a decision to move some roles to India, pointing to hiring there that took place around the same time.

Presenting its defense, CBA made the admission. Bank representatives appeared before the tribunal to say, in the words of Bloomberg, “it had not taken into account an increase in call volumes that began weeks before some of the staff were informed their jobs were redundant.” As the bank conceded at the tribunal, the sudden, sustained increase in call volumes at the time of the layoffs directly undercut its reasoning for declaring the positions redundant. “This error meant the roles were not redundant,” the bank told the tribunal.

In the days following, the bank reversed course. It apologized to the affected workers and said the 45 staff members would be given the option of returning to their previous positions, applying for other roles within the bank, or taking an exit package. “We have apologized to the employees concerned and acknowledge we should have been more thorough in our assessment of the roles required,” the bank spokesperson told Bloomberg.

The reversal of the layoffs has been hailed by the Finance Sector Union (FSU) as a “massive win” for members. But according to the FSU, much of the damage was already done. Staff affected by the sudden announcement faced weeks of uncertainty, with some of the more vulnerable suddenly unable to pay their rent or feed their children, the union claimed. “Our members are the real victims,” the union added.

The FSU has said the reversal of the layoffs should be a warning to other banks that AI should be deployed in a responsible way. They argue that if the rollout is rushed, workers will be caught by surprise and left facing an uncertain future.

AI, however, remains a big part of the bank’s future. Despite the controversy, it has announced partnerships with OpenAI to develop generative AI tools to “drive improvements in areas like scam detection and prevention, fraud prevention and the personalization of services for our customers,” CBA has said. The bank’s announcement last week that it would team with OpenAI to build an in-house AI platform to train its own models also suggested no slowdown in its plans to adopt AI.

The controversy comes as banks around the world are expanding into generative AI and automation, with Bloomberg Intelligence projecting that the number of jobs at banks, asset managers, and insurers could fall by up to 200,000 over the next three to five years as workloads are automated. This job destruction will come back to the back office, middle office, and operations roles. Many banks have flagged plans to deploy AI over the next three years, with industry insiders saying cutting the cost of human workers is the biggest draw for bank executives. But after the Commonwealth Bank of Australia AI fiasco, the rush to AI may be complicated by a host of new challenges, such as negotiations with unions and regulators over how to use the new technology.