In a global trend that is seeing banks prepare to automate parts of their workforces, Australia’s largest lender has been forced into a humiliating climbdown. Commonwealth Bank of Australia (CBA) is being forced to rehire 45 employees after they were initially told their roles had been made redundant by an artificial intelligence (AI) program. The decision comes after a tribunal challenge by the Finance Sector Union (FSU), which accused the bank of misleading staff and the public about its new chatbot technology.

The row was triggered by CBA’s decision to tell dozens of long-serving employees that their jobs were no longer required. The bank’s reasoning, offered to the people who were laid off in a face-to-face meeting, was that the demand for their work had shrunk. The bank’s newly launched AI voice bot, the claim went, had cut the number of incoming calls by around 2,000 a week, and the humans were no longer needed in the same numbers.

Some of the bank employees affected by the announcement had worked for CBA for 30 or more years, and news of the apparent job cuts was reported widely in the Australian media. But it did not take long for the bank’s account of events to be contested by the affected workers, who said their claims about the voice bot did not add up.

In reality, they said, calls were not down, but up, when the decision to cut jobs was made. On the contrary, they claimed, management had been having to redeploy managers to make calls themselves, and other staff had been working overtime, as it struggled to deal with a rising call volume. Far from making humans redundant, it was argued, AI was not responsible for the problem.

Unmoved, the bank soon faced a fresh complaint, after the FSU lodged a claim with the Fair Work Commission, Australia’s workplace tribunal. The union alleged that CBA had not adequately explained the basis on which the roles were being made redundant and indicated it had reason to believe they had, in fact, been axed to cover up an effort to offshore them to India.

The reference to India is significant, as it emerged the same day the voice bot was announced that the bank was hiring call-center staff in India. Taken together, the union suggested, it looked like the chatbot claim was a cover for offshoring. The moves at CBA are part of a trend in which AI is being rapidly introduced to financial services, to cut costs, prevent fraud, and respond more intelligently to consumer needs.

Facing the prospect of a tribunal, CBA soon changed tack. At a hearing, the bank’s representatives appeared to contradict a central plank of their case. According to a transcript of the tribunal, the CBA gave in to the FSU claim by admitting it had “failed to consider a sustained increase in call volumes” at the time it made the redundancies.

The increase in call volumes, according to a statement by the bank quoted in the tribunal documents, was “inconsistent with the purported rationale for the redundancies being made”. The spike in calls, which according to the union continued for months, had come just as CBA was making the claim it could no longer support as many employees with calls.

With that admission, the case was settled, the bank issued an apology to the workers, and it was confirmed they would be given the option to return to their old jobs, apply for new ones, or take 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 spokesperson told Bloomberg.

The FSU, which has described the outcome as a “massive win” for its members, has also highlighted the impact of the decision on the workers who had to wait months before the dispute was settled. It said they had been “living with the uncertainty” and were suddenly facing serious financial hardship. A reversal of policy is all very well, but workers’ lives have already been disrupted, the union said, and executives should think twice before rushing into automation.

CBA is showing no signs of slowing the pace of its investment in AI, and last week announced a collaboration with OpenAI. The two companies will work together on “advanced generative AI tools for use by Commonwealth Bank to strengthen scam detection, prevent fraud, and deliver even more personalized products and services for customers and members.” CBA is “firmly embedding” the responsible use of AI, it said, and the effort is “all about investing in our people”.

That may not be the view of staff who were first told their jobs no longer existed and have seen CBA’s original contention for the layoffs found to be untrue. The bank has become emblematic of a wider, global trend in which Bloomberg Intelligence says as many as 200,000 bank jobs may be axed in the next three to five years as AI is deployed in back office, middle office, and operations roles.

The use of AI is expected to allow banks to cut costs and streamline service, and CBA is far from the first to hit the headlines for plans to automate work. But after what it has been through, CBA can expect to be under scrutiny in the coming years. For the workers involved, while the job remains, the decision to rehire them has not completely washed away the sense of betrayal the decision to fire them engendered. “The damage has already been done,” the union said.