Australia’s largest bank is reeling from an embarrassing U-turn as it prepares to axe hundreds of jobs by replacing workers with artificial intelligence (AI). The Commonwealth Bank of Australia (CBA) has agreed to offer reinstatement to 45 employees it sacked after the bank was accused of misleading the workers and the public over the rollout of a new chatbot.

According to the bank, its latest AI-powered “voice bot” had been so successful that it had cut incoming call volumes by 2,000 a week. This, in turn, made it possible for the bank to conclude that as many employees were no longer needed, and staff were notified that their positions were being made redundant. The Finance Sector Union (FSU), however, accused CBA of misleading the public and failing to properly inform the workers about the decision to reduce its workforce.

In particular, the union disputed the official reasons for the job cuts, telling a fair work tribunal that call volumes were not actually falling at the time of the layoffs, but were instead on the rise. In fact, bank management had reportedly been actively moving to hire more staff to deal with the increasing number of calls, according to the FSU. This included bringing in managers to help with call handling and offering overtime packages to existing call center workers.

As a result, the union went to the tribunal in a bid to reverse the bank’s decision, accusing CBA of failing to properly explain why the roles were redundant. The FSU also alleged that the bank was using the rollout of the chatbot as a “smokescreen” for a pre-planned decision to move some of the roles offshore to India. This would not only explain the simultaneous recruitment of call center agents in India but also the impression that CBA was cutting staff using the technology announcement as cover

The CBA further conceded in the tribunal that it had made a mistake in its handling of the layoffs. In its response to the claims, the bank’s representatives conceded that they had failed to take into account an increase in the number of calls received after they sacked workers. Call volumes had been increasing for months before the layoffs, which directly contradicted the bank’s assertion that incoming calls were the reason for the job cuts.

“This error meant the roles were not redundant,” CBA later stated in the hearing. With that in mind, the bank subsequently reversed course and told the tribunal that it had apologized to the 45 affected staff. The bank’s lawyers then confirmed that the 45 staff would be allowed to return to their old roles, apply for other roles at CBA, or accept an ex gratia package.

The FSU said it was a “massive win” for its members, while also warning about the risks of being put in similar positions by AI. The employees affected by the decision had found themselves in the spotlight at a time when the bank had experienced a surge in call volumes and then suddenly announced layoffs.

The union said its members who were caught up in the battle had already suffered irreparable damage to their “personal and financial well-being.” The 45 staff at the center of the dispute had found themselves in a position where they had had to endure weeks of uncertainty about their future and financial situations. “We have heard heartbreaking stories of people on edge about not being able to pay their bills and having their livelihoods ripped away overnight,” the union said.

The bank has already made it clear that it is not rolling back its plans to use artificial intelligence in its operations. This includes its recent announcement that it has signed a partnership with OpenAI to develop generative AI technology to further its capability in scam detection and fraud prevention, as well as helping to create personalized experiences for customers.

CBA told Bloomberg News that the move will allow it to embed “responsible use of AI” and create new jobs to focus on roles that the technology cannot do. In addition to this new collaboration, CBA has previously announced that it will work with IBM and Microsoft on using AI to improve back-office and customer-facing operations. AI is one of the hottest topics in banking as firms look for opportunities to use it to cut costs, and Bloomberg Intelligence thinks 200,000 bank jobs worldwide could be lost in the next 3 to 5 years as a result.