It’s a cautionary tale for the global banking sector, as it continues to gear up to automate swathes of its workforce: As Australia’s largest bank, Commonwealth Bank of Australia (CBA), moves to embrace AI, it’s been forced into an embarrassing U-turn, and is rehiring 45 employees it sacked only last month. In a case that’s going before the Fair Work Commission, the bank claimed that the positions had been rendered redundant due to a new chatbot. The decision to reinstate the staff comes after the bank was accused by the Finance Sector Union (FSU) of misleading both workers and the public over the impact of the technology.

The case centers around dozens of longstanding employees at CBA, which made redundant at the end of April. At the time, it claimed its new AI “voice bot” had cut call volumes by 2,000 per week, leaving it with no need for so many employees. The announcement that their jobs were no longer required came as a particular shock for some of the workers who had been with the bank for decades.

But, as quickly became clear, the workers did not buy CBA’s reasoning. Employees argued that far from being reduced, call volumes were in fact increasing at the time the redundancies were announced. In fact, management was allegedly struggling to keep up with demand and had at one point been forced to move other managers to handle the volume of incoming customer calls. They had even reportedly offered overtime packages to existing employees to cope.

Taking the issue to a fair work tribunal, the union alleged CBA failed to clearly explain the basis for its decision to make the roles redundant. It also claimed the bank was concealing a decision to move some of the roles offshore to India, with jobs there being advertised at the same time.

At the heart of the case were conflicting claims over the reasons for the roles being made redundant. In its evidence at the tribunal, CBA admitted to a crucial error. Speaking at the tribunal, a bank representative stated that it had failed to take into account “the ongoing increase in call volumes at the time of the proposed redundancies”. The spike in volumes, which continued for months, is at odds with the bank’s claims that calls were being avoided as a result of the voice bot, and continued to increase “despite the introduction of the chatbot”. “This error meant the roles were not redundant,” it stated at the tribunal.

CBA has since retracted the job cuts and apologized to the staff. “We have apologized to the employees concerned and acknowledge we should have been more thorough in our assessment of the roles required,” a bank spokesperson told Bloomberg. The bank has also confirmed that the 45 employees will all be offered the option to return to their old roles, apply for other vacancies, or take an exit package.

For the Finance Sector Union (FSU), which led the challenge on behalf of members, the decision to reverse the redundancies is a “massive win” for workers. But the union also emphasized the damage that had already been done to workers by the process, which saw many of the employees wait weeks to find out their fate. Others were suddenly at risk of being unable to pay their rent and bills, the union added.

As for the bank itself, the job cuts were only the latest in a series of moves by the bank to further automate its operations. In fact, even as the case was going to a tribunal, the bank announced another AI partnership. Last week, the bank teamed up with OpenAI to “develop next-generation generative AI tools” that will help with scam detection and fraud prevention. CBA is also set to use the new technology to provide more personalized services to its customers. CBA said that this latest AI initiative was designed to support its employees and show its commitment to the “responsible use of AI.” Staff may not be so easily convinced, though, after being caught out by a similar claim when the bank first announced the layoffs.

If the CBA case is a warning for other banks, so is the wider industry context. Global banks are expected to make deep job cuts in the coming years, in a major expansion of AI into the sector. Research by Bloomberg Intelligence predicts that as many as 200,000 bank jobs could be lost globally over the next three to five years. Banks are keen to tap into the efficiencies created by AI and automation, by shifting large swathes of the workforce out of back, middle, and operations roles. However, as the CBA case has demonstrated, missteps can come at a cost and risk the trust of both staff and customers.

The 45 workers involved are now in the position of having to decide whether to take up the offer to return to jobs that they were recently told were no longer needed. The union is not optimistic about how many will accept the deal and expects many to simply walk away from the bank. “The damage has already been done,” it said, and the case is a reminder that no bank job is safe.

In related news, the FSU has said that while it has settled this particular case, it is lodging a further claim in the Fair Work Commission against the bank, over its AI use in general. It’s a challenge that could have further-reaching implications for the bank’s AI push if it is successful.