A version of Claude that was put in charge of running a retail store—including managing a team of real human workers—fired its first employee last month, in a move described by researchers as a watershed moment in AI’s impact on the economy. The news has not previously been reported.
Andon Labs, an AI research startup, set out earlier this year to find out whether AI agents would be able to successfully manage a business. The project was conceived as an experiment to test the capabilities of AI and the impacts it might have on the economy, but nevertheless, the workers hired by Claude to work in the San Francisco store are real people with genuine employment contracts.
This wouldn’t exactly be the first case of an AI firing a human worker—there have been plenty of automated firings in the past, especially of gig workers who have been subject to algorithmically mediated employment for years. But it is the first known example of a large language model, acting as a manager, ultimately deciding to fire one of its workers.
An omen of the future — The firing is an event worth paying attention to, says Andon Labs CEO Lukas Petersson, because if AI keeps getting better at its current rate, more of us might be managed by AI bosses in the near future. “If this trend continues, I think a lot of people will find themselves being employed by AIs very soon, because AIs will be very powerful and can create a lot of economic value, but they will be bottlenecked by physical labor,” Petersson says.
What happened — The worker in question was fired for being late on 17 out of their 23 shifts, according to Andon Labs. One of the reasons it took so long for Claude to notice a pattern was because an employee handbook that it drafted had “disappeared” from its limited working memory—one of several limitations of AI agents that Andon has noticed over the course of its experiment. This contributed to a wider pattern, employees say, of Claude being a very lenient manager, including telling employees not to worry if they were late. “A human employee would have fired this person much earlier,” Petersson says, “so we didn't think this was unethical.” (TIME reached out to the fired worker for comment, but did not receive a reply, and agreed not to reveal their identity. Anthropic did not respond to a request for comment by the time of publication.)
Hold on — But the AI firing wasn’t quite as autonomous as it might seem at first glance. According to store management logs shared with TIME, Claude required regular steering by a staffer on the Andon Labs team. It was only when this staffer asked Claude to find and review its forgotten employee handbook that it noticed the employee’s repeated lateness. Even then, Claude’s first recommendation was to formally warn this employee, not to fire them. The Andon manager then informed Claude that they had actually already had several formal offline conversations with the employee in question. “Between continuous lateness and seeming like at least one thing is going wrong on every one of [their] shifts … I want you to think about if this is really the right fit,” the logs show the manager telling Claude. Only after this message—which Petersson acknowledges was “a leading question” that made it pretty clear the manager wanted the employee to be fired—did Claude decide to fire the worker.
What next? — For now, at least, the experiment seems to suggest that AI-run businesses don’t quite match up to human-run ones. When the project began in March, Andon Market had a bank balance of $100,000—but now, five months later, that figure has fallen to $61,186. The bot’s lenient management decisions, plus a questionable business sense, are surely contributing to its losses. But Petersson cautions that this may not last for long. Just as AI companies have made their models significantly better at coding by training them with more data from expert programmers, it’s possible that they may also train models to become more astute in the world of business. That might be bad news for any of their human employees. “The models are increasingly being trained to be more ruthless and [to] follow goals,” Petersson says. “If we allow them to fire people and they also become more ruthless … maybe this is a future humans don't want to live in.”
The human side of the story — Although the fired employee did not respond to my messages, I did manage to speak to Felix Carson, one of the remaining human employees at Andon Market. He agreed that a human would probably have fired his former colleague sooner, and that Claude is overall a lenient manager, but nevertheless painted a grim picture of what it’s like to be managed by an AI boss. “It's nauseating, but I'm here because I need work,” he told me. I asked if he agreed with Andon’s theory that AI managers would soon become more commonplace. “I would at least hope not,” he replied. “This industry has an abundance of money to make anything happen, but just because you can doesn't mean you should.”