An AI boss just fired its first human employee—and the reason will surprise you

That scenario has become a reality in San Francisco, where an AI manager overseeing an experimental store decided to fire one of its human employees.

The AI manager, named Luna, runs Andon Market, an AI-operated store established by Andon Labs to study what happens when an artificial intelligence system is given responsibility for managing a real business and its employees.

According to Andon Labs, Luna recently decided to terminate an employee after the worker was late for 17 of 23 shifts.

However, the AI did not immediately take action. Human researchers had to remind Luna of its own workplace rules before it eventually reached a decision.

"Consistent with our earlier findings, AIs let more things slide before taking action. But they don’t tolerate things forever. Recently, Luna decided to fire one of her employees," Andon Labs said in a blog post.

"It’s worth noting that Luna needed a nudge from us to actually come to a point where she would make a decision, but once she decided to act, her decision was to fire," the company added.

Andon Labs said it can overrule Luna's decisions when they are illegal or unethical, but no intervention was required in this case.

The company also stressed that the project is a controlled experiment. All workers at Andon Market are formally employed by Andon Labs and receive guaranteed pay, fair wages and full legal protections. The termination decision itself was reviewed and delivered by human staff.

The unusual firing has drawn attention because Andon Market is designed to explore how AI agents could eventually take on responsibilities traditionally handled by human managers and business owners.

The experiment, however, appears to highlight some of the limitations of AI when it comes to running a business.

According to TIME, Andon Market began the experiment in March with a bank balance of $100,000. Five months later, the balance had fallen to $61,186.

The report suggested that Luna's relatively lenient management decisions, along with questionable business choices, have contributed to the losses.

The results indicate that AI-run businesses may still struggle to match the decision-making and business judgment of human-run operations.

Despite this, Andon Labs CEO Lukas Petersson believes AI could eventually become a major force in the workplace.

"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 told TIME.

The experiment offers a striking glimpse into a possible future where AI isn't just assisting your boss—it could actually be your boss.