By: Abhishek Ramaswami on behalf of Cadogan Law | September 2024
On April 29, 2024, the Department of Labor (“DOL”)’s Wage and Hour Division issued new guidance on the use of artificial intelligence (“AI”) in the workplace titled “Artificial Intelligence and Automated Systems in the Workplace under the Fair Labor Standards Act (“FLSA”) and Other Federal Labor Standards”. Much like the Equal Employment Opportunity Commission (“EEOC”) with discriminatory impacts implicating Title VII, the DOL also recognized the potential dangers of AI as pertains to federal labor laws. Today, AI programs can perform numerous functions for employers, including: tracking work hours, calculating wages, measuring worker performance, setting work schedules, assigning tasks, and performing complex human resources functions. The DOL’s guidance emphasizes the fact that, despite the conveniences of AI in streamlining many administrative and human resources functions, human oversight and intervention is necessary to avoid violation of federal labor laws, including the Fair Labor Standards Act (“FLSA”). The DOL issued guidance, as pertains to the use of AI, in the following areas:
Hours Worked:
The FLSA generally requires that covered employees be paid at least the federal minimum wage for every hour they work and at least one and one-half times their regular rate of pay for each hour worked in excess of 40 in a single workweek. Employers must pay employees for all hours worked in accordance with the FLSA regardless of the employee’s level of productivity or performance. Some AI and employee monitoring tools have the ability to measure and analyze metrics of worker productivity or activity. These systems are used to analyze worker activity in real time, such as computer keystrokes and mouse clicks, website browsing, presence and activity in front of a web camera, or other data to determine when an employee is active or idle, as well as to track work time, break time, meal periods, and to assign tasks.
The DOL stresses that relying solely on automated timekeeping and monitoring systems without human oversight can run afoul wage and hour laws. Employers must ensure that AI systems used to track work time, breaks, or geographic location, are accurately accounting for all hours worked. An AI program that inaccurately categorizes time as non-compensable work hours based on the program’s own analysis of worker activity, productivity, or performance could result in a failure to pay all wages due and owing for the hours worked. This could lead to liability for the employer for a violation of the DOL’s wage and hour laws.
Productivity measuring tools utilized by AI programs are not necessarily determinative of whether an employee is performing “hours worked” under the FLSA. For example, an AI program that predicts if and when an employee has taken a break may not be 100% accurate and may misidentify non-computer work time (if the computer is idle) with break periods. Some AI systems may also auto-populate hours or auto-deduct time for break periods and may be inaccurate. Similarly, AI programs that use geolocation to track employee clock-ins and clock-outs may not properly take into account an employee’s task that takes place at multiple locations. Moreover, time spent waiting for AI to assign a task to an employee might be compensable, even if the AI program does not indicate such. The DOL stresses that the metrics described herein do not substitute for the analysis of whether the employee was suffered or permitted to work during that time and thus performed “hours worked” under the FLSA, and compensable vs. non-compensable time needs to be reviewed for accuracy by employers themselves.
Calculating Wages:
Employers that use AI programs to calculate wage rates must ensure that employees are paid in accordance with federal minimum wage, overtime, and other wage requirements. Many AI programs use automated algorithms to determine employees’ rates of pay based on a variety of data and metrics collected by these systems. These can include: fluctuating supply and demand, customer traffic, geographic location, worker efficiency or performance, or the type of task performed by the employee. Furthermore, some AI systems can automatically recalculate and adjust a worker’s pay rate throughout the day (including rates paid by the piece, or on a per task basis), which may result in inaccurate rates of pay from one week to the next. Employers must verify that the AI tools they utilize account for numerous methods of compensation, including nondiscretionary bonuses, commissions, or other compensation, that go into an employee’s regular rate of pay, and not solely rely on AI to calculate wages, which may very well be inaccurate and not compensate workers appropriately, leading to employer liability.
Administering Leave – FMLA Compliance:
Employers that use AI to process time off requests, track time off or absences, or certify leave must account for time as required by the Family Medical Leave Act (“FMLA”) and must not ask employees to provide more information to the employer than the FMLA allow, such as unnecessary medical information if the system has difficult processing the request. As the guidance states, “without responsible human oversight, relying on automated systems to process leave requests, including determining eligibility, calculating available leave entitlements, or evaluating whether leave is for a qualifying reason, can create potential compliance challenges”. A timekeeping tool that inaccurately records time, for example, might incorrectly calculate FMLA eligibility for an employee, violating FMLA leave laws. Finally, it should be emphasized that AI may not be used “to target FMLA leave users for retaliation or discourage” use of leave. If the use of AI or an automated system leads to adverse action against employees because of their use of FMLA leave (or any other protected activity under federal law), that may result in unlawful retaliation or interference, creating liability for the employer.
PUMP Act Violations:
As with FMLA violations, the guidance warns that AI programs might run afoul the Providing Urgent Maternal Protections for Nursing Mothers Act (“PUMP Act”). Under the PUMP Act, employers must provide reasonable break time and space to express breast milk. The guidance warns employers of the risks of AI systems penalizing employees for taking these protected breaks, including the assigning of “productivity” scores that fail to take into account nursing mothers. Consequently, employers need to be mindful of AI programs negatively impacting nursing mothers.
AI and the Employee Polygraph Protection Act
The Employee Polygraph Protection Act (EPPA) prohibits most private employers from conducting polygraph or “lie detector” tests. AI systems can use “eye measurements, voice analysis, micro-expressions, or other body movements” to assess truthfulness of an employee and could violate the EPPA.
Key Takeaways for Employers:
- Employers that use AI systems that track work hours, measure worker performance, set work schedules, assign tasks, calculate wages, or other human resource functions are subject to federal labor laws and an employer cannot avoid liability for an AI system’s miscalculations or inaccuracies.
- Human oversight is necessary to ensure that AI systems accurately track employee hours and activities, including compensable and non-compensable time, to ensure they are receiving all wages due and owing to them under federal law, including minimum wages, overtime, commissions, and other forms of compensation.
- Employers must ensure that AI systems do not penalize employees for engaging in protected activities, such as FMLA leave or break time under the PUMP Act, for example. AI technologies used to generate “pretextual reasons to penalize or discipline an employee for engaging in protected activity could constitute unlawful retaliation”, under the guidance. Retaliation or adverse action taken based on engaging in protected activities (especially for AI tools that utilize ‘productivity’ metrics) can lead to employer liability.
As more and more businesses and individuals utilize AI, and the laws governing the use of AI in the workplace rapidly evolve, it is important to ensure that you are up to date on, and compliant with, the latest laws and regulations in this sphere. We are happy to assist you if you have any questions about AI in the workplace, or any other employment law or business matter. Please visit us contact us to schedule a free consultation.
Biography: Abhishek Ramaswami is an Associate Attorney at Cadogan Law, practicing in all aspects of Labor and Employment Law from the agency level through trial, as well as Business Litigation. He is licensed to practice law in Florida, New York, and New Jersey, with pending licensure in Illinois. In his spare time, he enjoys sports, cooking, the outdoors, and traveling with his wife.