When using AI at work, be sure to avoid wage and hour claims

Employers are looking to save time and money and are turning to artificial intelligence (AI) to make employment practices more efficient. In early 2024, the U.S. Department of Labor (DOL) issued guidance to help employers navigate the use of AI. The takeaway is that eliminating humans from critical employment processes could result in a violation of federal employment laws. Read on to learn ways to avoid federal wage and hour claims when using AI.

Wage and hour issues

The Fair Labor Standards Act (FLSA) generally requires employers to pay covered employees at least the federal minimum wage for every hour worked and at least one and one-half times the regular pay rate for each hour worked in excess of 40 hours in a single workweek. Time working must be paid regardless of the employee’s level of productivity or performance.

Additionally, “hours worked” aren’t limited solely to time spent on active productive labor but may, for instance, include certain time spent waiting and breaks of short duration. If the employer knows or has reason to believe work is being performed, the time must be counted as hours worked and must be paid.

AI and wage and hour practices

Many employers use AI to automate timekeeping systems and calculate pay. The recent DOL guidance suggests this use of AI—without human oversight to ensure accuracy—could result in FLSA violations. The agency warns of potentially incorrect calculations of hours worked, on-call time, break time, and travel time.

Hours worked

Some employers use AI to monitor keystrokes, clicks, and website browsing to analyze whether employees are active or idle. These productivity metrics don’t determine whether an employee is performing “hours worked” for FLSA purposes. If the AI tool incorrectly determines an employee isn’t “working” and improperly categorizes working time as noncompensable, you may fail to pay the employee for all hours worked in violation of the FLSA.

On-call time (or engaged to wait)

Some employers are using AI technology to assign tasks and routes and adjust schedules to boost efficiency. Under the FLSA, waiting time is compensable if employees are required to be fully available to work, must remain near their workstation/jobsite, and don’t have time between assignments for their own nonwork pursuits.

While AI tools can make assignments more efficient, employees are still working and must be paid when they’re “engaged to wait” between the assignments. The DOL guidance warns that AI tools to automate scheduling and assign work tasks may result in an FLSA violation if the tools don’t accurately identify waiting time that’s compensable.

Break time

Under the FLSA, meal or break time of at least 30 minutes when the employee is fully relieved of duties isn’t compensable. Some automated timekeeping systems or software that tracks employee breaks incorporate AI to predict and auto-populate break time entries based on past entries, regular shifts and break schedules, and other factors.

Employers using “auto-deduct” tools must ensure employees are completely relieved of duty during recorded breaks, that time records accurately reflect breaks actually taken, and that employees are properly compensated for breaks not taken. There should also be a mechanism that permits employees to identify when their unpaid breaks didn’t result in being fully relieved of work so they’re paid properly for that working time.

Travel time

Employers are increasingly using geolocation software that tracks employees’ location relative to a jobsite, automatically clocking employees in and out when entering and leaving. Location doesn’t determine hours worked under the FLSA. These AI geolocation systems may fail to account for employees’ compensable time at the beginning of the workday, in between jobsites, and at the end of the workday under certain circumstances. Such examples include the following:

• When an employee is required to pick up tools at the employer’s plant before arriving at the worksite, the time spent at the plant and driving to the first jobsite would be hours worked.
• Time spent driving between jobsites is hours worked.
• If the employee is required to return and unload supplies at the plant at the end of the workday, the time driving to the plant and returning the tools is hours worked.

Employers must confirm that geo-tracking systems account for the compensable travel time between jobs at different sites.

DOL’s recommended AI best practices

The DOL recommends the following as best practices for federal contractors, but all employers can benefit from these recommendations:

• Verify AI systems and vendors.
• Understand the specifics of the AI system (data, reliability, safety, etc.).
• Provide advanced notice of AI uses and practices in a handbook or separate policy.
• Monitor use of AI in making employment decisions, and track the data to standardize the system(s), provide effective training, and create internal governance structures with clear case standards and monitoring requirements.
• Conduct routine tests of the AI system to ensure it’s working properly.

These best practices, referred to as “Promising Practices” by the DOL, aren’t mandatory and aren’t an exhaustive list. AI in the employment context is a rapidly advancing and quickly evolving area. We’ll continue to keep you informed about important developments.

Mary Elizabeth “Betsy” Davis is an attorney with Whiteford, Taylor & Preston, LLP, in Richmond, Virginia. Betsy is a partner in the Labor and Employment Group and serves Whiteford as its Co-General Counsel and Co-Chair of the Labor and Employment Group. She focuses her practice on advising management in all areas of labor and employment law and can be reached at bdavis@whitefordlaw.com.