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As artificial intelligence becomes more prevalent in workplaces, it may have an unexpected impact upon employers.
While employers may focus on the benefits AI provides, they must also be mindful that AI may impact employee classifications under the Fair Labor Standards Act (FLSA). And it may lead to litigation, including collective action lawsuits, alleging that employers have misclassified some employees as exempt.
Generally speaking, to qualify as exempt from overtime pay under the FLSA's administrative exemption, employees must engage in duties that require discretion and independent judgment on significant matters. However, AI's growing role in decision-making and in streamlining complex tasks may erode the very discretion and judgment that had defined many administrative exempt positions.
For example, professionals who analyze data, generate reports, and recommend strategic actions – and had been treated as exempt as a result – may now be relying more and more on AI to perform all or part of those tasks.
While that may boost efficiency, cutting the time employees spend on those tasks, it can also reduce the employees' discretion and independent judgment. If discretion and independent judgment are limited to reviewing or approving AI-generated suggestions, plaintiffs' counsel are likely to argue that the employees no longer satisfy the duties test for the administrative exemption and, therefore, must be paid for overtime.
This is just one way in which employers must be careful as AI becomes more prevalent in the workplace.
To preserve exempt status of employees under the FLSA's administrative exemption – as well as similar state exemptions – employers should review employees' activities in the new, AI-integrated workplace to ensure that they retain meaningful discretion and independent judgment. If they do not, employers would be wise to consider reclassifying those employees as non-exempt.
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