Employment Law Update: AI and Wage and Hour Claims
Date: June 26, 2024
Wage and Hour Issues
The Fair Labor Standards Act (FLSA) generally requires that covered employees be paid at least the federal minimum wage for every hour worked and at least one and one-half times the regular rate of pay for each hour worked in excess of 40 hours in a single workweek. 29 U.S.C. §§ 206(a) and 207(a). Time working must be paid regardless of the level of productivity or performance of the employee. Furthermore, “hours worked” are not limited solely to time spent on active productive labor but may, for instance, include certain time spent waiting and breaks of short duration. 29 C.F.R. §§ 785.14 and 785.18. If the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked, and, therefore, be paid. 29 C.F.R. §§ 785.11 and 785.12.
AI and Wage and Hour Practices
Many employers use AI to automate timekeeping systems and calculate pay. The DOL guidance suggests that this use of AI, without human oversight to ensure accuracy, could result in FLSA violations. The DOL warns of potentially incorrect calculations of hours worked, on-call time, break time and travel time, as discussed below.
Hours Worked. Employers use AI to monitor keystrokes, clicks, and website browsing to analyze whether employees are active or idle. Employers must be aware that that these productivity metrics do not determine whether an employee is performing “hours worked” for FLSA purposes. If the AI tool incorrectly determines that an employee is not “working” and improperly categorizes working time as non-compensable, the employer may fail to pay the employee for all hours worked in violation of the FLSA.
On-Call Time (or Engaged to Wait). Employers are using AI technology to assign tasks, 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 do not have time between assignments for their own non-work pursuits. While AI tools can make assignments more efficient, employees are still working and must be paid where they are “engaged to wait” between the assignments. The DOL guidance warns that AI tools to automate scheduling and assign work tasks may result in a FLSA violation if the tools do not accurately identify employees’ waiting time that is compensable.
Break Time. Under the FLSA, generally, meal or break time of at least 30 minutes when the employee is fully relieved of duties is not compensable. Some automated timekeeping systems or software that track employee breaks incorporate AI to predict and auto-populate break time entries based on past time entries, regular shifts and break schedules, and other factors. Employers using “auto-deduct” tools must ensure that employees are completely relieved of duty during recorded breaks, that time records accurately reflect employee 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 did not result in being fully relieved of work so they are paid properly for that working time.
Travel Time. Employers are increasingly using geolocation software that tracks an employee’s location relative to a job site, automatically clocking in and clocking out the employee when entering and leaving a job site. Location does not determine hours worked under the FLSA. These AI geolocation systems may fail to account for the employee’s compensable time at the beginning of the work day, in between job sites and at the end of the work day under certain circumstances. Such examples include:
- Where an employee is required to pick up tools at the employer’s plant prior to arriving at the work site, the employee’s time spent at the plant and driving to the first job site would be hours worked.
- Time spent driving between job sites 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 geotracking systems account for the compensable travel time between jobs at different job 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 resulting 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 that it is working properly.
These best practices, referred to as “Promising Practices” by the DOL, are not mandatory and are not an exhaustive list. The use of AI in the employment context is a rapidly advancing and quickly evolving area. Stay tuned to Whiteford’s Employment Law Blog or contact Betsy Davis or your Whiteford attorney for continual updates.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.