In this monthly series brought to you CDF's Wage and Hour Taskforce, we will delve into the WHD's recent release of a Field Assistance Bulletin relating to Artificial Intelligence in the workplace. 

It goes without saying that Artificial Intelligence (“AI”) is no longer just a concept in science fiction movies. With the technological advancements that AI provides, it is no wonder that employers are turning to AI to hire talent, increase productivity, track hours worked, and many other features. But with great power comes great responsibility, and the U.S. Department of Labor’s Wage and Hour Division (“WHD”) has swooped in to remind us of employer responsibility in the context. This is why, on April 29, 2024, the WHD released a Field Assistance Bulletin to remind employers of their obligations when using AI to prevent pitfalls that turn into litigation. As the Bulletin states, “AI and other automated systems can provide ways to streamline tasks for employers, improve workplace efficiency and safety, and enhance workforce accountability. However, without responsible human oversight, the use of such technologies may pose potential compliance challenges concerning federal labor standards.”

Tracking Work Time

The Bulletin recognizes that some AI monitoring tools can analyze worker activity through keystrokes, website browsing, and activity in front of a web camera. As the WHD explains, reliance on automated timekeeping software based on human productivity can create potential compliance challenges with respect to determining hours worked under federal law—and especially under California law. Such automated timekeeping software may not accurately track when an employee actually begins working, takes their meal period, returns from their meal period, or stops working. As the Bulletin states, using automated measures to track productivity does not “substitute for the analysis of whether the employee was suffered or permitted to work[.]” Such software must also be able to understand compensable breaks, even if it appears that the employee is not working. It is difficult to say whether there is AI that is sophisticated enough to accurately track all hours worked for an employee, or whether such software would accurately capture de minimis time as required in California. In short, reliance on AI to track time worked without human oversight would be more of a liability than a tool of productivity.

Calculating Wages Owed

The Bulletin also notes that AI can sometimes “use automated algorithms to independently calculate and determine workers’ rates of pay based on a variety of data and metrics collected by the systems.” This information could include fluctuating supply and demand, customer traffic, geographic location, worker efficiency, etc. However, employers still need to ensure that an employee’s regular rate of pay is calculated properly and overtime is properly paid. As the Bulletin notes, in the case of an employee who is paid multiple or different wage rates based on different metrics, the employer must ensure that the different rates are properly calculated into the regular rate of pay by adding together the employee’s total earnings for the workweek (including earnings from hourly rates, piece rates, or other compensation), and then dividing these earnings by the total number of hours the employee worked during that same week. This becomes further complicated when determining whether AI can properly differentiate between discretionary and non-discretionary bonuses when calculating the regular rate of pay. AI software that fails to do this, subjects employers to liability for improper regular rate calculations. 

Summary

AI is on track to change the way we do business, just like the internet did. However, employers need to be even more careful when choosing to incorporate AI in their workplace. Oftentimes, AI vendors do not take into consideration the complicated nuances of wage and hour laws, particularly in California. Rather, their goal is to create a system that provides employers with the most profits in the hopes of selling more of their AI software. Thus, it is imperative that an employer does their due diligence when determining whether to incorporate AI into the workplace and they must carefully select which AI service to use.