The rules governing the employment relationship are always changing. Laws creating new employer obligations, technology solutions making work more efficient and more complicated, and rules governing the resolution of disputes between employers and their workers are around every corner. Wage and Hour Around the Corner is a new blog series for employers, in-house lawyers, and HR, payroll, and compensation, that helps employers stay on the cutting edge of wage and hour changes happening now and those on the horizon.

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Seyfarth Synopsis: The viable use cases for Artificial Intelligence are skyrocketing as AI models become capable of more and more. Some of those include various applications in remote work environments, like tracking employees’ time worked and work activities. According to the DOL, however, using AI-driven surveillance software to track time worked poses risks under the Fair Labor Standards Act.

Working remotely is here to stay.  Although declining from pandemic-era levels, telework remains popular, especially hybrid-style arrangements where employees work remotely part of the time.  That poses certain problems from a wage-hour perspective.  Generally, under the Fair Labor Standards Act, employers have an obligation to pay employees for all work the employer knows or should know has been performed.  But it is not always clear when an employer “should know.”  As the Department of Labor has noted, this is especially so with respect to telework, when employees are working without any direct oversight.  This has important implications for employers who use Artificial Intelligence tools to monitor and track time worked by remote employees.   

Those tools have made it easier to work remotely.  Increasingly, AI is also being used for automated timekeeping in which software tracks when workers sign in and out of work and then determines an employee’s “active” and “idle” time.  ‎These tools capture data such as application and website usage, mouse and keyboard activity, and even physical movement.  Some AI tools act as a fully digital time clock that allows businesses to calculate an employee’s weekly, bi-weekly, or monthly pay.     

But as noted here, reliance on AI also poses certain risks from a wage-hour perspective.  While AI-driven software allows employees to monitor and record when employees login and logout, employers may face FLSA exposure if the software fails to account for all time worked, including offline tasks.  According to the DOL, “[a]n AI program that incorrectly categorizes time as non-compensable work hours based on its analysis of worker activity, productivity, or performance could result in a failure to pay wages for all hours worked.”  AI-powered monitoring software can potentially fail to fully account for the time employees spend working away from their workstation, offline time spent thinking about or reviewing a document, or offscreen engagement with clients or co-workers. 

Other risks include if AI-monitoring tools automatically code all non-productive work as non-compensable time.  Short breaks lasting 20 minutes or less are generally deemed to be for the employer’s benefit and, therefore, compensable.  29 C.F.R. § 785.18.  If AI-monitoring tools automatically deduct from pay all time deemed non-productive time, even non-productive time of short duration, employers may unwittingly run afoul of the FLSA.    

These are not hypothetical concerns.  In Kraemer v. Crossover Market, LLC et al., (W.D. Tex.), a plaintiff brought a proposed collective action under the FLSA for unpaid off-the-clock work and her purported former employer.  The plaintiff, who primarily worked remotely, alleged that she and others similarly-situated were monitored through tracking software and compensated based on the software’s tracking of her activities.  For example, she claimed that if the surveillance software did not see her working, she would not be paid for that interval of inactivity, such as “10-minute time frame[s].”  The plaintiff claimed that the system failed to account for various offline work, including reviewing and annotating hard copy documents, receiving work-related phone calls away from her computer webcam, and participating in online conferences on her mobile phone away from her workstation.  The parties eventually settled for an undisclosed amount.     

The upshot is that reliance on AI-powered monitoring software may provide insight into employees’ work habits, but it should not be used as a panacea for time tracking.  Best practices include auditing any AI-powered software to ensure it does not lead an employer to unwittingly violate the FLSA.  Best practices also include implementing a reasonable reporting system that allows non-exempt employees to report hours worked that they believe were not captured by the software.  By doing so, employers will help guard against potential off-the-clock claims.