Navigating a New Era: Department of Labor’s Guidance on AI Compliance with FLSA and FMLA

The rise of artificial intelligence (AI) in personnel management has ushered in a new era of efficiency and productivity, but it also raises important questions about compliance with labor laws. The U.S. Department of Labor (DOL) recently issued guidance regarding the employment law impact of certain AI features used in performance management, wages and hours, timekeeping, leave management, and other human resources technology systems.

While acknowledging that “AI and other automated systems can provide ways to streamline tasks for employers, improve workplace efficiency and safety, and enhance workforce accountability,” the DOL cautioned that, “without responsible human oversight, the use of such technologies may pose potential compliance challenges with respect to federal labor standards.” The new guidance specifically addresses compliance with leave management under the Family and Medical Leave Act (FMLA) and minimum wage and overtime compliance under the Fair Labor Standards Act (FLSA).

As a refresher, the FLSA governs fair labor practices such as minimum wage, overtime pay, and recordkeeping. The FMLA guarantees eligible employees unpaid leave for specified family and medical reasons. These laws were crafted long before the advent of AI, presenting challenges in their application to modern workplaces infused with automation and machine learning.

New AI technology leverages employee monitoring, measuring and analyzing metrics of worker productivity or activity in real time, such as computer keystrokes, mouse clicks, website browsing, web camera monitoring, and other data to determine whether and when an employee is active or idle. Employers can use these tools to more accurately determine hours worked and thus increase efficiency in payroll management. While these are helpful tools, employer reliance on such technology without regular, consistent human oversight may create FLSA compliance challenges when employees are actually performing “work” (as defined by the FLSA), but the AI system docks pay because it perceives that an employee is not working. 

Addressing this concern, the DOL noted “an AI program that incorrectly categorizes time as noncompensable work hours based on its analysis of worker activity, productivity, or performance could result in a failure to pay wages for all hours worked.” Employee start times, end times, break times, and waiting time are particular risk areas if timekeeping errors occur.  As we have previously advised, employers utilizing these tools should therefore conduct regular audits and provide for active human monitoring to ensure accuracy in timekeeping. Similarly, employers using AI for payroll management purposes should develop clear and consistent policy guidance, including avenues of recourse for employees who believe they may be underpaid.

Developing a policy with reporting and appeal mechanisms — and clearly communicating these procedures to employees — is crucially important to ensuring fairness and accuracy in employee compensation. In all cases, employers must exercise diligence to ensure that AI-driven recordkeeping complies with FLSA requirements to prevent disputes and potentially costly liability over unpaid wages or overtime.

For purposes of FMLA compliance, the DOL cautions that AI presents unique challenges regarding leave eligibility and accommodation, emphasizing that AI systems must appropriately handle requests for FMLA leave, accommodate eligible employees, and avoid discriminatory practices. For example, an AI system that manages FMLA leave certification which requires employees to disclose excess medical or other personal information could violate the FMLA or the Americans with Disabilities Act’s (ADA) limitations on requesting certain information. Further, an AI system’s failure to consider extenuating circumstances in determining whether employees have complied with their obligations for FMLA certification (or the interactive process for ADA accommodations) could violate either the FMLA, the ADA, or both, implicating an interference or discrimination claim.

Thus, as with wage and hour management, employers should establish clear communication channels for employees to seek FMLA-related information or ADA accommodations as well as reporting/appeal procedures to ensure that AI systems do not hinder access to essential benefits. The DOL’s guidance underscores the need for ongoing vigilance and adaptation. As AI technologies continue to evolve, so too must compliance strategies. Employers should prioritize regular audits and assessments of AI systems to identify and address any potential compliance gaps or biases. Furthermore, fostering a culture of transparency, accountability, and inclusivity within the organization is crucial for ensuring equitable outcomes in AI-driven decision-making. As we venture further into the age of AI, the commitment to upholding the principles of fairness, equality, and equity remains paramount.