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How does AI affect my employee classification? 

It is possible that AI will lead to a reclassification of certain employees. Generative AI is being deployed across many industries and has already prompted a shift in many employees’ duties. Those responsible for creating content or media and those who perform analysis in technical roles might be fully or partially displaced. 

Those who previously interacted with customers on the phone and on the web might also be replaced by automated chatbots. The vast majority of customer service roles could be performed by computers, leaving only oversight and complex problems for humans to solve.

Which workers may go from exempt to non-exempt and vice versa due to AI?

While we are not quite in the realm of an automated workforce displacing workers with technical responsibilities, for certain roles, AI has already changed the game. Once technical functions might be modified so those staff no longer qualify for an exemption in accordance with the language of the Fair Labor Standards Act (FLSA).

AI may gradually reduce the demand for workers to be creative or to use their technical knowledge, or do so as much. Those skills may be used to review AI outputs instead of creating or using those technical skills. When job functions change due to the use of AI, determining whether an employee must be paid hourly or can be put on salary may become a more challenging question. 

According to the FLSA, covered workers are compensated with time and a half of their pay rate when working in excess of 40 hours per week unless exempted. State laws also establish criteria for the overtime exemption that extends past the FLSA requirements.

Can I reclassify an employee as an independent contractor if their duties change due to AI?

Though this area of the law lacks precedent, it is possible that employers will be allowed to reclassify workers as independent contractors after the introduction of AI. Employment terms with freelancers can be specified in an Independent Contractor Agreement or Work for Hire Agreement.

The Administrative Exemption of the FLSA states the primary duty of an employee is the performance of non-manual or office work connected to the employer or customers’ operations and management.

There is also a Professional Exemption that covers learned professionals and creative professionals. The learned professional exemption details how the primary duty of an employee must be characterized by advanced knowledge that is mainly intellectual. Moreover, the exemption also mandates the consistent exercise of judgment and discretion.

The exemption for creative professionals centers on the worker’s primary duty requiring one of the following attributes within a creative or artistic field:

  • Talent.
  • Originality.
  • Imagination.
  • Invention.

Though the overtime exemptions above are not the only ones within the FLSA, they are the most commonly cited. Moreover, state laws also provide exemptions.

The bottom line is an employee’s exemption status can change. The demotion, promotion or alteration in job duties resulting from AI has the potential to change exemption status.

As a result, employers can audit workforces and identify alterations to job duties after implementation of AI. The failure to make such changes could lead to misclassification claims.

How do I classify workers who will be tasked with supervising AI output?

The FLSA’s Executive Exemption is applicable to high-ranking employees tasked with management responsibilities, such as:

  • Oversee two or more full-time people.
  • Hire or terminate workers.
  • Make personnel recommendations that affect decision-making.

There is the potential for AI to make human-based executive functions unnecessary, ultimately removing their overtime exemption status. Though the duties of the executive might morph from monitoring the work of others to overseeing AI work-product, currently, monitoring AI is not the same as monitoring or supervising employees. Therefore, the Executive Exemption may not apply.

Consider a hypothetical situation in which an executive’s role changes from supervising employees to managing AI models. If the executive no longer oversees employees, his or her role may become non-exempt.

Can I fire an employee who is caught using AI to do their job?

The legality of terminating an employee for the use of AI differs is likely to depend on the context. It may also depend on the Employment Contract or a company’s policies. Generally, if a business hires someone, it can typically fire them for not completing work the way the company wants it done.

Many employers have already made policies to bar employees from using AI tools to perform the following tasks and more:

  • Generate reports.
  • Draft legal documents.
  • Write code or creative text.

Even using AI tools such as ChatGPT to craft emails has the potential to lead to termination.

However, if an employee is merely using AI to supplement workplace tools, boost productivity, or add to his or her knowledge base, a business may not want to think of this as a fireable offense. After all, the new AI tools have been proving themselves to be effective helpers for businesses large and small.

For employers, making a clear AI Workplace Use Policy helps communicate to your workers whether the use of AI is encouraged, or if it constitutes a terminable offense. With how prolific AI is, if an employer is going to penalize an employee for using it, not having a clear policy could potentially lead to a wrongful termination lawsuit.

Employee Handbooks can address rules pertaining to AI. If the organization frowns upon AI for work, its disallowance of AI’s use in the workplace or when working remotely should be expressly communicated in the handbook or a separate policy that gets distributed.

Have more questions about AI in the workplace, reaching out to a Rocket Legal Pro™ is an easy and reliable way to get affordable legal advice. 

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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