Employment Law Update: Danger, Employers, Danger! How Machine Intelligence Is Pushing White-Collar Employees Toward Overtime Eligibility
Date: August 21, 2025
By:
Lisa M. Brauner
Once that happens, an employee may no longer satisfy the FLSA duties tests that hinge on “discretion and independent judgment” to be exempt from overtime pay under the “administrative” exemption. A supervisor who was exempt under the “executive” exemption because they managed two or more full-time workers may no longer benefit from that overtime exemption if the workers’ roles have become automated or replaced by robots (and can a supervisor even “hire or fire” a robot?). Yesterday’s exempt professional can become tomorrow’s overtime-eligible worker—leaving employers exposed to back-pay liability, liquidated damages, and fee-shifting litigation.
A decade-old case underscores the stakes. A contract attorney who sued the law firm Skadden Arps argued that document review stripped his work of legal judgment because it could be performed by a machine, persuading a court to let his overtime claim proceed. Similarly, accountants whose data analysis and fraud detection tasks are now handled by AI tools may find their roles reclassified as nonexempt, as the human discretion that once justified their “learned professional” exemption is diminished.
States such as California may magnify the risk. Its wage orders demand that most of an exempt employee’s time be spent on qualifying duties—a standard that AI can erode quickly. A single misclassification suit invoking that rule could eclipse any labor-cost savings the technology delivers.
What Should Employers Do Now?
- Conduct regular audits and map tasks to exemption tests. Inventory each role AI touches, distinguishing between routine monitoring and genuine discretion. The question is no longer “Does this employee make decisions?” but “Does the algorithm?” If the manager is no longer supervising human workers, the employer may need to reclassify the manager to a nonexempt role.
- Rewrite job descriptions in real time. Annual reviews are no longer enough; revise descriptions whenever a new AI tool is deployed, and secure written acknowledgment from incumbents that they are performing the duties stated.
- Add human-centric duties or reclassify. If automation has hollowed out discretion, layer in higher-order responsibilities—client counseling, strategic planning—or convert the role to non-exempt status while tightening overtime authorizations. If roles change due to AI implementation, the position may need to be reclassified as nonexempt.
- Align HR, Legal, and IT. Implementation teams may champion AI without focusing on wage-and-hour potential liability. Cross-functional audits to assess how AI changes job content can surface legal compliance gaps.
- Upskill and document. Training employees to interpret AI outputs or override erroneous recommendations may preserve an overtime exemption and create a defensible record of the worker exercising independent judgment.
- Remember that state laws may have different or stricter duties tests than the FLSA to establish overtime exemption, so be sure you also know the state’s requirements for exemption.
Please contact your Whiteford Labor & Employment attorney if you would like legal advice in determining proper worker classification (and preserving attorney-client privilege when conducting self-audits), conducting training on worker classification, and updating policies and protocols.
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.