AI Boosts Chances White-Collar Jobs Are Eligible for Overtime

The growing use of artificial intelligence risks making white-collar employees like accountants and human resources professionals potentially eligible for overtime pay.

AI’s rapid adoption to automate routine job tasks almost doubled over the past two years, with the highest users in sectors like technology, professional services, and finance, a recent Gallup survey found.

But use of the technology for functions that traditionally require human discretion or independent judgment could knock those workers outside the Fair Labor Standards Act’s exclusions from overtime pay, wage-and-hour attorneys said. The 1938 law has one carveout for executive, administrative, and professional workers that’s based, in part, on their duties.

The FLSA is “decades old and didn’t anticipate anything like AI,” said Zack Domb, a partner at the worker-side Domb & Rauchwerger Employment Law Group.

“The foundation starts to crack” when AI tools absorb at least some of what was previously required by humans, said Domb, who represented employers in the past.

For example, AI has already started to take over streamlining and data analysis duties for accountants, flagging a range of issues in real time like duplicate transactions, spending patterns, and financial fraud, attorneys said.

“From the plaintiff’s bar perspective, AI is quietly replacing the judgment that once justified exempt status,” Domb said. “We do expect more misclassification lawsuits to stem from that.”

Management-side attorneys advise companies to regularly evaluate the work overtime-exempt employees perform daily to identify potential legal risks AI might pose to their core duties.

“There is likely to be a more optical or superficial attack where plaintiff’s attorneys are arguing that the use of AI replaces responsibilities rather than augmenting them,” said Brett Bartlett, a partner at Seyfarth Shaw LLP and co-chair of the firm’s national wage and hour litigation practice group.

Exempt Duties, Test

The FLSA’s “white collar” exemptions will cover employees if they meet specific salary requirements, work more than 40 hours in a week, and perform job duties that fall outside the carveout.

Overtime violations could result in substantial civil penalties, such as back wages, liquidated damages, and legal costs for employers. Willful violations may result in fines up to $10,000 or imprisonment.

Liability risks can be even more significant under analogous state laws that set stricter requirements than the FLSA. In California, for example, the main tasks of a white-collar employee must be exempt, and the worker should spend at least 51% of their time performing those primary responsibilities, despite AI use.

Unlike the California law, the FLSA has a “qualitative primary duty test that looks at the employee’s key value to the employer and doesn’t give the percentage of time spent on exempt work versus non-exempt work,” Bartlett said.

Limited Case Law

So far, there’s been a dearth of FLSA cases in the AI context. However, a few lawsuits have tested the bounds of the law’s professional exemption in cases involving machine-led legal work.

The US Court of Appeals for the Second Circuit in 2015 revived a contract attorney’s now-settled case, ruling he plausibly alleged that Skadden Arps Slate Meagher & Flom LLP and a legal staffing agency owed him overtime pay for document review service.

A machine could’ve done the service provided, and his work didn’t involve legal practice and judgment to be qualified for the FLSA’s professional exemption, the attorney alleged in his proposed FLSA collective action.

In a similar case against Quinn Emanuel Urquhart & Sullivan LLP, a New York federal judge held that a contract attorney wasn’t entitled to overtime because his document review work required him to exercise legal judgment.

Gray Area

Most jobs will still need human expertise for oversight and complex tasks, and the use of AI by workers like architects can be considered an exercise of professional opinion, said Nisha Verma, a partner at Dorsey & Whitney LLP.

“It’s not like you’re just plugging things in, getting an output, and calling that work. It shouldn’t be that,” she said. “It should be you’re deciding when it’s going to save time and money for the ultimate goal,” and not being totally reliant on the output.

But the actual amount of discretion needed to stay exempt under the FLSA is a legal gray area, attorneys said.

“There are a few different ways of attacking the problem” before it turns into a legal matter, said Erica Given, vice chair of Fisher & Phillips LLP’s artificial intelligence team, who also practices employment law. Employers should regularly audit roles for compliance risks, and may assign additional exempt duties that align with that worker’s job. Or, they could simply reclassify them as non-exempt, Given said.

“In my experience, most of them don’t want to be reclassified because they see themselves as professionals and doing work that should be salaried,” she said. “Telling them, ‘The software is doing part of your job and you’re an hourly employee now,’ that’s a way to lose talented workers.”

Another option is offering workers upskilling opportunities that enhance problem-solving abilities and adaptability in today’s job market. This ensures exempt workers maintain “oversight of the AI tools they’re using and not just running a static protocol that they follow,” Given said.

Switching to Non-Exempt

Still, current exempt workers whose duties are more vulnerable to AI might argue they should be reclassified to receive overtime pay.

Being non-exempt might appear more appealing to workers above a certain income level who are now able to deduct taxes on overtime under a new federal law, Verma said. The law went into effect retroactively for 2025 and expires after 2028.

“Now that there’s a deduction on overtime, you may have more employees” scrutinizing their exemption status, she said.

“Even if they haven’t been reaching for this AI theory before,” she said, it gives them fodder to “attack their exemption.”