As AI continues to reshape industries, employers are hiring for roles that didn’t exist just a few years ago. Positions like AI specialists and Prompt Engineers present unique challenges when it comes to classification under federal and state wage and hour laws. Proper classification is essential to avoid legal risks and ensure compliance.
For additional information regarding wage and hour laws, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
Here’s a concise guide to help you classify AI-related roles effectively.
1. Clearly Define the Role
A clear job description is the foundation of proper classification. It should detail the responsibilities, required skills, and expectations for the role. For example, a Prompt Engineer might be responsible for developing AI prompts, collaborating with teams, and staying updated on AI advancements. A well-defined job description aids both recruitment and classification decisions.
2. Evaluate Applicable Exemptions
Administrative Exemption: This applies to employees whose primary duties involve non-manual work related to management or business operations. To qualify, the employee must:
Be paid on a salary basis.
Earn at least $843 per week ($43,888 annually) starting July 1, 2024, and $1,126 per week ($58,656 annually) starting January 1, 2025.
Perform work directly related to business operations or management.
Exercise discretion and independent judgment on important matters.
Highly Compensated Employee (HCE) Exemption: This applies if:
The employee earns at least $132,964 annually, increasing to $151,164 in 2025.
Their primary duties involve office or non-manual work.
They regularly perform one or more exempt duties of an executive, administrative, or professional employee.
Computer Employee Exemption: This applies to technical roles if:
The employee is paid at least $27.63 per hour.
The role involves computer systems analysis, programming, or similar tasks.
The primary duties align with those outlined by the Department of Labor.
Remember, job titles or descriptions alone aren’t enough to determine exemption status—actual duties performed are key.
3. Consider State Law Requirements
State wage and hour laws may impose stricter requirements than federal regulations. Some states have higher salary thresholds, different duties tests, or may not recognize certain exemptions. Ensure you review the specific regulations in your state to maintain full compliance.
4. Adopt a Cautious Approach
If you're uncertain whether a role qualifies for an exemption, it’s safer to classify the employee as non-exempt. This approach ensures compliance with overtime pay obligations and reduces legal risks. If further review shows the role qualifies for an exemption, you can make adjustments as needed.
5. Regularly Review Job Classifications
AI-related roles can evolve rapidly, and what may have started as an exempt role could shift to non-exempt over time—or vice versa. Regularly reviewing job descriptions and comparing them to the actual duties performed helps maintain compliance with wage and hour laws. If significant changes occur, reclassify the position as needed.
Conclusion
As AI roles continue to evolve, staying compliant with wage and hour regulations is critical. Recent increases in salary thresholds and upcoming updates require employers to remain proactive. By carefully managing and regularly reviewing job classifications in line with federal and state laws, businesses can effectively oversee their AI workforce while minimizing legal risks.
For additional information regarding wage and hour laws, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.
Email: richard.liu@consultils.com | Phone: 626-344-8949
*Disclaimer: This article does not constitute legal opinion and does not create any attorney-client relationship.
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