Use of AI tools to manage independent contractors carries risk of reclassification of contractors as employees

As companies continue to adopt artificial intelligence (AI) tools to streamline various business processes, many of these tools are being applied to workforce management tasks. While the power of these tools is undeniable, concerns are emerging that the level of control they allow companies to have over independent contractors (ICs) could lead a court or government agency to determine that the contractors are actually employees, entitling them to minimum wages, overtime, and potentially other benefits. 

It is therefore critical for employers (and purported employers) to review closely, among other requirements, the level of control, via AI or otherwise, that they exert over workers they classify as ICs.

 Classification of ICs and employees

For decades, employment law has focused on, among other factors, a purported employer’s level of control over a worker in assessing whether a worker is correctly classified as an IC or an employee. While control has not been, and is not now, the only determinative factor in classifying an IC or an employee, it is arguably the most important factor. Worker or management control is also fairly easy to understand and demonstrate from an evidentiary standpoint. Typically, for ICs, the purported employer either took a hands-off approach or only monitored outcomes. Whereas, for employees, it set schedules, monitored progress, and exercised multiple other elements of control. 

 Employer use of AI