AI Tools in Retail: How Automation May Affect Store Manager Exemption Status and Trigger Litigation Risks

Litigation Considerations for Retailers with Exempt Managers When Implementing AI-Driven Tools

Artificial intelligence (AI) is changing many aspects of retail operations. Retailers are adopting AI programs to improve efficiency, but these tools can shift managerial duties in ways that affect whether store managers qualify as exempt employees under labor laws.

Determining exemption status depends on factors such as the importance of tasks performed, the level of responsibility, the use of discretion and independent judgment, and how much time managers spend on certain activities. These criteria are detailed in 29 C.F.R. part 541.

Employee Selection

AI is increasingly used in hiring, scanning resumes for qualifications and administering pre-employment assessments. These assessments can evaluate job compatibility and key competencies like customer service and task prioritization. Despite this, many retailers still rely on store managers to conduct final interviews and make hiring decisions.

However, legal debates and litigation are ongoing about how much employers should rely on AI for hiring decisions. Recent regulations aim to control AI’s role in selection processes, but outcomes remain uncertain.

Labor Forecasting and Scheduling

Creating effective employee schedules involves balancing factors like staff availability, expected customer traffic, deliveries, seasonal trends, weather, and community events. AI tools can process large amounts of data quickly to generate efficient schedules and adjust for unexpected changes like employee absences, reducing labor costs.

Even with AI-generated schedules, managers often need to review and adjust them based on their knowledge of store operations and employee needs.

Timekeeping

AI is used to track employee attendance, flagging missed punches or late entries and ensuring meal and rest breaks are taken. Real-time alerts help managers intervene before compliance issues arise. AI can also analyze attendance patterns to identify recurring tardiness or absenteeism.

Advances in biometric and facial recognition technology have improved timekeeping by verifying employee identity, reducing time-theft practices such as "buddy punching." However, privacy laws in some areas may restrict the use of these technologies.

Performance Management

Traditionally, store managers assess employee performance through observation. AI now supplements this by tracking customer interactions, upselling efforts, tone of communication, and productivity through data from point-of-sale systems and task trackers.

AI-driven video analytics can monitor safety protocol adherence, detecting unsafe behaviors like running or improper lifting. Despite these tools, manager oversight remains crucial for interpreting data and providing meaningful feedback and coaching.

Impact on Exempt Status

While AI tools offer clear benefits, their use may change how store managers spend their time and the level of discretion they exercise. These changes can affect whether managers meet exemption criteria. For instance, some managers may simply approve AI-generated schedules, while others may customize them extensively.

The degree to which AI shifts managerial duties varies by company and individual manager. Employers should regularly review store managers’ job duties to ensure proper classification, especially as AI continues to influence retail operations.

AI affects many aspects of retail beyond workforce management, potentially altering manager responsibilities in multiple ways.

For those managing AI adoption in retail, staying informed on these legal considerations is key. Additional resources and training on AI tools for management roles can be found at Complete AI Training.