AI monitoring: How does it impact employee morale and productivity?

Canada’s highly anticipated AI legislation, the Artificial Intelligence and Data Act (AIDA), is slowly making its way across the House of Commons floor, having just entered its sixth month of committee discussions with no end in sight.

For many industry experts, AIDA – or another act like it if this one dies on the floor – can’t come too quickly, as more and more businesses adopt AI technologies into their processes in the race to avoid being last to the party.

AIDA is one part of Bill C-27, the Digital Charter Implementation Act, 2022. If passed, one aspect of AIDA will regulate “high impact” AI systems, including predictive technology that is already being used to augment employee monitoring through analysing biometric and other data.

“Such systems have the potential to have significant impacts on mental health and autonomy,” the proposed Act states.

Aside from any legal ramifications, what effect does this fast uptake of technology, without too much forethought, oversight or governance, have on the employees who are expected to just make it work?

First, we’re going to take a look at what AI and the post-pandemic rise of employee surveillance may be doing to the fragile (and valuable) employee-employer relationship.

AI and employee surveillance

“The use of employee surveillance on employees has increased dramatically, and in ways that we never even conceived of as possible,” said David Zweig, professor of organizational behaviour and HR management at the Rotman School of Management.

“Employee surveillance has a huge impact on people's behaviours, their reactions, their performance, their trust with their leader — all of these things come into play.”

Zweig has studied the effects of electronic monitoring on employees during the first advent of the technology over two decades ago, and is now beginning new research on the topic.

“A lot of employers, particularly when people were working from home during the pandemic, decided that they needed to have the tools to monitor what people were doing,” he said.

“If you think about where that's coming from, it's coming from a lack of trust in your employees, and it's a desire by leaders to, in essence, exert control, to have some control over the fact that we're no longer face-to-face:

‘I can’t see what you're doing at your desk, and so I need a way to figure out if you're actually doing the work you're supposed to be doing.’”

Traditional employee monitoring tools include time tracking, email and employee chat monitoring, internet usage tracking, and phone call recording. However, the addition of AI to these existing tools renders the technology “turbocharged”, according to a report by The Canadian Press – and potentially more damaging to employee privacy.

Slow adoption of legislation for AI employee monitoring

“While many of these solutions are innovative and interesting, and their business utility is apparent, their use may expose the organization to legal risks,” said Kristen Pennington, privacy and data protection partner at McMillan. “It’s important to analyze whether the tool can be implemented in a manner that complies with local privacy laws before entering into any agreements with service providers or vendors.”

Aside from AIDA, the only specific law in Canada that applies to employee monitoring is the Working for Workers Act in Ontario which requires provincially regulated employers with over 25 workers to inform employees about how they are being monitored, and why.

AI is being used by employers to augment monitoring in various ways, said Kristen Pennington, privacy and data protection partner at McMillan, such as technologies that can identify anomalies in employee behavioural patterns, which can help to assess employee activity or productivity, and to detect security threats.

“I think that employers are increasingly interested in using employee monitoring technologies for a number of reasons,” she said.

“The technological advancement and innovation in this space is booming. The number of new solutions and tools that can be used for employee monitoring is growing exponentially, and businesses are eager to capitalize on them.”

No single law regulates employee monitoring in Canada, said Pennington.

“Depending on the nature of your organization and the industry in which you operate, and depending on where your employees are located, you may have obligations under several privacy laws.”

Working for Workers Act 2022 adds transparency

Obligations may include requirements to assess if a course of employee monitoring is reasonable, prior to informing employees. For this reason, if employers are contemplating implementing new monitoring technology or changing an existing system, Pennington recommends conducting a privacy impact assessment to ensure compliance with the various applicable laws.

“Even prior to the Working for Workers Act, employees in Ontario could bring legal claims related to workplace monitoring,” she explained. “For example, Ontario courts have recognized the tort of ‘intrusion upon seclusion’, meaning an employee can allege that they are entitled to damages if their employer has intentionally or recklessly intruded upon their private affairs or concerns, if that invasion would be highly offensive to a reasonable person.”

Pennington also pointed out that while the Working for Workers Act requires Ontario employers to inform employees if they’re being monitored, it does not prohibit monitoring.

“If anything, the increased transparency of having an appropriate monitoring policy in place may be avoiding legal claims related to covert monitoring,” she said.

Does employee monitoring help productivity?

However, just because they can does not necessarily mean they should, said Zweig, citing potential downsides to morale and trust of the employer.

“One of the rationales often used for surveillance is that employers are worried about maintaining productivity, ensuring that everyone is working when they're supposed to be working and focused on work if they're not in the office,” he said.

“What a lot of the research is demonstrating is that the concerns over productivity weren't really valid. Productivity did not go down during the pandemic, there were no dramatic decreases. But we haven't seen a pullback of the use of surveillance technology.”

Instead, employers, managers and leaders are using AI monitoring technology to create an “illusion of control” – and it’s a technique that can backfire when employees try to regain some control, Zweig said.

“It signals to the employee that ‘My employer does not trust me,’ and it changes the nature of the relationship, it becomes a much more transactional relationship,” he said. “Everyone is so concerned about engagement and satisfaction — this is not the way to foster engagement and satisfaction. In fact, this is a major cause of cynicism, a lack of engagement and growing dissatisfaction. Cynicism is on the rise everywhere, and this is contributing to it.”

Adverse effects on productivity, innovation

It’s not just employee morale that can be negatively affected by monitoring, according to David Brodeur-Johnson, principal analyst at Forrester. Productivity and innovation can take hits as well, as employees shift focus from performing optimally to doing what’s required to not get caught by their employer’s surveillance methods.

“If the intent is really to make sure that people are only spending time on certain activities, that kind of shuts off the opportunity for people to spend time in other ways that are even more productive,” he said.

“If what you're monitoring for is how they're spending their time, then they're going to spend their time only in ways that you're actually monitoring for. But you're leaving on the table the possibility that they could use that time in more productive ways than you might have even thought of.”

Not only that, just the knowledge that there is monitoring going on could potentially kill the kind of creativity that requires freedom and flexibility.

Johnson uses Heisenberg’s Uncertainty Principle to explain the phenomenon – basically that the act of observing something changes its behaviour.

“If people know that they're being monitored, but they don't know what they're being monitored for, then they're going to be really hesitant to communicate and collaborate through monitorable channels,” he said. “It actually could have a chilling effect on collaboration and communication with their colleagues.”

Create environment of trust, psychological safety

But the benefits need to be weighed with the costs, Zweig said, especially when there are other ways to increase productivity that do not damage employee trust like the “blanket approach” of surveillance.

And if employers do use monitoring, being transparent about what it’s being used for, no matter what province they are in, is critical to maintaining employee trust and not damaging the employment relationship.

“If you take the time to create a positive environment, create an environment of trust and psychological safety with your employees, then you don't need that kind of surveillance to make sure that everyone's doing what they're supposed to be doing,” he said.

“What you're doing is you're sapping the motivation of everyone who does work hard, who is trying to perform well, and you're destroying the trust with those employees. You might catch a couple who are abusing the system, but at the same time, you're ruining the relationship with everyone else.”