The U.S. Department of Labor is investigating the info labeling startup Scale AI for compliance with the Fair Labor Standards Act, TechCrunch has discovered.
That’s a federal regulation that regulates unpaid wages, misclassification of staff as contractors, and unlawful retaliation in opposition to employees.
The investigation has been lively since not less than August 2024, a doc seen by TechCrunch exhibits. And it’s ongoing, in response to an individual straight conversant in the matter.
The mere existence of an investigation doesn’t imply Scale AI has completed something mistaken, in fact, and the investigation may discover in favor of the corporate or be dismissed.
Scale AI is predicated in San Francisco and was valued final 12 months at $13.8 billion. It depends on a military of employees it categorizes as contractors to do important AI work, like labeling photos for Big Tech and different organizations.
Scale AI spokesperson Joe Osborne informed TechCrunch that the investigation was initiated throughout the earlier Presidential administration and that Scale AI felt that its work constructing, testing, and evaluating AI was misunderstood by regulators then.
Osborne stated that Scale AI has labored extensively with the DOL to clarify its enterprise mannequin and that conversations have been productive. More usually, Osborne stated that Scale AI brings extra “versatile work alternatives in AI” to Americans than every other firm and that suggestions from its contributors is “overwhelmingly constructive.”
“Hundreds of 1000’s of individuals use our platform to showcase their abilities and earn more money,” Osborne stated.
Scale AI is certainly a preferred gig work platform. But it has lately confronted authorized challenges from some ex-workers over its labor practices. Two lawsuits have been filed in opposition to the startup — one in December 2024 and the opposite in January 2025 — from former employees alleging they have been underpaid and misclassified as contractors as an alternative of staff, denying them entry to protections like additional time pay and sick days.
Scale AI has strongly disputed the lawsuits, saying that it absolutely complies with the regulation and works to make sure its pay charges meet or surpass native residing wage requirements.
Scale AI’s worldwide labor practices have been additionally the topic of an investigation by the Washington Post in 2023. Workers abroad described to the Post demanding work at low pay as contractors. The firm stated on the time that pay charges have been frequently bettering.
The U.S. Department of Labor’s web site says it is ready to resolve most circumstances administratively however that employers who violate the regulation could also be topic to fines and probably imprisonment. The DOL additionally has the ability to pressure employers to reclassify their employees as staff.
For instance, in February 2024, lodge staffing startup Qwick settled a DOL case by paying $2.1 million and saying that each one California employees performing work utilizing the Qwick app could be categorised as staff, Bloomberg Law reported.
Scale AI additionally seems to be among the many Silicon Valley companies in search of and seeing favor with the brand new presidential administration. Its CEO and founder Alexandr Wang, as an example, attended Donald Trump’s inauguration in January like many different tech CEOs.
More telling, Scale AI’s former managing director, Michael Kratsios, is President Trump’s nominee as new director of the White House’s Office of Science and Technology Policy. Kratsios beforehand served because the U.S.’s Chief Technology Officer throughout the first Trump administration.
In this place, Kratsios will advise Trump on science and expertise issues. This place has no oversight over the Department of Labor. Kratsios was a part of a Senate listening to on February 25, however has not been confirmed but. Kratsios didn’t reply to a request for remark.
U.S. Department of Labor spokesperson Michael Petersen informed TechCrunch that it can’t affirm or deny the existence of any investigation, per longstanding coverage.
