US Department of Labor Probes Scale AI

# Scale AI

The U.S. Department of Labor (DOL) is currently looking into Scale AI, a data-labeling startup, to see if they're following the Fair Labor Standards Act, according to TechCrunch. This federal law deals with issues like unpaid wages, misclassifying employees as contractors, and illegal retaliation against workers. The investigation kicked off around August 2024 and is still going, a source close to the situation told TechCrunch. Just because they're being investigated doesn't mean Scale AI did anything wrong, though. The investigation might end up clearing the company or get dismissed altogether. Scale AI, based in San Francisco and valued at $13.8 billion last year, uses a bunch of workers they call contractors to do crucial AI tasks, like labeling images for Big Tech and other groups. Joe Osborne, a spokesperson for Scale AI, told TechCrunch that the investigation started under the previous presidential administration. He mentioned that Scale AI thought regulators back then didn't really get what the company does in building, testing, and evaluating AI. Osborne said they've been working closely with the DOL to explain their business model, and those talks have been pretty useful. He also pointed out that Scale AI offers more "flexible work opportunities in AI" to Americans than any other company, and their workers generally give positive feedback. "Hundreds of thousands of people use our platform to showcase their skills and earn extra money," Osborne said. While Scale AI is a popular gig work platform, it's been hit with some legal challenges lately. Two lawsuits were filed against them—one in December 2024 and another in January 2025—by former workers who claimed they were underpaid and wrongly classified as contractors, missing out on benefits like overtime pay and sick days. Scale AI has strongly denied these claims, saying they follow the law and make sure their pay rates meet or beat local living wage standards. Their international labor practices were also under the microscope in a 2023 Washington Post investigation. Workers overseas told the Post about tough work for low pay as contractors. Scale AI said at the time that they were continually improving pay rates. The DOL's website says they usually resolve most cases without going to court, but employers who break the law could face fines or even jail time. The DOL can also make employers reclassify their workers as employees. For instance, in February 2024, hotel staffing startup Qwick settled a DOL case by paying $2.1 million and agreeing to classify all California workers using the Qwick app as employees, according to Bloomberg Law. Scale AI seems to be one of the Silicon Valley companies trying to get in good with the new presidential administration. Their CEO and founder, Alexandr Wang, was at Donald Trump's inauguration in January, along with other tech CEOs. Even more telling, Scale AI's former managing director, Michael Kratsios, is President Trump's pick for the new director of the White House's Office of Science and Technology Policy. Kratsios was the U.S.'s chief technology officer during Trump's first term. In this role, Kratsios will advise Trump on science and tech issues. This position doesn't have any say over the Department of Labor. Kratsios had a Senate hearing on February 25 but hasn't been confirmed yet. He didn't respond to a request for comment. Michael Petersen, a spokesperson for the U.S. Department of Labor, told TechCrunch that they can't confirm or deny any investigation, following their usual policy.

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