US Department of Labor Launches Investigation into Scale AI: What You Need to Know
The U.S. Department of Labor (DOL) is currently investigating the data-labeling startup Scale AI for potential violations of the Fair Labor Standards Act. This federal regulation addresses issues such as unpaid wages, the misclassification of employees as independent contractors, and illegal retaliation against workers. This investigation highlights critical labor practices within the gig economy, particularly concerning companies that utilize a vast workforce of contractors.
Details of the Investigation into Scale AI
According to information obtained by TechCrunch, the investigation has been ongoing since at least August 2024. While the presence of an investigation does not imply wrongdoing, it raises important questions about Scale AI’s labor practices and compliance with federal regulations.
Background on Scale AI
Based in San Francisco, Scale AI was valued at approximately $13.8 billion last year. The company employs a large number of workers classified as contractors to perform essential tasks such as labeling images for major tech firms and other organizations.
Scale AI’s spokesperson, Joe Osborne, indicated that the investigation was initiated during the previous presidential administration. He emphasized that the company has been proactive in communicating its business model to the DOL and has found the discussions to be productive.
Legal Challenges Faced by Scale AI
Despite its success, Scale AI has encountered legal troubles from former employees. Two significant lawsuits were filed against the company—one in December 2024 and another in January 2025—alleging underpayment and misclassification of workers. These former employees claim they were denied essential benefits such as overtime pay and sick leave.
- Scale AI’s Position: The company disputes these claims, asserting that it adheres to all legal requirements and aims to provide pay rates that meet or exceed local living wage standards.
- International Concerns: An investigation by the Washington Post in 2023 revealed issues regarding Scale AI’s labor practices overseas, where workers reported demanding conditions at low pay.
Understanding the DOL’s Authority
The DOL typically resolves most cases through administrative means, but violations may result in fines, penalties, and mandatory reclassification of workers. For example, in February 2024, hotel staffing platform Qwick settled a DOL case by paying $2.1 million and reclassifying all California workers using its app as employees.
Scale AI’s Political Connections
Scale AI is also noted for its connections within the current presidential administration. CEO Alexandr Wang attended the inauguration of Donald Trump in January, alongside other leaders in the tech industry. Additionally, Scale AI’s former managing director, Michael Kratsios, is nominated as the new director of the White House’s Office of Science and Technology Policy, though he has not yet been confirmed.
Despite these ties, Kratsios’s position does not oversee the DOL. He recently participated in a Senate hearing on February 25 but has not provided comments regarding the situation.
Conclusion
The investigation into Scale AI by the U.S. Department of Labor underscores the ongoing scrutiny of labor practices in the gig economy. As the DOL continues its examination, the outcomes may have significant implications for Scale AI and similar companies in the tech landscape.
For more information about labor laws and regulations, visit the U.S. Department of Labor website.
