Labor Department Investigation into Scale AI's Contractor Classification Ongoing
- The U.S. Department of Labor is investigating Scale AI for potential Fair Labor Standards Act violations involving worker classification and pay practices.
- Two lawsuits filed by former workers allege contractor misclassification and underpayment. Scale AI disputes these claims.
What the Scale AI contractor classification investigation examines
The U.S. Department of Labor (DOL) is conducting an investigation into Scale AI, a San Francisco-based data-labeling startup valued at $13.8 billion, regarding its compliance with the Fair Labor Standards Act, according to sources familiar with the matter.
The investigation has been active since at least August 2024. It focuses on unpaid wages, worker misclassification, and potential illegal retaliation against workers.
Scale AI relies heavily on workers it classifies as contractors to perform essential AI tasks such as data labeling for major tech companies.
This classification has recently sparked legal challenges, with two lawsuits filed against the company in December 2024 and January 2025.
Former workers allege they were underpaid and wrongfully classified as contractors rather than employees, preventing them from accessing benefits like overtime pay and sick leave.
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What Scale AI said about the DOL investigation
Scale AI spokesperson Joe Osborne stated that the investigation began during the previous presidential administration, suggesting that regulators misunderstood Scale AI's business model.
Osborne maintained that the company has cooperated extensively with the DOL and emphasized that Scale AI provides “flexible work opportunities in AI” to hundreds of thousands of Americans.
"Feedback from our contributors is overwhelmingly positive," Osborne told TechCrunch, adding that the company works to ensure pay rates meet or exceed local living wage standards.
Scale AI and the Trump Administration
The investigation comes at a time when Scale AI appears to be cultivating relationships with the new Trump administration.
CEO Alexandr Wang attended President Trump's inauguration in January, and former Scale AI managing director Michael Kratsios has been nominated to lead the White House's Office of Science and Technology Policy.
Potential Consequences of the Investigation
While the existence of an investigation doesn't necessarily indicate wrongdoing, the DOL has the authority to impose fines, require worker reclassification, and, in severe cases, pursue imprisonment for labor law violations.
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