• The Department of Labor is investigating Scale AI for potential Fair Labor Standards Act violations, focusing on worker classification and pay practices.
  • Scale AI faces two recent lawsuits from former workers alleging contractor misclassification and underpayment, though the company disputes these claims.
  • Despite the ongoing investigation, Scale AI appears to be building connections with the Trump administration, including a former executive's nomination to a White House position.

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, which has been active since at least August 2024, focuses on issues including unpaid wages, worker misclassification, and potential illegal retaliation against workers.

The DOL's inquiry comes amid growing scrutiny of Scale AI's labor practices both domestically and internationally.

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.

Company 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.

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.

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.

Edited By Annette George