Scale AI is being investigated by the US Department of Labor

The U.S. Division of Labor (DOL) is investigating the data-labeling startup Scale AI for compliance with the Honest Labor Requirements Act, TechCrunch has realized.

That’s a federal regulation that regulates unpaid wages, misclassification of staff as contractors, and unlawful retaliation towards employees.

The investigation has been energetic since at the least August 2024, a doc seen by TechCrunch exhibits. And it’s ongoing, in accordance with an individual immediately aware of the matter. 

The mere existence of an investigation doesn’t imply Scale AI has accomplished something fallacious, in fact, and the investigation may discover in favor of the corporate or be dismissed.

Scale AI relies in San Francisco and was valued last year at $13.8 billion. It depends on a military of employees it categorizes as contractors to do important AI work, like labeling photos for Huge Tech and different organizations.

Scale AI spokesperson Joe Osborne advised 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 elucidate its enterprise mannequin and that conversations have been productive. Extra typically, Osborne stated that Scale AI brings extra “versatile work alternatives in AI” to People than another firm and that suggestions from its contributors is “overwhelmingly constructive.”

“Tons of of hundreds of individuals use our platform to showcase their expertise and earn more money,” Osborne stated.

Scale AI is certainly a well-liked gig work platform. But it surely has just lately confronted authorized challenges from some ex-workers over its labor practices. Two lawsuits were filed towards 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 a substitute of staff, denying them entry to protections like extra 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 dwelling wage requirements. 

Scale AI’s worldwide labor practices have been additionally the topic of an investigation by the Washington Post in 2023. Employees abroad described to the Submit demanding work at low pay as contractors. The corporate stated on the time that pay charges have been frequently enhancing.

The U.S. Division of Labor’s website says it is ready to resolve most circumstances administratively however that employers who violate the regulation could also be topic to fines and doubtlessly imprisonment. The DOL additionally has the facility to power employers to reclassify their employees as staff.

For instance, in February 2024, resort staffing startup Qwick settled a DOL case by paying $2.1 million and asserting that every one California employees performing work utilizing the Qwick app could be labeled as staff, Bloomberg Regulation reported.

Scale AI additionally seems to be among the many Silicon Valley companies searching for and seeing favor with the brand new presidential administration. Its CEO and founder Alexandr Wang, for example, attended Donald Trump’s inauguration in January like many other tech CEOs.

Extra telling, Scale AI’s former managing director, Michael Kratsios, is President Trump’s nominee as new director of the White Home’s Workplace of Science and Expertise Coverage. Kratsios beforehand served because the U.S.’s chief expertise officer throughout the first Trump administration.

On this place, Kratsios will advise Trump on science and expertise issues. This place has no oversight over the Division of Labor. Kratsios was a part of a Senate hearing on February 25 however has not been confirmed but. Kratsios didn’t reply to a request for remark.

U.S. Division of Labor spokesperson Michael Petersen advised TechCrunch that it can not affirm or deny the existence of any investigation, per long-standing coverage.