TechCrunch learned that the U.S. Department of Labor is investigating Scale AI to determine if it is in compliance with the Fair Labor Standards Act.
This is a federal law which regulates unpaid wage, misclassifications of employees as contractors and illegal retaliation.
A document seen by TechCrunch indicates that the investigation has been ongoing since at least August 20, 24. According to a source familiar with the situation, it is still ongoing.
Of course, the mere existence of an inquiry does not mean that Scale AI did anything wrong. The investigation could either find in the company’s favor or be dismissed. Scale AI, based in San Francisco, was valued at $13.8 billion last year. It uses a large army of workers, which it classifies as contractors, to perform essential AI work such as labeling images for Big Tech or other organizations.
Scale AI’s Joe Osborne, a spokesperson for the company, told TechCrunch the investigation began during the previous administration. Scale AI believed that regulators at the time misunderstood its work in building, testing, evaluating AI.
Osborne stated that Scale AI worked extensively with DOL to clarify its business model, and that the conversations were productive. Osborne stated that Scale AI offers more “flexible AI work opportunities” than any other company, and that the feedback from its contributors has been “overwhelmingly positive.” Scale AI, a popular platform for gig work, is indeed popular. It has faced legal challenges recently from former workers over its labor practices. Two lawsuits have been filed against the startup – one in December 2024, and the other in Jan 2025 – by former workers who claim they were underpaid and wrongly classified as contractors rather than employees. This denied them access to protections such as overtime pay and sick leave.
Scale AI strongly disputes the lawsuits. It says that it fully complies to the law and strives to ensure its pay levels meet or exceed local living wage standards.
The United Nations also investigated Scale AI’s labor practices in other countries. Washington Post in 2023 () Workers overseas told the Post that they were contractors who demanded low-paying work. The company claimed at the time that wages were improving.
U.S. Department of Labor Website states that it can resolve most cases administratively, but that employers who break the law could be subject to fines or even imprisonment. The DOL can also force employers to reclassify workers as employees.
In February 2024, for example, hotel staffing startup Qwick settled with the DOL by paying $2.1m and announcing all California workers who perform work using the Qwick application would be classified as employee, Bloomberg Law reported.
It also appears that Scale AI is among the Silicon Valley companies seeking and receiving favor from the new presidential administration. Scale AI’s CEO and founder, Alexandr Wang, is one example. Many tech CEOs attended Donald Trump’s inauguration in January.
What’s more, President Trump has nominated Michael Kratsios as the new director of White House’s Office of Science and Technology Policy. Kratsios was the U.S. chief technology officer in the first Trump administration. Kratsios, in this position will advise Trump on matters of science and technology. This position does not have oversight of the Department of Labor. Kratsios served as a member of a Senate Hearing was reported on February 25, but has yet to be confirmed. Kratsios did not respond to a comment request.
Michael Petersen, a spokesperson for the U.S. Department of Labor, told TechCrunch it could not confirm or deny that any investigation had taken place. This is in line with long-standing departmental policy. Charles Rollet, a senior reporter for TechCrunch, is
a member of the U.S. Department of Labor. His investigative reporting led to U.S. sanctions against four tech firms, including China’s biggest AI firm. Charles covered the surveillance sector for IPVM before joining TechCrunch. Charles lives in San Francisco and enjoys hiking with dogs. You can reach Charles on Signal using charlesrollet.12, or by calling +1-628-282-2811.
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