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 legislation that regulates unpaid wages, misclassification of workers as contractors, and unlawful retaliation in opposition to staff.
The investigation has been energetic since not less than August 2024, a doc seen by TechCrunch reveals. And it’s ongoing, in keeping with an individual instantly acquainted with the matter.
The mere existence of an investigation doesn’t imply Scale AI has performed something unsuitable, in fact, and the investigation might 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 staff it categorizes as contractors to do important AI work, like labeling photographs for Large Tech and different organizations.
Scale AI spokesperson Joe Osborne instructed TechCrunch that the investigation was initiated in the course of the earlier presidential administration and that Scale AI felt that its work constructing, testing, and evaluating AI was misunderstood by regulators then.
Osborne mentioned that Scale AI has labored extensively with the DOL to elucidate its enterprise mannequin and that conversations have been productive. Extra typically, Osborne mentioned that Scale AI brings extra “versatile work alternatives in AI” to Individuals than every other firm and that suggestions from its contributors is “overwhelmingly constructive.”
“Tons of of 1000’s of individuals use our platform to showcase their expertise and earn more money,” Osborne mentioned.
Scale AI is certainly a well-liked gig work platform. Nevertheless it has lately confronted authorized challenges from some ex-workers over its labor practices. Two lawsuits were filed in opposition to the startup — one in December 2024 and the opposite in January 2025 — from former staff alleging they have been underpaid and misclassified as contractors as an alternative of workers, denying them entry to protections like additional time pay and sick days.
Scale AI has strongly disputed the lawsuits, saying that it absolutely complies with the legislation and works to make sure its pay charges meet or surpass native residing 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 Put up demanding work at low pay as contractors. The corporate mentioned on the time that pay charges have been regularly bettering.
The U.S. Division of Labor’s website says it is ready to resolve most circumstances administratively however that employers who violate the legislation could also be topic to fines and probably imprisonment. The DOL additionally has the facility to power employers to reclassify their staff as workers.
For instance, in February 2024, lodge staffing startup Qwick settled a DOL case by paying $2.1 million and saying that every one California staff performing work utilizing the Qwick app can be categorized as workers, Bloomberg Legislation reported.
Scale AI additionally seems to be among the many Silicon Valley companies looking for and seeing favor with the brand new presidential administration. Its CEO and founder Alexandr Wang, as an illustration, 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 Know-how Coverage. Kratsios beforehand served because the U.S.’s chief know-how officer in the course of the first Trump administration.
On this place, Kratsios will advise Trump on science and know-how 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 instructed TechCrunch that it can not verify or deny the existence of any investigation, per long-standing coverage.
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