The U.S. Department of Labor is investigating Scale AI.

The U.S. Department of Labor (DOL) is conducting an investigation into Scale AI, a startup focused on data labeling, to verify its compliance with the Fair Labor Standards Act. This federal law covers issues such as unpaid wages, misclassification of employees as independent contractors, and illegal retaliation against workers. According to a document, the investigation has been ongoing since at least August 2024 and is still active, according to sources close to the case.

It is important to note that the existence of the investigation does not necessarily imply that Scale AI has committed any violations, as the outcomes could be favorable for the company or could lead to the case being dismissed. Based in San Francisco and valued at $13.8 billion last year, Scale AI employs a large number of workers whom it classifies as contractors to carry out essential tasks related to artificial intelligence, such as image labeling for major tech companies and other organizations.

A spokesperson for Scale AI, Joe Osborne, commented that the investigation began during the previous presidential administration and that the company has felt that its work in building, testing, and evaluating artificial intelligence has not been accurately understood by regulators at that time. He further stated that Scale AI has deeply collaborated with the DOL to explain its business model and that the discussions have proven to be productive. Osborne also mentioned that Scale AI offers "flexible job opportunities in AI" to more Americans than any other company, and that feedback from its contributors is "overwhelmingly positive." "Hundreds of thousands of people use our platform to showcase their skills and earn extra money," he added.

Despite its popularity as a gig work platform, Scale AI has faced legal challenges from some former employees regarding its labor practices. Two lawsuits have been filed against the startup—one in December 2024 and another in January 2025—by former workers alleging that they were underpaid and incorrectly classified as contractors, which denies them access to benefits such as overtime pay and sick days. Scale AI has firmly rejected these accusations, asserting that it complies with the law and strives to provide pay rates that meet or exceed local minimum wage standards.

Additionally, Scale AI's international labor practices were the subject of an investigation in 2023, where overseas workers reported being required to work for low wages under the classification of contractors. The company stated at that time that pay rates were continuously improving. According to the DOL's website, the department can resolve most cases administratively, but employers who violate the law may face fines and potentially prison time. The DOL also has the authority to require employers to reclassify their workers as employees.

Scale AI seems to be in a favorable position within the Silicon Valley ecosystem under the new presidential administration. Its CEO and founder, Alexandr Wang, attended Donald Trump's inauguration, as did many other tech sector CEOs. It is also noteworthy that former Scale AI CEO Michael Kratsios is Trump's nominee to lead the White House Office of Science and Technology Policy. Kratsios, who previously served as U.S. CTO during Trump's first administration, will advise on science and technology matters, although this role does not oversee the Department of Labor. While he participated in a Senate hearing on February 25, he has yet to be confirmed.

A DOL spokesperson, Michael Petersen, stated that they cannot confirm or deny the existence of any investigation, according to long-standing policy.