Scale AI Under Department of Labor Investigation for Potential Labor Law Violations

Exclusive: Scale AI is being investigated by the US Department of Labor

The U.S. Department of Labor is investigating the data labeling startup Scale AI for compliance with the Fair Labor Standards Act, TechCrunch has learned. That's a federal law that regulates unpaid wages, misclassification of employees as contractors, and illegal retaliation against workers. The investigation has been active since at least August 2024, a document seen by TechCrunch shows. And it's ongoing, according to a person directly familiar with the matter. The mere existence of an investigation doesn't mean Scale AI has done anything wrong, of course, and the investigation could find in favor of the company or be dismissed. Scale AI is based in San Francisco and was valued last year at $13.8 billion. It relies on an army of workers it categorizes as contractors to do essential AI work, like labeling images for Big Tech and other organizations. Scale AI spokesperson Joe Osborne told TechCrunch that the investigation was initiated during the previous Presidential administration and that Scale AI felt that its work building, testing, and evaluating AI was misunderstood by regulators then. Osborne said that Scale AI has worked extensively with the DOL to explain its business model and that conversations have been productive. More generally, Osborne said that Scale AI brings more "flexible work opportunities in AI" to 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," Osborne said. Scale AI is indeed a popular gig work platform. But it has recently faced legal challenges from some ex-workers over its labor practices. Two lawsuits were filed against the startup -- one in December 2024 and the other in January 2025 -- from former workers alleging they were underpaid and misclassified as contractors instead of employees, denying them access to protections like overtime pay and sick days. Scale AI has strongly disputed the lawsuits, saying that it fully complies with the law and works to ensure its pay rates meet or surpass local living wage standards. Scale AI's international labor practices were also the subject of an investigation by the Washington Post in 2023. Workers overseas described to the Post demanding work at low pay as contractors. The company said at the time that pay rates were continually improving. The U.S. Department of Labor's website says it is able to resolve most cases administratively but that employers who violate the law may be subject to fines and potentially imprisonment. The DOL also has the power to force employers to reclassify their workers as employees. For example, in February 2024, hotel staffing startup Qwick settled a DOL case by paying $2.1 million and announcing that all California workers performing work using the Qwick app would be classified as employees, Bloomberg Law reported. Scale AI also appears to be among the Silicon Valley firms seeking and seeing favor with the new presidential administration. Its CEO and founder Alexandr Wang, for instance, attended Donald Trump's inauguration in January like many other tech CEOs. More telling, Scale AI's former managing director, Michael Kratsios, is President Trump's nominee as new director of the White House's Office of Science and Technology Policy. Kratsios previously served as the U.S.'s Chief Technology Officer during the first Trump administration. In this position, Kratsios will advise Trump on science and technology matters. This position has no oversight over the Department of Labor. Kratsios was part of a Senate hearing on February 25, but has not been confirmed yet. Kratsios didn't respond to a request for comment. U.S. Department of Labor spokesperson Michael Petersen told TechCrunch that it cannot confirm or deny the existence of any investigation, per longstanding policy.

Scale AI faces probe amid allegations that it's underpaying its data labeling contractors - SiliconANGLE

Scale AI faces probe amid allegations that it's underpaying its data labeling contractors The data labeling startup Scale AI Inc. is being investigated by the U.S. Department of Labor, amid suspicions that it's violating the Fair Labor Standards Act, the company said today. The DOL probe is investigating Scale AI's compliance with fair pay standards and working conditions described by the Act. It's believed that it was first launched almost one year ago during previous U.S. President Joe Biden's administration, but it has only just now come to light. According to the startup, it has been working closely with the department to explain its business model and how things work in the broader artificial intelligence industry. The Fair Labor Standards Act is a federal law that covers unpaid wages and illegal retaliation against workers, and it also defines who should be classified as an employee or a contractor. Just because Scale AI is being investigated, it doesn't necessarily mean that the company is guilty of wrongdoing, and it may be that no charges are brought against it. Founded in 2016, Scale AI is a provider of AI training datasets. It supplies AI model developers with the vast amounts of accurately labeled data they need to train sophisticated large language models, such as OpenAI's GPT-4. The company does produce its own datasets, but most of them are created by third-party contributors, who also label the information within them. In this way, it's also a gig work platform for researchers and data scientists, who create and fine-tune customized datasets on request. Scale AI claims to have tens of thousands of contributors working for it in more than 9,000 cities and towns in the U.S. A spokesperson for the company told TechCrunch that it strongly disputes any allegations that it's underpaying or mistreating its contributors. He added that the company is in full compliance with the Fair Labor Standards Act, and strives to ensure its pay rates provide contributors with a living wage, based on local standards. He further insisted that almost all of its payments are made on time, and that more than 90% of inquiries regarding payments are resolved within three days. The spokesperson complained that regulators misunderstood its work in building, testing and evaluating AI when they first launched their investigation last year. He stressed that the company provides "flexible work opportunities" to Americans, and that it has had overwhelmingly positive feedback from contributors. On its website, the Department of Labor says the vast majority of cases it deals with are resolved administratively, but it does have the power to prosecute employers who violate the law, with hefty fines and possible imprisonment for the worst offenders. It also has the ability to force companies to reclassify contractors as employees. It's notable that this isn't the first time Scale AI has come under scrutiny for its labor practices. In 2023, the Washington Post reported that overseas contributors had complained of low pay and impossible demands. The company responded back then, saying that its rates of remuneration were constantly improving. More recently, in December and January, two former workers filed lawsuits against the company, alleging they were underpaid and misclassified as contractors rather than employees, which meant they were denied overtime pay and sick days. Scale AI has much stronger ties to the new White House administration under President Donald Trump. The company's founder and chief executive Alexandr Wang was one of several tech CEOs who attended Trump's inauguration in January, and its former managing director Michael Kratsios previously served as the country's chief technology officer during Trump's first term as president. Kratsios has since been nominated by Trump to serve as the director of the White House's Office of Science and Technology Policy, where he will advise the President on matters relating to science and technology. The company's ties with the government appear to be advantageous for the company. Earlier this week, Scale AI announced it had signed a multimillion-dollar deal with the U.S. Department of Defense, under which it will help it to train AI agents for military planning and operations.

Investigation Into Scale AI Also Targets Its HR Partners HireArt and Upwork

The U.S. Department of Labor investigation into Scale AI is also probing two of the company's human resources partners, HireArt and Upwork. Scale, the $14 billion data-labeling startup that hires scores of freelancers to train AI models for clients in Big Tech and government, has been under investigation by the DOL since last October, according to an email seen by Inc. The company, which netted $1 billion in venture investment last May, is relatively unknown compared with the bigger players in the AI space. But Scale's role is no less significant: Scale farms out contract work to legions of freelancers, who work for its subsidiaries Outlier AI and Remotasks. The work is referred to as tasking and involves refining AI tools such as chatbots and self-driving technology by correcting the raw models' mistakes. The company's labor force has helped mold the technology behind the commercial AI revolution, but Scale is also being sued in two separate class action complaints for a variety of labor violations and for subjecting workers to distressing content that caused PTSD in some cases. Scale AI CEO Alexandr Wang has been making inroads in Washington D.C., having recently met with House Speaker Mike Johnson.

US Labor Department investigating Nvidia, Amazon-backed startup Scale AI

(Reuters) - The U.S. Department of Labor is investigating Scale AI, a data labeling startup backed by tech giants Nvidia, Amazon and Meta, for its compliance with the Fair Labor Standards Act, the California-based firm said on Thursday. The investigation is looking into Scale AI's compliance with fair pay practices and working conditions and was initiated nearly an year ago under the former President Joe Biden's administration, the company said. The startup said over the last year it has worked with the department to explain its business model and the emerging artificial intelligence industry. Founded in 2016, Scale AI provides vast amounts of accurately labeled data, which is pivotal for training sophisticated tools like OpenAI's ChatGPT. It also provides platform for researchers to exchange AI-related information, with contributors in more than 9,000 cities and towns. "The feedback we get from contributors is overwhelmingly positive, and we have dedicated teams to ensure people are paid fairly and feel supported," a spokesperson said. Nearly all contributor payments are made on time and the company resolves 90% of payment-related inquiries within three days, the company said. The startup was valued at $14 billion in a late-stage funding round last year and counts AI firms OpenAI and Cohere, as well as Microsoft Morgan Stanley among its clients. (Reporting by Kritika Lamba in Bengaluru; Editing by Arun Koyyur)

US Labor Department investigating Nvidia, Amazon-backed startup Scale AI

March 6 (Reuters) - The U.S. Department of Labor is investigating Scale AI, a data labeling startup backed by tech giants Nvidia (NVDA.O), opens new tab, Amazon (AMZN.O), opens new tab and Meta (META.O), opens new tab, for its compliance with the Fair Labor Standards Act, the California-based firm said on Thursday. The investigation is looking into Scale AI's compliance with fair pay practices and working conditions and was initiated nearly an year ago under the former President Joe Biden's administration, the company said. The startup said over the last year it has worked with the department to explain its business model and the emerging artificial intelligence industry. Founded in 2016, Scale AI provides vast amounts of accurately labeled data, which is pivotal for training sophisticated tools like OpenAI's ChatGPT. It also provides platform for researchers to exchange AI-related information, with contributors in more than 9,000 cities and towns. "The feedback we get from contributors is overwhelmingly positive, and we have dedicated teams to ensure people are paid fairly and feel supported," a spokesperson said. Nearly all contributor payments are made on time and the company resolves 90% of payment-related inquiries within three days, the company said. The startup was valued at $14 billion in a late-stage funding round last year and counts AI firms OpenAI and Cohere, as well as Microsoft (MSFT.O), opens new tab Morgan Stanley (MS.N), opens new tab among its clients. Reporting by Kritika Lamba in Bengaluru; Editing by Arun Koyyur Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Society & EquitySocial Impact

Nvidia And Amazon-Backed Startup Scale AI Undergoes Probe By The US Labor Department - Meta Platforms (NASDAQ:META), Amazon.com (NASDAQ:AMZN)

The U.S. Department of Labor has reportedly launched a probe into Scale AI, a startup backed by Nvidia NVDA, Amazon AMZN, and Meta Platforms Inc. META, to assess its compliance with the Fair Labor Standards Act. What Happened: The investigation into Scale AI's adherence to fair pay practices and working conditions was launched about a year ago under the Biden administration, reported Reuters. The startup, established in 2016, has been working with the department over the past year to clarify its business model. Scale AI, which provides a platform for AI-related information exchange and supplies large volumes of accurately labeled data crucial for training advanced tools like OpenAI's ChatGPT, has contributors in over 9,000 cities and towns. A company spokesperson stated, "The feedback we get from contributors is overwhelmingly positive, and we have dedicated teams to ensure people are paid fairly and feel supported." Scale AI did not immediately respond to Benzinga's request for comment. The company also stated that nearly all contributor payments were timely made, with 90% of payment-related inquiries resolved within three days. Scale AI, valued at nearly $14 billion in a late-stage funding round, has a clientele that includes OpenAI and Cohere, along with Microsoft MSFT and Morgan Stanley MS. SEE ALSO: Wage Theft Allegations Target $13.8B Tech Giant Scale AI Why It Matters: This investigation comes on the heels of Scale AI's recent announcement of a multimillion-dollar defense military deal. It is yet to be determined whether this crucial deal will be affected by the results of the Labor Department's investigation. Also, this is in sharp contrast to the recent development where Anthropic, another AI company backed by Amazon and Alphabet has made good progress and raised $3.5 billion in a Series E funding round, taking its valuation to $61.5 billion. READ MORE: Elon Musk Pushes For Privatization Of Postal Service And Amtrak: 'It Will Leave You With A Very Bad Impression Of America' Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMZNAmazon.com Inc$200.70-%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum83.13Growth3.96Quality86.36Value48.12Price TrendShortMediumLongOverviewMETAMeta Platforms Inc$628.000.01%MSMorgan Stanley$119.860.41%MSFTMicrosoft Corp$397.500.15%NVDANVIDIA Corp$111.500.84%Market News and Data brought to you by Benzinga APIs