U.S. Department of Labor Drops Investigation into Scale AI's Labor Practices
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4 Sources
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Exclusive: The Department of Labor just dropped its investigation into Scale AI
The U.S. Department of Labor has dropped its investigation into Scale AI's compliance with the Fair Labor Standards Act, according to a source directly familiar with the matter. The FLSA is a federal law that regulates misclassification of employees as independent contractors and unpaid wages. TechCrunch first reported that Scale was the subject of such an investigation in March. Upwork and Hireart, two of Scale AI's HR partners that were also being investigated for FLSA compliance per Inc. magazine, are also no longer being investigated by the DOL, they each confirmed to TechCrunch. Scale AI, which was valued last year at $13.8 billion, depends on an army of workers it categorizes as contractors to do critical AI work, like labeling images for Big Tech. However, Scale has been sued by ex-workers alleging they were underpaid and misclassified as contractors instead of employees, denying them access to benefits like sick leave. It's not clear exactly why the DOL dropped the probe. San Francisco-based Scale AI declined to comment, while the DOL didn't respond to a request for comment. There's several possible reasons, though. A recent move from the DOL hints at a friendlier approach to classifying workers as contractors, with the agency announcing on May 1 that it was no longer enforcing, at least for now, a Biden-era rule which made this more difficult. Scale AI is also seeking favor with the Trump administration. Its CEO Alexandr Wang attended Trump's inauguration (like many other tech CEOs) and has published a letter urging Trump to "win the AI war." Meanwhile, Scale AI's former managing director Michael Kratsios was confirmed in March as the new director of the White House's Office of Science and Technology Policy. The position involves advising the President on science and tech issues, and has no oversight over the DOL. Kratsios didn't immediately respond to a request for comment.
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US Department of Labor drops investigation into Scale AI, TechCrunch reports
May 9 (Reuters) - The U.S. Department of Labor stopped its investigation into Scale AI's compliance with the Fair Labor Standards Act, TechCrunch reported on Friday, citing a source directly familiar with the matter. The FLSA is a federal law that establishes minimum wage, overtime pay, recordkeeping and other labor norms. The investigation was looking into Scale AI's compliance with fair pay practices and working conditions. It was initiated nearly a year ago under the former President Joe Biden's administration, the company had said in March. Scale AI did not immediately respond to a Reuters request for comment. Founded in 2016, Scale AI is 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. Scale AI, last valued at nearly $14 billion, also provides a platform for researchers to exchange AI-related information, with contributors in more than 9,000 cities and towns. Reporting by Juby Babu in Mexico City; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Sustainable Finance & ReportingSocial ImpactWorker Rights
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US Department of Labor drops investigation into Scale AI: Report
The investigation was looking into Scale AI's compliance with fair pay practices and working conditions. It was initiated nearly a year ago under the former President Joe Biden's administration, the company had said in March.The US Department of Labor stopped its investigation into Scale AI's compliance with the Fair Labor Standards Act, TechCrunch reported on Friday, citing a source directly familiar with the matter. The FLSA is a federal law that establishes minimum wage, overtime pay, recordkeeping and other labor norms. The investigation was looking into Scale AI's compliance with fair pay practices and working conditions. It was initiated nearly a year ago under the former President Joe Biden's administration, the company had said in March. Scale AI did not immediately respond to a Reuters request for comment. Founded in 2016, Scale AI is a data labeling startup backed by tech giants Nvidia, Amazon and Meta. Scale AI, last valued at nearly $14 billion, also provides a platform for researchers to exchange AI-related information, with contributors in more than 9,000 cities and towns.
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US Department of Labor drops investigation into Scale AI, TechCrunch reports
(Reuters) -The U.S. Department of Labor stopped its investigation into Scale AI's compliance with the Fair Labor Standards Act, TechCrunch reported on Friday, citing a source directly familiar with the matter. The FLSA is a federal law that establishes minimum wage, overtime pay, recordkeeping and other labor norms. The investigation was looking into Scale AI's compliance with fair pay practices and working conditions. It was initiated nearly a year ago under the former President Joe Biden's administration, the company had said in March. Scale AI did not immediately respond to a Reuters request for comment. Founded in 2016, Scale AI is a data labeling startup backed by tech giants Nvidia, Amazon and Meta. Scale AI, last valued at nearly $14 billion, also provides a platform for researchers to exchange AI-related information, with contributors in more than 9,000 cities and towns. (Reporting by Juby Babu in Mexico City; Editing by Alan Barona)
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The Department of Labor has halted its investigation into Scale AI's compliance with the Fair Labor Standards Act, raising questions about the company's labor practices and the broader implications for the AI industry.
Department of Labor Halts Investigation into Scale AI
The U.S. Department of Labor (DOL) has dropped its investigation into Scale AI's compliance with the Fair Labor Standards Act (FLSA), according to a source familiar with the matter
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. This development marks a significant turn in the ongoing scrutiny of labor practices within the rapidly growing AI industry.Background of the Investigation
Scale AI, a data labeling startup valued at $13.8 billion, has been under investigation for its labor practices, particularly concerning the classification of workers as contractors rather than employees
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. The company relies heavily on these contractors for critical AI work, such as labeling images for major tech companies.The investigation, initiated nearly a year ago under the Biden administration, was examining Scale AI's compliance with fair pay practices and working conditions
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. The FLSA, which the DOL enforces, establishes standards for minimum wage, overtime pay, recordkeeping, and other labor norms.Implications for the AI Industry
The halting of this investigation raises questions about the broader implications for labor practices in the AI industry. Scale AI's business model, which depends on a large workforce of contractors, is not unique in the sector. The outcome of this case could potentially influence how other AI companies structure their workforce and classify their employees.
Political Context and Potential Influences
Recent developments in the political landscape may have influenced the DOL's decision. The agency recently announced it would no longer enforce a Biden-era rule that made it more difficult to classify workers as contractors
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. Additionally, Scale AI has been seeking favor with the Trump administration, with CEO Alexandr Wang attending Trump's inauguration and urging the administration to "win the AI war"1
.Related Stories
Scale AI's Position and Response
Scale AI, founded in 2016, is backed by tech giants including Nvidia, Amazon, and Meta
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. The company not only provides data labeling services but also offers a platform for researchers to exchange AI-related information, with contributors in over 9,000 cities and towns globally4
.Despite the significance of this development, Scale AI has declined to comment on the matter
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. The company continues to face legal challenges, including lawsuits from ex-workers alleging underpayment and misclassification as contractors, which denied them access to benefits such as sick leave1
.Broader Implications and Future Outlook
The DOL's decision to drop the investigation into Scale AI, along with similar probes into Upwork and Hireart, may signal a shift in the regulatory approach to worker classification in the tech industry
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. This could have far-reaching consequences for how AI and tech companies structure their workforces and manage labor costs in the future.References
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