The Department of Labor Has Concluded Its Investigation into Scale AI
The U.S. Department of Labor has concluded its investigation into Scale AI’s adherence to the Fair Labor Standards Act, as reported by a source with direct knowledge of the proceedings.
The Fair Labor Standards Act (FLSA) is a federal law that addresses the misclassification of employees as independent contractors and unpaid wages. TechCrunch initially disclosed that Scale was under investigation back in March.
Upwork and Hireart, two HR partners of Scale AI, which were also being scrutinized for FLSA compliance according to Inc. magazine, have confirmed to TechCrunch that they are no longer under investigation by the DOL.
Valued at $13.8 billion last year, Scale AI relies on a workforce it classifies as contractors to perform essential AI tasks, such as labeling images for major tech companies.
Nonetheless, Scale has faced lawsuits from former employees who claim they were underpaid and misclassified as contractors rather than employees, thereby missing out on benefits like sick leave.
The reason behind the DOL’s decision to drop the investigation remains unclear. Scale AI, based in San Francisco, chose not to comment, and the DOL has not responded to inquiries.
Several factors could explain this development.
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A recent action by the DOL suggests a more lenient stance on classifying workers as contractors, with the agency announcing on May 1 that it is not currently enforcing a Biden-era rule that complicated this classification.
Scale AI is also attempting to gain favor with the Trump administration. CEO Alexandr Wang was present at Trump’s inauguration (like many other tech executives) and has released a letter urging Trump to “win the AI war.”
In addition, 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.
This role involves advising the President on science and technology matters and does not oversee the DOL. Kratsios has not yet responded to a request for comment.