The U.S. Department of Labor (DOL) 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 long-standing policy.