The U.S. Department of Labor (DOL) is investigating Scale AI, a data-labeling startup, for compliance with the Fair Labor Standards Act, reports. This law covers unpaid wages, worker misclassification, and illegal retaliation against employees.
The investigation has been ongoing since at least August 2024, according to documents reviewed . However, an investigation does not imply wrongdoing, and it could either clear Scale AI or be dismissed.Based in San Francisco, Scale AI was valued at $13.8 billion last year. The company relies on a vast network of contractors to perform AI-related tasks like image labeling for major tech firms.
Scale AI spokesperson Joe Osborne stated that the investigation began under the previous administration and that regulators had misunderstood the company’s work in AI development. He emphasized that Scale AI has cooperated extensively with the DOL and described their discussions as productive. Osborne also claimed Scale AI offers more flexible AI-related job opportunities than any other company, with overwhelmingly positive feedback from workers.
Despite this, Scale AI faces legal challenges from former workers. Two lawsuits filed in late 2024 and early 2025 allege that the company misclassified employees as contractors, denying them benefits like overtime and sick leave. Scale AI disputes these claims, asserting that it complies with labor laws and ensures fair pay.
International labor concerns also surfaced in 2023 when The Washington Post reported that overseas contractors faced demanding workloads for low wages. Scale AI responded by stating that pay rates were improving.
The DOL has the authority to impose fines and force companies to reclassify workers. While the agency hasn’t confirmed the investigation, its outcome could have significant implications for Scale AI and the gig economy.
